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Mortgage Modifications In The Post-HAMP Era

Posted on: March 1, 2017 by in Bankruptcy, Loan Modification, Real Estate
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The government’s Home Affordable Modification Plan went away at the end of 2016, but there are still mortgage modification options available to the vast majority of distressed homeowners.

Fannie Mae and Freddie Mac both participate in the Flex Modification plan. The process is much the same. Homeowners must have a documented hardship, like a serious illness or job loss, that caused them to temporarily fall behind on their house payments. There are a slew of home modification companies who can basically wait on hold with the mortgage lender and help the homeowner compile the required documents, but these companies cannot expedite the process and cannot represent borrowers in court if the lenders try to foreclose on the loans.

According to some estimates, Freddie Mac and Fannie Mae own or have a controlling interest in as many as 90 percent of the residential mortgages in the United States.

Mortgage Modification Without Bankruptcy

In a nutshell, obtaining a loan modification outside bankruptcy is a frustrating process, to put it nicely. Typically, the lender requires the borrower to resubmit financial documents every 90 days in order to maintain eligibility, and the final decision is usually made strictly according to the numbers.

Many lenders deny eligibility because of a failure to comply with these strict technical requirements. If one document is one day late or faxed to the wrong location, or if one trial payment is one day late, the lender usually denies the application regardless of any good faith on the borrower’s behalf. Furthermore, if the DTI (debt-to-income ratio) is even slightly off, the lender normally denies the application no matter what the borrower is willing to do to make the arrangement work financially.

Mortgage Help in Bankruptcy

If an interest rate modification is the answer, and it often is if the debtor underwent a temporary hardship that is now over, bankruptcy judges usually refer the matter to mediation. Before a mediation, the lender has a duty to negotiate in good faith, which means that instead of a knee-jerk denial, the lender must articulate a legitimate reason for the decision. Many times, such a reason simply does not exist, and the bank would rather change the loan terms than litigate the question.

Many times, an interest rate modification is not the answer, because if the delinquent amount is more than a few thousand dollars, the monthly payments may actually increase. Instead, Chapter 13 repayment is normally a better option. Debtors have up to five years to catch up on mortgage payments, and during the protected repayment period, the automatic stay prevents moneylenders from undertaking any foreclosure proceedings or other adverse action unless the bankruptcy judge grants a special exception.

Bankruptcy lawyers are also skilled negotiators, and they are strong voices during talks with the bank, so distressed homeowners often receive relief through bankruptcy that they may not have even known was available.

Contact Experienced Lawyers

Bankruptcy helps people with past-due mortgages get fresh financial starts. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Loan Modifications in Chicago

Posted on: July 27, 2016 by in Loan Modification
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Last month the U.S. Department of Housing and Urban Development (HUD) announced that it is awarding $42 million in housing counseling grants to groups across the country, including $890,000 to agencies in Illinois. An article in The Chicago Tribune reports that Open Communities, an advocacy group that provides fair and affordable housing counseling services in Chicago, is one of the organizations that is receiving a grant from HUD. Approximately 150 people come to Open Communities each year seeking mortgage counseling, and roughly 30 percent of those people work with the organization for months in order to obtain different types of debt relief such as loan modifications.

Loan Modifications

What are loan modifications? A loan modification, sometimes referred to as a mortgage modification, is a workout plan that a homeowner and their lender enter into in order to change the terms of the homeowner’s mortgage so that payments under the loan are more manageable. Some lenders will only grant a loan modification if the homeowner is experiencing a major financial hardship that will likely lead to a foreclosure. This is because lenders would much rather continue receiving monthly payments from their customers rather than go through the lengthy foreclosure process. With that said, a lender will only accept a mortgage restructuring if the terms are appealing to them. Therefore, if you are interested in obtaining a loan modification be sure to consult with an experienced loan modification lawyer who can advise you on your legal rights and negotiate with the lender on your behalf.

Tips for Obtaining a Loan Modification

While consulting with an experienced loan modification lawyer is the best advice that we can give you, provides a very helpful list of tips for obtaining a loan modification. These tips include:

  • – Make Sure to Provide Every Document that the Lender Requests: When applying for a loan modification, homeowners are usually asked for a list of documents including paycheck stubs, a hardship letter, and a budget. It is very important to make sure that you submit every document that the lender asks for. Additionally, it is a great idea to put your name and loan number on each document in case a paper accidentally gets misplaced.
  • – Release Your Tax Return: Homeowners applying for a loan modification are almost always required to grant their loan servicer access to their federal tax returns by signing IRS Form 4506-T. Signing and submitting this form is very important so don’t forget!
  • – Be Persistent: You may be asked to repeatedly re-submit documents and while you may find this extremely frustrating hang in there, be persistent, and try your best to comply with all requests.

Need Legal Advice?

If you live in Chicago and are unable to keep up with your mortgage payments, applying for a loan modification may be a good option for you. The experienced loan modification lawyers at the Bentz Holguin Law Firm, LLC would be happy to sit down with you during a free consultation to discuss your legal options. Our office in Chicago can be reached at (312) 881-5112.