In the past few years, many Americans have faced the prospect of foreclosure. The current economic climate and lack of job stability have caused an alarming rise in mortgage defaults, forcing people to make tough choices. There are several options available to someone facing foreclosure, including but not limited to bankruptcy. If you are more than sixty days in default on your mortgage, bankruptcy is not the only option; Onondaga and Westchester County foreclosure attorney Theodore Araujo can help you decide if a loan modification may be right for you.
How Does a Loan Modification Work?
A loan modification is a permanent change to one or more terms of your mortgage loan. The result is an affordable monthly payment and a current, reinstated mortgage. The U.S. Department of Housing and Urban Development (HUD) guidelines provide many options to save your home. With a well-negotiated loan modification, you could:
- Permanently reduce your interest rate. A rate reduction could lower your monthly payment and reduce the total amount you pay over the life of the loan.
- Capitalize the arrearage into the loan, taking any default in principal, interest or escrow and rolling it into the mortgage balance.
- Reamortize the remaining balance by extending the term of your loan to 360 months, or thirty years, from the date of the modification, giving you more time to pay the balance.
- Eliminate late fees.
- Obtain a fixed interest rate, which protects you from unforeseeable rate and payment changes.
Do I Qualify for a Loan Modification?
To obtain a loan modification, you must meet the following criteria:
- You must be sixty-one days or more in default on your loan.
- You must have a verifiable loss in income or increase in necessary living expenses.
- You must be able to show that you have enough income to make your modified payment.
- Your loan must be at least 12 months old.
- You cannot have another FHA mortgage.
- The mortgage must remain the first mortgage on the house.
- Your mortgage must not already be in foreclosure.
There are many clear benefits to a loan modification. However, the recent mortgage crisis has created a perfect breeding ground for scam artists charging exorbitant fees to “help” individuals obtain loan modifications. If you are facing foreclosure and want advice about your options from an honest and knowledgeable Onondaga and Westchester County foreclosure lawyer, do not wait until it is too late. Contact Theodore Araujo at the Bankruptcy Law Center now for a free consultation.