Mortgage Modifications In The Post-HAMP Era
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.