A home is a person’s most significant possession, and losing it can be devastating. In the recent past, a combination of a poor economy and declining real estate values have put many people in situations where they cannot afford to keep a home. Most will do whatever they can to save it, but success isn’t always simple. In the sections below, a discussion of some of the most common misconceptions surrounding loan modification services can be found.
Lenders must restructure a mortgage if the borrower owes more than the home’s value
Contrary to popular belief, mortgage lenders are not obligated to modify a loan, and they have the legal right to pursue all rights given to them in loan documents. HAMP, or the Making Homes Affordable program, only offers incentives to lenders agreeing to modify loans. Some lenders have reached state-level agreements where they offer high-risk borrowers alternatives if they meet strict qualifications, but these are the exception rather than the rule. While lenders rarely agree to cut a loan’s principal, they might extend the term or temporarily reduce the interest rate.
Lenders will offer a modification because it’s cheaper than foreclosure
Many property owners think that lenders want to avoid the risk and expense of foreclosure because the market is inundated with foreclosed properties. It may be years before a foreclosed property makes it to a judicial sale, and the lender typically gets the property back. Then, the lender is faced with the prospect of making a sale in a down market, which leads some to think that they will avoid foreclosure at all costs. The lender is not a bank. Rather, each loan is held in an investor-owned trust. Homeowners typically deal with loan servicers that collect payments and perform other administrative duties. While servicers do offer mortgage modification services, the guidelines are strict and the decision isn’t always up to the servicer.
Foreclosure is something many homeowners don’t want to face, and a loan modification is a viable option in many situations. It is important for clients facing foreclosure to seek qualified and individualized legal counsel from an attorney with us who is familiar with state law.