Q: What are Acceptable Hardship Situations?
Some common hardship situations include:
- Loss of job or income
- Death in the family
- Job relocation
- Military service
- Medical bills
It is tempting to blame the lender for your hardship due to their disorganization or mistake in processing payments or adjustment in the loan terms. We caution you to try to take responsibility on yourself rather than blame the lender (even though it’s often truly the lenders fault). In this sense, for a successful modification, you have to play by their rules unfortunately.
Q: What are the Benefits of Loan Modification?
Loan modification success results in your lender agreeing to make a change to your home loan payment in order to create affordable payments. This is meant to prevent foreclosure and help you stay in your home. Loans are modified in three primary ways (Realistically):
- Reducing your interest rate,
- Creating a longer term for your loan, or
- Shifting a large portion of the loan to the end of the loan as a balloon payment.
A successful loan modification will reduce the financial burden of loan payments, and get the homeowner out of foreclosure so they may keep their home in the future.
Q: Why Was My Loan Modification Denied by My Lender?
The most common reason lenders decline loan modifications is based on income. Most commonly insufficient income to support the mortgage payment going forward, or insufficient proof of income to convince the underwriter that you will not default again. In presenting long modification documents (and income documentation) to your lender, income must come in high enough to make a reasonable mortgage payment, but no so high that the lender doesn’t think you need any help. It can be a narrow window of where income needs to fall in order to qualify for your loan modification.
If your income seemed appropriate for you mortgage payment and you were still declined, you may have a good litigation option. Lenders wrongfully decline homeowners every day and without legal representation, homeowners often don’t realize the options they may have to keep their home.
Q: What is Commercial Loan Modification?
Business owners who have taken out commercial real estate loans have the ability to apply for a commercial loan modification as well. Commercial loan modification can be challenging as many of the protections afforded to homeowners do not apply to business loan situations, nonetheless, there are many options to explore with proper legal representation.
A successful commercial loan modification can prevent foreclosure on a business, reduce payments, lower interest rates, extend the terms of a loan, and temporarily suspend loan payments. You may also be able to create a commercial short sale, if this is the only way to prevent foreclosure and severe debt.
Q: Can a Loan Modification Eliminate Fees?
As part of preventing your foreclosure, a successful modification can eliminate many late fees and penalty fees that have accumulated. If not eliminated altogether, these fees can usually be added to the principal of the loan (along with back payments or “arrears”) so that the homeowner or property owner can begin making a reasonable monthly payment again.
Q: Where Can I Find More Information About My Loan Modification?
At McFarlin LLP, our legal team understands how complex and confusing the loan modification process can be to homeowners suffering a financial hardship. That’s why we provide in-depth legal assistance throughout the entire process.
To learn more about how we can guide you to the best result possible, call us at (949) 570-5025 and receive a no-cost consultation.