Loan Modifications

A mortgage modification is a change in one or more of the terms of a mortgage, typically allowing a delinquent loan to be reinstated to “current” status and resulting in a new payment that a borrower can afford. The loan modification may be permanent or for a limited time. The modification generally changes the interest rate of a mortgage. In some instances, the term of the mortgage may be lengthened which also can help lower a monthly payment. Also, there is widely held belief that the mortgage lenders also regularly reduce the principal balances of mortgages. In reality, it is extremely rare that this happens.

The lenders have their own varying criteria for evaluating loan modification requests. Despite the varying criteria, most lenders require some sort of “hardship” (a reason why the borrower needs the loan modified). Common reasons for hardships for loan modifications include divorce, loss of job, reduction in income, illness, death of a spouse, etc…

We use loan modifications as a tool to stop foreclosure and get our clients an affordable monthly payment. There are many services that have recently sprung up to offer loan modification services, however, there is a real difference between what they might be offering and the services we provide. As an established local law firm, we will advise you on all of your available options and explain the pros and cons of each option. Further, you will meet with and have your questions answered by a licensed attorney, not an out-of-work loan officer.

Many of the so-called professionals proclaiming their ability to help borrowers with problem loans are either out-of-state lawyers who are not licensed to practice in Nevada or out-of-work mortgage officers. It is this group of mortgage officers who are primarily responsible for fueling the current mortgage crisis by putting homeowners in the risky loans in the first place. In this time of personal crisis, do you want to rely on the people who were driven by their greed to maximize their own commissions at your expense, or do you want a law firm with a history of helping homeowners get a handle on their financial crises?

Further, it seems that most of the persons offering loan modification services have no real experience in loss mitigation and are just selling the services of out-of-state companies. You never will have the opportunity to personally consult with the person who will represent you when negotiating with your lender(s). These loan modification services will just follow their adopted protocol for handling your file and not be able to review your unique situation.

Lastly, recent legislation was introduced in Congress in the first week of 2009 that would now allow Bankruptcy judges in Chapter 13 cases to modify first mortgages by:

• reducing the amount of the secured claim (i.e. lowering the balance on the mortgage/deed of trust that is secured by the home);
• changing the interest rate of the loan or modifying the adjustable feature of certain loans; and/or
• changing the term of the loan.

This bill, if enacted, would finally provide some relief to homeowners. Also, one of the provisions requires that a homeowner first attempt to modify the loan directly with the lender(s) before the loan can be modified by a Bankruptcy judge. We expect that if this becomes a law, the lenders will become more willing to provide better terms on their loan modifications (i.e. more principal reductions) or else they will face having a Bankruptcy judge make the decision for them.

This Legislation was approved by the House of Representatives. It is now waiting for the U.S. Senate to approve. It is unclear when, or if, this will happen.

Please contact The Christopher Legal Group for additional information on modifying your mortgage or for an update of the status of this legislation.