7 Things To Consider When You Go For Loan Modification

The most common scenario for a loan modification is usually a foreclosure. What most homeowners do not know is that going down this road can cause problems in the future. There are instances where lenders will allow and even encourage other options. For example, short sales, although not a popular option, many lenders will allow it. The thing to remember is whatever option you go with, the lender has the right to move forward with the foreclosure process until something works out.

As far as loan modification is concerned, following are the seven things to keep in mind:

  1. Most lenders will not stop the foreclosure process, while you are trying to figure things out. Therefore, be very clear about this from the very beginning and be sure you are on the same page with the lender. This process of the lender continuing the foreclosure while you are working on a solution is called dual-tracking in the banking world. And some people make the costly mistake by thinking it is illegal. In short, this is not the case.
  1. If you can find a beneficial loan modification, then consider yourself lucky. Most are not beneficial in the long run. Most lenders follow the federal government rules called HAMP (Home Affordable Modification Plan) when considering modifications. This usually involves adjusting interest rates and the term.
  1. If the loan modification does get approved, then it is time to take a close look at it. Many loan modifications come with lots of strings attached such as a balloon payment in one or two years. In other cases, the modification includes extending the term for as long as 60 years. Both scenarios are not too good, to say the least.
  1. Most loan modifications come with a three-month trial. Then there will be another review after that. Meanwhile, you are making payments. If the review does not go the applicant’s way, they can still foreclose. It doesn’t sound fair, but the lender has the legal right to do it.
  1. In some states, lenders are required to tell you about HAMP when you are considering a loan modification. They are required to do this even if they know the HAMP guidelines will not help you. Therefore, when they mention HAMP, take it with a grain of salt.
  1. Another common misunderstanding is that loan modification and mortgage refinancing are the same. This is not the case. Therefore the paper work will also be different. These could be different from lender to lender, but in most cases, you will need to provide a letter stating your hardship, pay stubs of everyone who lives in the house, utility bills, and bank statements.
  1. There are two different types of loan modifications. One is government run and the other is bank run. Methods done by both will be slightly different, which is why it is important to consult with a Queens real estate lawyer.

So, these are the things that you need to consider when looking for a loan modification. To know more about your loan modification, contact us today!

Author: RAYMOND D. RADOW
Ray Radow is a founding partner of the Radow Law Group, P.C. His practice concentrates on Real Estate and Commercial Litigation with a focus on Foreclosure Defense Litigation and Real Estate Transactions, as well as Personal Injury and Criminal Law. Since the onset of the housing crisis, Mr. Radow has represented countless borrowers faced with the looming prospect of foreclosure and has regularly obtained loan modifications for eligible clients, resulting in significant reductions in monthly mortgage payments and, most importantly, keeping families in their homes.

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