The coronavirus pandemic has dramatically set back a large percentage of Americans financially. All you have to do is turn on the television, open a web browser, or pick up a newspaper to see the numerous stories of families losing their homes or struggling to pay their rent or mortgage payments. However, the story is often much more complicated than these publications can detail.
That’s because while many Americans are falling behind on rent or mortgage payments, a great deal more are just getting by. However, this cycle has been unsustainable for many of these families, which means that many are teetering on the edge of eviction or foreclosure. With this situation settling in during the middle of winter – when utility bills are high and holiday bills are coming due – 2021 may be posed to be a huge year for these devastating events for families.
If you and your family are facing foreclosure due to falling behind on your mortgage payments, you have options. Here’s more of what you need to know – and how to possibly sidestep this traumatic experience yourself.
Loss Mitigation and What It Means for Those Facing Foreclosure
Believe it or not, there are actually numerous options for avoiding foreclosure, depending on what your individual financial and housing situation is. What’s more, the company that handles your home loan – or servicer, as they may be called – is actually on your side when it comes to ensuring that you know about all of these options. After all, they would really prefer you not end up in foreclosure, either!
These various options are collectively known as loss mitigation. Loss mitigation refers to any process by which you and your servicer work together to prevent foreclosure from happening to you. This can be achieved in a variety of ways, including but not limited to:
- Loan modification
- Forbearance agreements
- Payment plans, and more
Loan modification is perhaps the most common and most popular option among these. This is because it is one of the most easily-personalized options. The modification of a loan is just the of the renegotiation loan’s original terms to better fit the financial situation and repayment capabilities of the borrower. Its purpose it to make the regular payments more manageable and prevent the borrower from falling behind and falling into foreclosure.
A Focus on Loan Modifications
Why is the loan modification so popular in comparison to other options? Aside from just giving borrowers more options for tailoring the solution to their individual needs, modifications also typically lower interest rates. This can save borrowers a lot of money over time, especially if they still have many years left of repayments on their home loan.
While the modification of a loan will obviously extend the term of the loan – meaning more years of repayment obligation added to your plans – it also means those payments will be more manageable. In some cases, you may be able to negotiate overdue payment amounts into the terms of your new loan. This means that if you have fallen behind on making payments, that amount may be able to be worked into the repayment plan for your new loan – and you will no longer be considered “behind”, so long as you can make the first payment after modification on time.
It is important to note that you won’t usually be able to obtain a principal reduction as part of your modification – even if the outstanding balance of your loan is greater than the fair market value of your home.
How Can You Get a Loan Modification?
Can loan modification stop foreclosure? Very possibly – but only if you are able to get one!
To do so, you’ll need to start by contacting your loan servicer to begin your application for modification. In that application, you’ll probably see an outline of everything you’ll need to provide in terms of proof of your financial situation and need, but you can also inquire with your servicer for more information.
In general, you’ll need to demonstrate details about your finances, including your income, your regular expenses, and any other important details that may be relevant. You will be obligated to provide documentation, and while that might sound a little intimidating, there’s no need to worry. For most people, the process is simple enough to handle it without professional help.
Typically, you will be asked to provide documentation of the following:
- The fact that the home in question is your primary residence.
- Any financial difficulty or other hardship that you have been through. This may include anything from a divorce you’ve been through to the loss of a job. There are plenty of major life changes or circumstances that may qualify as a financial hardship, so if you’re not sure, talk to your lawyer about whether your situation is one of them.
- Your regular income or assets that will allow you to make payments on time under the new terms of a modification.
How can you be certain that you will be able to make the payments of a newly renegotiated loan? Generally, there will be a trial period – typically around three months – in which you will be asked to comply with the new terms of the loan and demonstrate that you can make the payments necessary to stay current.
So – Can Loan Modification Stop Foreclosure?
Now that you know more about the loan modification process and what it might mean for your individual case, you’re probably wondering – can loan modification stop foreclosure? The answer is yes, if you know what you’re doing and how to get that modification.
Obviously, if you have questions or concerns surrounding the process of loan modification and how it may be able to help you stop foreclosure, talk to a legal professional. The experienced staff at the Van Horn Law Group will help you better understand your options in the state of Florida.
