Loan alteration Fact and Fiction – Who Qualifies and What Can Be alternation
- Do you owe more than your house is worth?
- Has your rate modificated so high you cannot make your monthly payments?
- Have you received calls or mail offering loan alteration sets?
This article explains who qualifies for a loan alteration. It describes what can be negotiated with lender and gives advice on how to decide whether to seek a loan alteration alone or hire an expert.
Should you hire someone to help you with loan alteration?
The answer is maybe, maybe not. Before you retain a firm to negotiate on your behalf, understand that you can negotiate by yourself. There is no “magic” that lawyers, mortgage brokers or anyone else can bring to a loan alteration negotiation. Homeowners can avail themselves of the free information obtainable from HUD and the California Department of Real Estate and attempt to negotiate a loan alteration by themselves. A lawyer or broker can communicate on your behalf and attempt to negotiate a alteration of the terms of the loan, so can you. Recently, California enacted Senate Bill 94 which prohibits upfront fees for residential loan alteration sets. As a consequence most loan alteration providers have stopped offering sets.
Should a homeowner use a lawyer or a company that ‘specializes’ in loan alteration?
Homeowners behind on their mortgage payments are often contacted by individuals or companies that will offer to help work out a loan alteration. But California law now forbids anyone accepting upfront fees. Any person or company who seeks upfront fees is breaking the law now that SB 94 has been filed. The loan alteration industry was fraught with misleading practices. Numerous companies in California attempted to take advantage of desperate homeowners by offering to help them save their homes. Many over potential and under deliver. Brokers cannot provide legal advice and may not have anymore knowledge about real estate law than a homeowner can acquire from HUD and the California Department of Real Estate.
What can a lawyer do that a homeowner cannot do for himself?
The lawyer can review the loan for statutory defects that might be used as bargaining chips with the lender, but the most important thing a lawyer can do is act as an unemotional advocate and attempt to persuade the lender that the loan alteration is the best interests of both parties. In other words the lender will make more money by agreeing to loan alteration than foreclosing on the character. Most lawyers prepare a report highlighting the homeowner’s financial situation and describing why a loan alteration makes sense for both the homeowner and the lender.
What can be negotiated with the lender?
Reinstatement: Your lender may agree to let you pay the total amount you are behind, in a lump sum payment and by a specific date. This is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become obtainable at a specific time in the future.
Forbearance: Your lender may offer a permanent reduction or suspension of your mortgage payments while you get back on your feet. Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments.
Repayment Plan: This is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have little by little paid back the amount of your mortgage that was delinquent.
Loan term changes: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your observe to make the payments more affordable. This is the goal of most homeowners in trouble on the home loans. A loan alteration agreement changes the terms of your loan– a lower interest rate, an extension of the loan life, conversion of an adjustable rate loan to a fixed rate loan maybe effected.
What are the problems with loan alteration?
Many people will not qualify. Good candidates are homeowners who have a demonstrable reason they fell behind, like a change in their income or loan amount, and can prove that they have sufficient income to make the payments if the loan terms are changed. The mortgage business is a business. A loan holder will not consider modifying a loan unless the homeowner can provide to make the new payments. If homeowner is current, paying on time, he or she is doubtful to acquire a alteration. Loan servicing companies are less likely to negotiate than edges because they often without the strength to modify the loans.
If you are considering loan alteration, check out all the free information obtainable. Think hard about trying to do it yourself. If you decide to acquire help a qualified attorney can explain the law, review your situation and guide you toward the most appropriate choices.