What about Principal Reductions?
Principal reductions are rare, however they are not impossible. Principal reductions may occur in several circumstances which are discussed below.
Your Lender may send you a letter stating that you qualify for a principal reduction, so you should always open your mail. If you need assistance in filling out the forms, you can always retain our law office to assist you.
With loan modifications, principal reductions occur when the homeowner is significantly underwater and it is usually an option for those who have low incomes, or those who have interest only loans, adjustable rate mortgages, or those who are underwater and have had a reduction in income or for people who have a unique situation. Some of those unique situations have been where the homeowner basically did a short refinance but borrowed the cash to purchase the house outright at close to fair market value, where there was an issue with the note and possible securitization issues, where the home was infested with mold and had structural issues, and where the home was located in such a remote place that the bank did not want to get the home back.
Sometimes Lenders will allow the settling of the note or the purchase of the underlying note, however few banks participate. It is a very lengthy process and it is never guaranteed that your Lender will be cooperative. Purchasing of the note is where you or a third party purchases your mortgage for only a fraction of what you owe on the note. Some Lenders will do this because they want to get out of a certain area, some Lenders may want to get out of the mortgage business, some Lenders sell their notes when they are viewed as a risky note, or when the borrower has defaulted on the note. Still other Lenders may have bought your note for pennies on the dollar and just want to make a small profit on the note and are willing to settle the note. There may be a variety of reasons a Lender would be willing to settle your note.
Another option is of course stripping the lien through bankruptcy or a cram down in bankruptcy. This is where we see larger sums of negative equity wiped out. Bankruptcy may not be an option for everyone, especially when the mortgage is the only debt. It is best to seek legal advice when it comes to which option may be the best for you.
Another program is the Nevada Hardest Hit Funds (NHHF) program. Still in the second quarter of 2012, only 52 principal reductions were given. At the time of this writing, the Nevada Hardest Hit Funds (NHHF) has decided to cease accepting applications, because they are assessing how much funding they have so as to not over commit and they have also ceased accepting applications because they are working with the backlog of applications they currently have.
Second lien stripping is usually an easier route, but the Lender still must participate in this program.
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Please feel free to contact us today so that we may discuss the options that are available to you.
Van and Associates Law Firm at 702-529-1011