If you have fallen into a recent financial hardship and you know that you may not be able to afford your mortgage payment then the time to act is now. Seeking a loan modification from your lender will allow you to renegotiate the terms of your mortgage agreement, resulting a lower, more affordable payment. A loan modification is a viable alternative to falling behind on payments and facing foreclosure or bankruptcy. Merritt Law Office offers a free case evaluation in which we will determine if a loan modification is a viable option for your situation.
There are a few qualifications that you must meet before being eligible for a loan modification:
- Prove that you are unable to make your monthly mortgage payment due to a true financial hardship (e.g. significant loss of income, divorce, reduction in pay or hours),
- Provide all documentation (e.g. bank statements, hardship letters, proof of income, etc.) requested by your lender in a timely manner, and
- Be able to successfully complete a trial period in which you are able to make timely payments of the reduced amount.
In a loan modification, your mortgage lender may agree to one or more of the following term revisions that would result in smaller, more affordable monthly payments:
- Lower interest rate,
- Convert a variable interest rate into a fixed interest rate, or
- Extend the length of the mortgage loan term (e.g. from 15 years to 30 years).
If you are facing a temporary financial hardship (e.g. short term company shut down or other loss of hours) and miss some of your mortgage payments, then signing up for a repayment plan will allow you to catch up on those missed payments once your finances are back on track.
A repayment plan distributes your missed payments over a period of several months, adding a portion of the past due balance to your regular monthly payment. Once you have paid off the overdue amount, you will resume making just your regular monthly payment.
This plan is meant for those who have missed only a few payments. The length of time allowed to catch up on the past due amount depends on how many months you are behind on your payments but are usually set as three or six month terms.
In a forbearance agreement, your lender agrees to reduce or suspend your monthly payment for a limited time due to a temporary financial hardship. During the forbearance agreement period, the lender also agrees to not initiate a foreclosure due to lack of proper payment. In exchange, you will be required to resume your regular monthly payments at the end of the forbearance period. You will also be required to pay any missed payments plus interest, late fees, taxes, and insurance.
This agreement is established in advance, so if you know that you will not be able to afford your next mortgage payment, contact your lender immediately. If you are not able to establish a forbearance or other type of payment agreement, contact our office for assistance. We offer free case evaluations and will do our best to provide you foreclosure defense.