Mortgage Modification To Avoid Foreclosure?

Home Loan Modification has become increasingly attractive as the foreclosure rates continue to climb. Prior to the deterioration in the real estate market, some mortgage lenders were resistant to permit homeowners looking at foreclosure, to take advantage of home loan modification programs. Now with the present state of the economy and so many hard working homeowners at risk of losing their home, lenders view mortgage modification as a more acceptable practice.

A mortgage modification, also known as a home loan modification, empowers homeowners to decrease their monthly mortgage payments by re-negotiating the provisions of the first loan. This is one of the most sought alternatives to foreclosure as it allows people in the midst of financial hardship to stay in and keep their home. By acquiring a new payment arrangement through mortgage modification people can avoid foreclosure and lenders still receive payments.

While not all mortgage companies offer this type of program, it is surely in your best interest to at least ask. Anyone facing the potentiality of foreclosure needs to do their own due diligence and proactively find ways to save their home. Understand, lenders do not want your home, they make money by lending money, not by foreclosing on homes. If you are in jeopardy of losing your home, you owe it to yourself to discuss choices with your lender.

Negotiating a home loan modification is often arduous, there is a process. You must meet the requirements for the program and provide sufficient documentation. You will be obliged to show that you can genuinely pay the new loan. Modifying your payment is just one of many options. However, it is one of the most convenient methods of rescuing your home from foreclosure.

Some people think that it will cost them nothing to just give up their home and let it go into foreclosure. In actuality, foreclosure will cost you money and will negatively affect your credit. Count the cost. Avoid Foreclosure With A Home Loan Modification.

The loan modification process can be mind-boggling and confusing for many worried homeowners. If you are uneasy with negotiating with your lender by yourself or if you want to better understand your options, contact a loan modification attorney for assistance.

By: Ginger Taylor

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This is a complex question and the answer will vary depending on your specific situation. I cannot stress enough, the importance of seeking a qualified consumer attorney familiar with the applicable laws in this area. The wrong advice could cost you thousands of dollars!

Short Sale: A short sale is the process of selling a piece of real property for less than what is owed on the loan(s). Short sales require the approval of the lender who will be affected by the sale, because the funds received will be’short’ of what is owed to the lender. For example, consider a person who has real property worth $500k, with a first mortgage of $400k and a second mortgage of $200k. In this case, the second mortgage holder would have to approve the short sale and agree to accept less than the full balance owed on the loan. Even if the lender agrees to accept this arrangement, the borrower is not entirely off the hook just yet. A short sale by definition is an agreement to sell property for less than what is owed. If the lender agrees to accept a short sale, they are most often agreeing to forgive the remaining debt that is owed so there is no deficiency balance the borrower can be sued for (Read the agreement very carefully. Some lenders may try to hold you responsible for any deficiency balance as an unsecured creditor.) However, the forgiveness of debt is a taxable event that can trigger a 1099-C by the lender requiring the borrower to pay income taxes on the amount of debt forgiven. With the drastic decrease in home values over the last several years, the tax liability on forgiven debt can be thousands of dollars in this scenario! There may be exceptions to this general rule under State and Federal law and consumers are strongly encouraged to discuss their potential applicability with an accountant before moving forward with this option.

Foreclosure: Foreclosure is the process of taking back property, generally pursuant to a deed of trust or other security interest. California is a non-judicial foreclosure state, meaning the lender does not need to get the court system involved in the process in order to recover the property. Judicial foreclosure is an available remedy in California, however it is the rare instance that it is pursued. Borrowers who are contemplating letting their home foreclose need to be aware of exactly what that decision means to them.

Purchase Money Rule- This statute prevents a judgment from being entered against you for any deficiency balance resulting from a foreclosure assuming the following is true:

1) The lender(s) loaned you 100% of the money to purchase the property. (Includes 80/20 loans on 100% financed property).

2) Upon the original purchase, you occupied the home as your primary residence.

3) The loan(s) have not been refinanced, or purchase money HELOC’s have not been paid down and borrowed against.

One Action Rule- Lenders in California are allowed to take but one action against you, either a non-judicial foreclosure (ie. take back the property) or a judicial foreclosure (ie. sue you on the contract/loan.) Because of the uncertainty and costs associated with judicial foreclosures, they rarely take place. The One Action Rule may not apply to a sold out junior lienholder who has not had the option to take their ‘One Action.’ Subject to the Purchase Money Rule above, junior lienholders may have recourse against borrowers in this instance.

Forgiveness of Debt Rule- California and the IRS tax you for the amount of forgiven debt in any given year. Debt is forgiven when the lender gives up all rights to collect the debt or are otherwise leally barred from collection.

Insolvency Exception- California and the IRS both exclude forgiven debt as taxable income, but only to the extent you are insolvent. The insolvency test is met when your debts exceed your assets, and assets include all real and personal property including retirement accounts.

Bankruptcy: For those individuals who have refinanced their original loans, taken out equity lines, or in addition have other significant debts they want to eliminate, bankruptcy may be the choice for them. In this instance, bankruptcy would discharge any money owed to the lender for a deficiency balance and also prevents the lender from suing to collect it. Moreover, bankruptcy would wipe out any tax implications that would normally result from a short sale or foreclosure.

The bottom line here is to do your homework and get competent advice before choosing the course of action that best suits you.

For more information regarding short sales, forecloses, or for any other bankruptcy law questions, contact The Larkin Law Firm at http://www.live-debt-free-now.com

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Mortgage Modification Explained

A mortgage modification is a change to your loan agreement by the lien holder (bank or other financial institution). The purpose of a mortgage modification is to lower your monthly payments to make them more affordable. Banks are more receptive to mortgage modifications in light of the tremendous losses they are taking on foreclosures and short sales.

Banks are open to mortgage modifications because they are trying to limit the number of homes they are foreclosing on and accepting short sales on. By approving a mortgage modification the bank and the homeowner win. This does not mean, however, that every mortgage modification request will be approved.

A mortgage modification can be a permanent change to the terms of your mortgage or a temporary change depending on many factors. When you or your mortgage modification company are negotiating the terms of the modification you will want to make sure you consider both your immediate and future economic goals and expectations.

Because the lender is the one who has to give final approval of the mortgage modification and therefore are a party to the transaction, the actual terms of the mortgage are changed. This could include a principal change, a rate change, a term change or any combination of these things.

It is important for you to understand what is being changed and the short-term and long-term impact of those changes. A new amortization schedule should be reviewed and questions asked prior to you finalizing your mortgage modification.

Many homeowners are seeking legal counsel when they are looking for a mortgage modification. They know that hiring a lawyer means someone is specifically focused on their needs. The lender’s primary focus is their needs. Your primary focus is yours. It is important to make sure you fully understand the transaction before making any final decisions.

If you are struggling to pay your mortgage you should speak to someone about getting a mortgage modification.

Related information for mortgage modification

By: Robert Melillo

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How To Use The Law To Help You Stop Mortgage Foreclosure

You can use the law to help you stop mortgage foreclosure on your home but you need to know what your options are and what you are looking for. Your best bet is to hire a real estate attorney to look at the foreclosure documents you received as well as your loan origination documents for any mistakes.

The Truth in Lending Act may be the perfect ally for you to stop mortgage foreclosure if you want to call into question the validity of your mortgage loan. If you want to go this route, you will need to prove that your originating loan documents were wrong. The area where this really comes into play is if your mortgage company made any mistakes in disclosing vital financial pieces of information. If this is the case, it is possible that your loan itself could be canceled. Here is where it is very important to have an attorney who is familiar with Regulation Z (has many of the detailed requirements of the Truth in Lending Act).

Some truth in lending areas that could help you stop mortgage foreclosure that you might want to have your attorney verify on your loan:
– Your mortgage company having more money in your escrow account than they are allowed.
– Not putting information in the documents that describes how you can get rid of your private mortgage insurance.
– Not adjusting your ARM (adjustable rate mortgage) correctly.
– Not including referral fees to the originator of the mortgage.

If you are going to try to use the Truth in Lending Act to stop mortgage foreclosure, you are going to need to make sure that your attorney goes through all of your loan origination documents with a fine-tooth comb. Any errors, mistakes or discrepancies could mean the difference between being able to stop mortgage foreclosure and losing your home.

Some other legal avenues that you may have available to you to stop mortgage foreclosure are:
– If you can prove that your mortgage company lost any of your payments. Having clear and detailed records on this will be your best defense.
– If you have an FHA-insured loan, you should have received information about preforeclosure counseling. This is required by law for FHA-insured loans.
– If your mortgage company accepted payment from you after foreclosure was filed on the home.

By: Jill B

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Stop Foreclosure – So What Is A Mortgage Loan Modification And How Does It Work?

Foreclosures are a problem encountered by many home owners and are sometimes unpreventable by conventional means. A foreclosure notice is seen by many as a sign of impending doom from which there is no release, but many prospective homeowners fail to realize that there are methods of making a foreclosure stop in its tracks by a loan modification. Previously available only to the underprivileged or people who had fallen on hard times (Losing a job, Medical conditions, Divorce, excessive debt etc.) certain corporations are willing to provide the facility of a loan modification to the average Joe or Jane.

So what is a loan modification and how does it work? In short, a Loan Modification reduces the interest rate of a mortgage and defers some of the principle owed by the borrower to a more realistic level. To receive a mortgage modification one must give valid and logical reasons as to why a mortgage modification is required. The prerequisite for a mortgage modification is based on financial, emotional or physical hardships. Valid reasons must be given for seeking a mortgage modification — not everyone can get one, but if you can provide even a couple of valid reasons for why you require one, your foreclosure notice will be a thing of the past. That’s not all; however, one must also provide credit reports, previous reports of bankruptcy and so on to ensure the integrity of the clients’ claims. If everything adds up, you will receive a mortgage modification, and a portion of the principal you owe will be deferred to a later date making things much more manageable.

In short, stopping foreclosure with a loan modification is a viable exit strategy for most people facing imminent foreclosure. The proposed solution could save you from future hassles and make you say bye-bye to your financial issues with foreclosures.

By: Jason Witts

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3 Powerful Principles For Negotiating Home Loan Modification Terms

We’ll get to Home Loan Modification negotiation in a minute. First off, I’d like to explain three powerful principles for negotiations. The examples below will help portray the necessity of these three principles.

When buying or selling a car, many people automatically think of getting a trade-in value quote at KBB or Edmunds to know how much the car is worth. These quotes give both buyer and seller great negotiating power. As a seller of a car, the more positive information that you can provide to the buyer, the more likely he or she will agree to the price and terms that you have set.

The same is true when negotiating the modification of mortgage loan terms. Now, here are the 3 principles that will give you an edge:

1.Turn the Negative into Positive

The lending institution will require you to write a hardship letter. This letter is a vital tool in pleading your case for obtaining a modification of your mortgage. The negatives of job loss, lay-offs and other financial struggles can be turned into positives by stating that those issues were in the past or will soon be. You can explain how your financial situation has changed or is changing. If a lender can be convinced that your situation is or will be getting better, even in the slightest, and that modifying your home loan will make it possible for you to repay them, they will be much more likely to offer a loan modification workout to you. Financials and documentation of income sources will be proof to the lender that you have the capability to pay the amount requested in the new modified loan.

2. Know your Options

Knowing your options, such as the different rates at different term lengths that are available to you will give you great negotiation power. These options can be found by getting home loan modification quotes. You can get these quotes for free online. The quotes will show you the estimated amounts that you will be paying at the different rates and term lengths. You can also speak with your lender or another professional that can help you figure out your options and guide you to the best decision.

3.Let the papers do the talking

If you fear negotiating or feel that you will be weak at it, remember this key factor in negotiations: If you can gather enough documents and evidence that prove your point of view, you negotiate favorable results for yourself. For example, say you want to lose 15 lbs a day and a dietician tells you that you can lose it by using her Ultimate Weight Loss program, you would probably just pass it up, even though 15 lbs a day would be the exact amount you want to lose. But if the dietician can show you proof, on paper, from research, that the diet can in reality do as she says, then you would be more likely to believe her and agree to the diet. That is the power of proof in negotiations.

The same is true with any negotiation and is true in negotiations with lending institutions. Prove to them that it is in their best interest to modify your mortgage and you will be successful. Prove to them that you will be able to make the monthly payments at the lower interest rate and/or longer term.

Home Loan Modification can reduce your payments and provide a way for you to stay in your home. The more you know the options available to you, the better the results will be for you.

By: Bill Witherman

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Mortgage Modification Tips – 6 Tips For Negotiating Modification Terms

Home Loan Modification is defined as the process where the terms of a home loan are modified outside the original terms of the contract agreed to by the lender and borrower. During this process, interest and principal payments are made till you pay off the mortgage in full and the lender holds the lien till then. Any change to the mortgage terms is considered a modification.

Negotiation

1. Before going for a Home Loan modification, find out the status of your finances and fix an income which you can bring in each month. Know how much you spend on bills and where you can make some cost cutting. Some non-profit counseling services can help you with this and also guide you for a negotiation with your lender.

2. Consult with your lender regarding the Home Loan modification requirements and inform your lender about your situation and how he or she can help you to overcome this.

3. Be ready with an answer against the lenders inquiries about your ability to repay the loan. It is better to submit an initial proposal to your lender.

4. Ask the lender for forbearance or to postpone payments for a couple of months until you recover your financial problems in case you encounter some dire circumstances in the future.

5. In case you possess an adjustable rate mortgage (ARM) with higher monthly payments, ask your lender to switch your mortgage to a fixed rate mortgage and assure him or her about your ability to pay a fixed rate mortgage.

6. Documents required by the bank are: a letter documenting and explaining your hardship, proof of current income and capability to make modified loan payment, detailed monthly expense report or budget, etc.,

Benefits

The process of Home Loan Modification itself is designed to get the maximum benefits to borrowers and a few of them are as follows:

a) Status-quo on credit rating- this process does no harm to you.

b) You can avoid foreclosure and you are free to sell the home later

c) Terms of the home loan are easily modified to work within borrower’s financial means.

d) Families are relaxed as they can stay in their homes with peace of mind and without fear of losing their home.

Home Loan Modifications are a must for those who have big debt, expect foreclosure at any time, or are in fear of losing their home. Hence, this program will be a blessing to any borrower who is struggling to make their monthly payments and constrained to lead a life of hardship in view of accelerating expenses and economic downturn.

By: Jason Witts

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Generally, a person can loan some amount against his property to a bank or other lending institution. The higher the market value of the property, the higher the loan amount will be. As soon as the contract is sealed, the mortgage loan is issued. This gives the lender the right to foreclose on the property if the money is not paid according to the loan terms.

The right of redemption is given to the property owner to redeem his or her foreclosed property back from the person who purchased it at the foreclosure sale. Many homeowners do not understand their redemption rights after a foreclosure. As a result they often miss the opportunity to buy their home back after the foreclosure auction.

Right of Redemption is totally different from the right of reinstatement because:

1. The homeowner may still have a chance to redeem the property back, provided it is sold by judicial foreclosure.
2. While the homeowner can reinstate their mortgage by paying the delinquencies, the redemption involves paying the redemption price, which means paying the outstanding principal balance including other fees and charges.
3. A homeowner cannot invoke this right over his or her property at a trustee’s sale or sold under a trustee’s sale.

In other words, it is only under judicial foreclosure that the right of redemption can be called. This is the reason why judicial foreclosure is less preferred by lenders. In addition, it makes the house in question hard to sell since it is being held until the expiration of the redemption period.

How long can a redemption period last?

Redemption periods change from state to state. The calculation would be base on the home’s value when sold, and whether the proceeds of the sale are enough to pay off the secured debt on the property. If it is, the redemption period will last for 3 months, otherwise, 12 months. There are states that allow the extension of a redemption period if the foreclosure is found faulty or has resulted from fraud.

What Exactly Has to be Paid to Reclaim a Home with Redemption Rights?

The redemption price must be paid in order to redeem the foreclosed house. The original homeowner must pay the buyer the outstanding balance or the principal mortgage amount, including the taxes, costs and interest.

Redemption Rights As Seen by Foreclosure Investors

The original property owner can still buy the property back as long as the redemption value is produced. Before you purchase a foreclosed home, you need to know how long the redemption period will take. In some states, as soon as the property is purchased, the original homeowner has lost their right to buy the property back. If this is the case, your investment is safe and you can move on putting it on the market again. But, since it usually will take 12 months by most state’s laws, the original homeowner will have plenty of time to pay the redemption price which puts your investment at risk.

If possible eliminate this risk by buying the redemption rights from the homeowner either before the auction or shortly after. Foreclosed homeowners are typically in financial trouble, so your luck in negotiating might prove fruitful.

If you are a homeowner facing foreclosure or plan on investing in a foreclosure, knowing how the process works for both parties is essential. I urge you to speak with a professional and get familiar with your state’s laws

What Are Your Foreclosure Rights?

If you are going to fight the foreclosure of your home, you need to know what your foreclosure rights are and how to use them to your best advantage. This means getting educated and if you want to save your home, it means getting educated quickly.

The first thing you need to know is that every state has different foreclosure laws. There is not one universal law that governs all states. What this means is that you need to research the laws for your state to figure out what they are. Because whatever those laws are, that is what governs your foreclosure rights.

A good place to start looking to find out what your foreclosure rights are is the website for your state. Doing a search for foreclosure should point you in the right direction. That should at least give you some information and hopefully a phone number to call. I know that in Colorado, there is a free foreclosure hotline that offers free assistance. Because of the current foreclosure crisis in the U.S., many states are now offering all kinds of different free assistance to homeowners to help them understand their foreclosure rights and stop the foreclosure of their homes.

Another good place to look to understand your foreclosure rights is an attorney. I know that it can be difficult or even impossible to afford an attorney when you are facing foreclosure but there are resources out there that can help. If your income is low enough, you might be able to qualify for free help from an attorney or you may be able to find an attorney that would take on your situation pro bono (for free). You will never find out unless you do a little digging and unless you ask an attorney if they are willing to help you.

Doing some research on the internet can also help you understand your foreclosure rights. Sit down with the documents that your mortgage company’s lawyers have sent you and look up every word or phrase that you do not understand. That is what I did and it helped me get a better idea of what I was dealing with. My one warning here is that be careful who you listen to. There are plenty of people out there who try to take advantage of people who are in the middle of foreclosure. Look at more than one website to get your information. It gives you different perspectives as well as giving you a better idea of whether or not it is actually credible, good information.

By: Jill B

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So many people believe that once they receive the letter from their mortgage company that the home has entered the foreclosure process, they have to leave. This is the absolute last thing you want to do. Even though the foreclosure process has begun, you are still the legal owner of the home and it will remain that way until you sell it or it becomes sold through a foreclosure auction. Why leave the house unless you have to, especially if you would like to keep it.

If you do want to keep the house, you want to make sure that you are looking through all of the options that are available to you out there. The more you research, the more you will find that there are so many ways you can get the funding you need to save your home. Even your mortgage company may have a few options for you to look into. Many mortgage companies can offer their borrowers repayment plans, loan modifications or maybe even a refinance.

Speaking of refinance, you can still go out to other lenders to seek financial assistance from them. You can refinance your home with another lender, which will automatically stop the foreclosure proceedings. Some people are told that they do not have this option while the home is in foreclosure but you do. You can even sell the home if you like.

Another thing that you want to research is whether or not there is a redemption period for foreclosed homes in your state. If you are expecting a large sum of money that is enough to completely pay off the mortgage or your refinance is running a little behind, you may be able to pay off the loan and retain all rights to the home, even after the foreclosure sale. This is because of what is called a redemption period. This is a certain amount of time that the borrower has after the foreclosure sale to "make good" and pay off the loan. During this time, as the homeowner, you should still have full rights to remain in the home. For specifics on the laws in your state, you will want to consult an attorney.

You also have the right as the homeowner to not be harassed by collection calls. Sure, you are past due with your mortgage payments but that does not mean that you have waived your right to be treated with respect. Understand that there are certain laws that protect you. The mortgage company is not allowed to leave twenty messages on your answering machine in one day. They also are not allowed to name call or threaten you with action that they have no intention on taking. In addition, they cannot call you before eight in the morning or after nine at night. If your mortgage company is doing any of these things, you will want to consult an attorney.

Make sure that you are taking a stand as the homeowner. It is not like you are the first person to run into financial difficulty. Find out what all of your rights are and make sure that you exercise them.

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