CAN I MODIFY MY MORTGAGE LOAN AND GET REDUCED PAYMENTS?
Many homeowners are struggling to make their mortgage payments in this tough economy. To assist you, the federal government has created the Home Affordable Modification Program also known as HAMP. It is designed to help some borrowers make their payments more affordable. The HAMP program began in 2009. Prior to that time, lenders were very unwilling to modify the terms of a home mortgage loan. They might reinstate the loan if the borrower could pay back the arrears or they might agree to forbear from foreclosing if the borrower could pay the arrears over 12 months on top of the regular payments, but lenders were not usually willing to lower the interest rate and the monthly payments. So, what happened? The banking system almost collapsed and the government stepped in to bail out some of the banks. Those banks that participated in the bailout and took “TARP” money agreed to also participate in HAMP. Not every bank took the money, so not every bank participates in HAMP. Not to worry. Non-HAMP lenders have still shown a willingness to do “in-house” modifications under their own guidelines, which frequently are very similar to the U.S. Treasury guidelines.
With HAMP, your loan is modified to make your monthly mortgage payment no more than 31% of your gross (pre-tax) monthly income. If eligible, the modification permanently changes the original terms of your mortgage.
A modification may be an option if:
- You are ineligible to refinance
- You are facing a long-term hardship
- You are behind on your mortgage payments or likely to fall behind soon
- Your loan was originated on or before January 1, 2009 (i.e., the date you closed your loan)
- Your loan is owned by Fannie Mae or Freddie Mac or is serviced by a participating mortgage company. If you are not sure, contact us for assistance.
One thing to be on the watch for are scammers who try to take advantage of unsuspecting homeowners. Some of these scammers call themselves “consultants.” There is no such thing. A consultant is usually an unemployed mortgage broker who found a new way to earn income. The problem is that these people are not regulated or subject to the ethical rules that govern attorneys. Moreover, they make promises that they do not or can not keep. Some red flag warning signs are people who are located out of state. I have heard from many clients about how they sent money to someone like this and never got the help they paid for. That is not to say that results can be guaranteed in a load mod, but the person helping you should at least be able to try with their best efforts. Loan mod consultants often cross the line and undertake what is called unauthorized practice of law, doing things that only licensed lawyers are permitted to do. Unauthorized practice of law in New York is a misdemeanor. Sometimes, a clueless “consultant” will actually try to represent a homeowner in court only to be told by the judge to sit down and shut up. They are simply not allowed to represent you in court. Others will not even show up in court, and will just leave the homeowner hanging.
In the New York Supreme Court, there is now a requirement that all homeowners be given the option to participate in a mandatory foreclosure settlement conference. It is therefore essential that your loan mod lawyer also be an experienced foreclosure lawyer. If the loan mod is denied, the case is released from the settlement part of the court and then the lender’s attorneys will file a motion for summary judgment. If the loan mod is granted, it is usually only on a temporary basis which hopefully will lead to a permanent modification agreement later.