There are several ways that you can prevent a foreclosure on your home. You can catch up on the payments in one lump sum, refinance the mortgage loan, file a bankruptcy case, or apply for a home loan modification. Our Scottsdale home loan modification attorneys can explain the process of applying for a modification and help you determine if you may qualify for a modification of your mortgage.
How Does a Home Loan Modification Work?
A mortgage modification involves changing the terms of your loan. When you applied for your loan, the loan had certain terms, such as the amount borrowed, the interest rate, and the number of payments.
When you apply for a loan modification, you are asking the lender to change one or more of the original loan terms. Most people apply for a mortgage modification to prevent foreclosure. To help you keep your home, the lender could:
- Lower your interest rate;
- Lengthen the term of the loan (add additional payments to the end of the loan);
- Forgive part of the past due mortgage payments; or,
- Add the past due mortgage payments to the end of the loan.
The goal is to lower your monthly payments so that you can afford to keep your home.
During the mortgage crisis when foreclosures were increasing at substantial rates, the federal government enacted several programs to encourage mortgage modifications. Many of those programs have expired. However, many mortgage companies have procedures for applying for a home loan modification.
Unfortunately, the modification process can be time-consuming and frustrating. The lender may require substantial information and documentation to review. Also, the lender may have complicated steps and requirements that a homeowner must follow to qualify for a mortgage modification.
It can be helpful to consult with a Scottsdale loan modification lawyer if you want to apply for a loan modification. A loan modification attorney in Scottsdale understands the process, knows how to deal with a lender, and is aware of any special programs available to homeowners who need help with their mortgage.
Should I File Bankruptcy or Apply for a Loan Modification?
In some cases, filing a Chapter 13 bankruptcy case is preferable to obtaining a loan modification.
If you are struggling to pay other debts, a bankruptcy filing can help you deal with those debts before they create an additional financial hardship. Also, by taking care of those debts through the Chapter 13 plan, you have more money each month to pay your mortgage payments.
Through your Chapter 13 plan, you can catch up on the past due mortgage payments over time. In many cases, a Chapter 13 plan is scheduled for 60 months. Therefore, you could stretch out the past due payments for five years.
A mortgage company is not required to modify your loan. You could spend many months working on a loan modification to have it denied. The lender then demands that you pay the entire past due amount immediately, or it will begin foreclosure proceedings.
However, your mortgage company must work with you if you file a Chapter 13 case. The mortgage company cannot “opt-out” of your bankruptcy case. If you include the mortgage arrearage in your plan and pay all future payments on time, the lender has no reason to object to your bankruptcy plan.
Contact Our Scottsdale Loan Modification Attorneys for More Information
Deciding between a loan modification and Chapter 13 can be difficult. For more information, contact Allegiant Law Group at 602-562-1000 today to schedule your free consultation with a Scottsdale loan modification lawyer.