What Happens To Your Home When You Can No Longer Afford Your Mortgage Payment?
With the turmoil in the financial markets, rise in unemployment, drop in the equity markets, and the incredible increase in the amount of mortgage lates and foreclosures around the country, is there anything that a homeowner can do to save mortgage refinancing home from the lender that is holding the mortgage note?
Typically, when a borrower is late making a mortgage payment, the lender would notify them, allow a certain amount of time to go by, and then begin foreclosure proceedings. While that still goes on, today, with the pressure being applied by the government on lenders to be more flexible and work with borrowers in order to allow them to remain in the house, a new opportunity for borrowers exists in the form of mortgage modifications.
What Is A Mortgage Modification
When a homeowner can demonstrate a hardship that is taking away their ability to make their mortgage payments at the current level, a mortgage modification can be negotiated that could:
- Lower the existing rate and turn an adjustable rate into a fixed rate.
- Put the amount that has been missed on the back of the loan in a recapitalization.
- Defer payments for a number of months.
- In some cases reduce the principal amount of the loan
The idea is to take a loan that would become non-performing for the lender and would put the homeowner into a foreclosure, and turn it into a loan that will be performing for the bank and that the borrower can afford. It is a classic win-win situation.
How Is A Modification Accomplished
There are two ways for a modification to be accomplished. The 1st is for a homeowner to go to their lender and negotiate the modification themselves. In many cases this can be penny wise and dollar foolish, because a homeowner is in a refinancing mortgage of maximum stress and anxiety, doesn't really know the process and is typically dealing with a lender that may not have a real interest in working with them or in helping them.
The other way is to work with an attorney who is specially trained in modifications, who knows the people in the banks to speak with, knows the borrowers rights and all of the laws in a specific jurisdiction. What are some of the reasons to use a professional:
- The complexity of the process.
- They know the point people in the banks to go to.
- They know the exact information that a bank wants to see and how to package and present it.
- They know what can be negotiated and what should be attainable.
- Their ability to halt or delay the foreclosure process.
The bottom line is that for the foreseeable future a homeowner should not assume that they have no options, but know that the pendulum has swung in their direction in that the powers that be want to see people stay in their homes.
Michael Haltman, President
Exeter Commercial LLC
Jericho, New York
The Political and Financial Markets Commentator
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