How To Use Loan Modifications To Stop Foreclosure

More and more clients are seeking loan modifications to change their loan payment terms as their ARMs reset or simply because of changed circumstances that make paying their regular mortgage payment too difficult. Most lenders appear willing to consider this. They have entire “Loss Mitigation” departments set up for this. Keep in mind that most lenders do not want to foreclose property, especially property that has no equity because the market value has declined.

Typically, a lender will want proof of income, a hardship letter, and a budget. It pays to have an experienced loan modification attorney assisting you with this. Of course, there are no guarantees that a bank will modify. I have seen many clients come to me after trying this on their own and messing it up, only to get denied. Often, this was avoidable. This process is a negotiation and workout. Having an attorney shows the bank that the homeowner is serious. An attorney can also communicate more effectively with the bank’s attorneys and can guide the homeowner through the laws and other options that may be available.

Homeowners should beware of any out of state modification companies. There now appears to be a hotbed of them forming in California. Many violate New York laws in several ways. They are effectively practicing law in this State without a license and may not even have attorneys on staff in their own states. Non-attorney rescue scams are also not allowed to charge a fee in advance for this type of service and cannot give legal advice. Clients often miss possible claims arising out of predatory lending or the possiblity to discharge (wipe out) debts in Chapter 13 while still keeping their home. Non-attorney companies are, in my opinion, a very dangerous alternative for the homeowner. Many clients have told me they paid a fee to some out of state company that won’t return their calls. Be careful who you rely on.