What About Loan Modifications?
If you are facing foreclosure and your mortgage payments are too high, a loan modification might be your best option. A loan modification is a permanent change in the terms of the original mortgage contract. Typically, the loan modification’s purpose is to allow the homeowner to obtain more favorable mortgage terms and stay in their home. When qualifying for a loan modification, Lenders are looking for the homeowner’s hardship and ability to pay the modified payment terms.
The loan may be altered in the following way:
- Interest rate reduction
- Extending the length of the loan (e.g. extending the mortgage payoff from 30 years to 40 years)
- Change the type of mortgage (e.g. ARM to Fixed)
Why a Modification May Make Sense
- Principal reduction
- Reduced monthly payments
- Reduced interest rates
- Delaying the foreclosure process
Qualifying for Loan Modification
Some of the common hardships that Lenders look for when granting a modification:
- Loss of Employment
- Death of a Spouse
- Military Relocation
- Reduction in income
- You can’t afford your payments, but can afford a modified payment.
These are some of the loan modification services that we offer:
- Combining past due payments into a modified loan repayment plan.
- Review appropriate documentation and help prepare documents to negotiate better terms for our clients usually through the Nevada Foreclosure Mediation program, through the Nevada Hardest Hit Funds program, or directly with the bank.
- Lower monthly payments
- Lower interest rates
- Fix the interest rate
- Extend the repayment period
- Reduction of the loan balance
- Wavier of past due interest
- Second lien removal/settlement
- Principal reduction in limited cases
- Commercial Mortgage Renegotiation
Do not just agree to a loan modification with an unaffordable payment, you will simply run through your savings, leading to you having no money and no house. Do not agree to a loan modification program that forces you to liquidate your retirement funds such as 401Ks and IRAS in order to make mortgage payments on a house that you ultimately cannot afford. The goal is not just to keep your house, but to have an affordable payment so that you can keep your house over the long term. Be realistic with what you can afford.
In most circumstances, a loan modification will not help a borrower, because it is a temporary band-aid for a larger issue. The average home appreciation in Las Vegas is 4% per year, if your home is, for example, currently worth $100,000, but you owe $200,000, it may take you 20 years to break even assuming $4,000 in appreciation based on simple math (this is not even taking into account compound interest). So you would essentially be renting for the next 20 years.
In some cases, some of the attorneys that we have relationships with have been able to reduce principal, but this is on a case by case basis and very rare. Please call us to set up an appointment with an attorney to discuss your options with regards to loan modifications.
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