If you face circumstances affecting your ability to pay your mortgage, there are mortgage repayment options that could help you. With a loan modification, you may be able to adjust your mortgage payments so that you will not have to fear foreclosure.
Many homeowners have fallen behind on their mortgages. The scary idea of losing their home is becoming more of a reality. If this sounds like your situation, it is time to hire a Chicago loan modification attorney. With a loan modification, you can protect your credit and alleviate the stress created by unaffordable loan payments.
What Is A Loan Modification?
A loan modification is a change to your current loan terms. Usually, it involves the lender adjusting your mortgage so that your payments are lower. Lenders have various avenues to achieve this. Their loan modification options include everything from providing a different type of mortgage loan to altering the length or interest rates for your current mortgage.
A loan modification considers your current circumstances and adjusts your payments to an amount you can afford. The purpose of the modification is to remove your risk of foreclosure due to payment issues.
How Do You Get a Loan Modification?
It’s a good idea to consult with a Chicago loan modification attorney to help you determine whether loan modification is a good option for you. A loan modification is a process with several steps:
- The homeowner applies to their lender for a loan modification;
- The lender evaluates the homeowner’s financial circumstances and determines whether the homeowner is eligible for a loan modification;
- If the lender decides that the homeowner is the right candidate for a loan modification, they offer the homeowner new terms and conditions for their mortgage; and
- If the homeowner accepts the modification offer, they sign an adjusted or new mortgage agreement.
A Chicago area loan modification lawyer can help you with each step of the process. They will begin by meeting with you to discuss your full circumstances. If you choose to pursue a loan modification, the attorney will help you apply to your lender.
How Does a Loan Modification Reduce Payments?
Lenders have several types of loan modifications to help you reduce your payments. Most lenders accomplish reducing your mortgage payments by:
- Giving you more time (additional years) to pay off your full mortgage;
- Applying a lower interest rate to your mortgage; or
- Changing your loan to an entirely different type of mortgage (for instance, changing to a reverse mortgage).
Here is an example: You cannot work at your previous occupation due to a sudden injury. You can no longer afford the mortgage payments on your 15-year mortgage. You apply for a loan modification. Your lender may offer to extend your loan term to 30 years, decreasing your monthly payment. That same lender could also propose a change of a lower interest rate on your remaining mortgage, which would also lower your payment but keep the same loan term.
If you accept either modification offer, the terms and conditions will be in writing for you to sign. The modification terms would then replace the terms (payment amount, length, etc.) of your current mortgage.
Your loan modification lawyer will work with the lender to get you the best loan modification terms for your situation. The attorney, having met with you, will know what amount you can afford. In working with your lender, they will seek a loan modification that gets you to that amount by the best method available.
How Do You Qualify for a Mortgage Loan Modification?
Each lender has criteria for eligibility for loan modification.
Your loan modification attorney can research the policies of your lender regarding loan modification eligibility. They then will tell your story to the lender to help you qualify. If a loan modification is not the viable route, your loan modification attorney will help you with other options.
There are three main factors a lender typically looks at to determine loan modification eligibility.
Circumstances Prompting the Modification
In most cases, loan modifications are available only to those who have experienced a long-term reduction in income resulting from a crisis or financial hardship. For example, someone who lost their spouse and is going from a two-income household to a one-income household might qualify.
Generally, you must show a good track record of payments up until the date of the crisis. You will also need to show that the current payment is very challenging for you to make, which may be apparent if you have only recently missed payments.
Ability to Make Future Payments
Finally, you need to provide evidence that you can meet the terms and conditions of a modified loan. For example, if you have gone from two incomes to one due to the death of a spouse, the lender would want to see that you have income adequate to make the modified payments.
What Crises Qualify for a Loan Modification?
It is up to each lender to decide if a circumstance is considered a crisis for loan modification purposes. The most common examples of a crisis or financial hardship that warrant consideration for a loan modification are:
- Long-term illness or disability;
- Sudden loss of income due to death or injury;
- Death of a family member (and loss of their income);
- Natural or declared disaster; or
- A sudden and very high increase in housing related costs, such as property taxes or homeowner association fees.
The list is just an illustration of events. Do not rule out loan modification as an option just because your specific situation is not listed. For instance, you may find yourself suddenly offering financial assistance to elderly parents. To keep them safe, you have taken on their bills or hired help to provide home care for them. Providing this much needed support impacts your finances so much that you have missed your mortgage payments. Your lender may find your situation appropriate for a loan modification.
If you have experienced a hardship that has affected your ability to pay your mortgage, contact a loan modification lawyer. The lawyers understand life’s challenges and how to present them as a financial crisis to a lender. Let the lawyer review your situation and help you pursue a loan modification.
What Happens to the Original Mortgage If You Get a Loan Modification?
Your loan modification will be a new contract that will replace (cancel) your current mortgage contract. Your modified new loan will have terms and conditions that you will need to meet, just as there are conditions with your existing mortgage.
A new or modified contract may sound scary, but it is just a change to your agreement so that you can reduce your monthly payment to a more affordable amount. You will not be handling two mortgages under a loan modification.
What Are the Advantages and Disadvantages of a Loan Modification?
As with any significant financial decision and any contract, it is essential to evaluate how a loan modification will affect you before you commit. The advantages of a loan modification include:
- Your loan terms will change immediately to loan payments that you are financially able to handle;
- If you were facing foreclosure, the process ends; and
- Your credit can be protected after being at risk or negatively impacted by missed payments.
Disadvantages of a loan modification to consider are:
- Lenders don’t always offer loan modification to a person more than once, so, you may not have the opportunity to do so again in the future;
- If you accept the loan modification offer but cannot make your newly modified payments, you could still face foreclosure; and
- Terms may leave you paying your mortgage for more years or paying more in the long run.
Have a lawyer review the terms of your loan modification. They can explain every aspect of the contract and help you decide if the modification offer is in your best interest. Experienced Chicago area loan modification attorneys have the training to help you with this important decision.
Loan Modifications Due to the COVID-19 Pandemic
COVID-19 presented a global crisis. In response to this, the US Government sought ways to help the millions of people who were impacted financially by the pandemic. One way they did this was through the CARES Act. Passed by the federal government on March 27, 2020, the CARES Act required lenders of all federally backed mortgage loans to offer a payment suspension program (forbearance). CARES was a help to homeowners in distress.
A loan modification is different from CARES forbearance. A loan modification provides a new long-term contract to repay the loan. It is not a temporary change to your mortgage. A loan modification is a permanent contractual change, not short term help.
However, some parts of CARES could impact loan modification and your current status. For instance, CARES also ordered a temporary halt to foreclosures. Your loan modification attorney can ensure that you receive all government relief that is relevant to your situation. The lawyer will also make sure your lender complies with any part of CARES or other programs that impact loan modification.
Do I Need a Lawyer for a Loan Modification?
You should have a lawyer if you are seeking a loan modification. A lawyer with a track record of successfully assisting clients to achieve loan modification will:
- Review the contract relating to your current mortgage;
- Listen to your concerns about keeping up with payments;
- Review all government programs that are available to assist you;
- Seek loan modification on your behalf with your lender;
- Review newly modified loan contract offers to be sure you receive fair and helpful terms; and
- Guide you as you determine whether to accept your loan modification offer.
Consult a loan modification attorney as soon as you experience any issues impacting your ability to pay your mortgage. If you have already received a foreclosure notice, you should still immediately seek legal help.
How Do I Find the Right Loan Modification Lawyer?
Given the overwhelming issues you may be facing while fearing foreclosure, having the right lawyer will be a huge relief for you. It would be best if you looked for an attorney who is:
- Experienced in general foreclosure defense;
- Familiar with negotiating with lenders;
- In the Chicago area and up to date on courts, banks, and procedures of Illinois law;
- Aware of government programs impacting foreclosure, such as COVID-19 relief; and
- Willing to offer a free consultation so you can evaluate whether they meet these criteria.
With an experienced attorney, you have a knowledgeable foreclosure defense expert to help you save your home. Hand over your questions, concerns, and worries to a loan modification attorney.
Vantage Group Legal Services Provides Experienced Loan Modification Attorneys in Chicago
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