It is common for people to find themselves in a difficult financial situation. However, if a person is struggling to stay on top of their mortgage payments, it may be time to pursue other options that can prevent the foreclosure of their home. When facing this situation, debtors should know that it is possible to receive a loan modification. This can assist a debtor in their time of need as they figure out how to move forward financially.
What is a Loan Modification?
Loan modifications are available to debtors when they are struggling with their mortgage payments. This allows debtors to adjust their loans so that the payments can better suit their financial situation. This process is done by matching the individual’s mortgage payments with their current financial state so that they can make payments at a more comfortable pace. There are two types of loan modification programs:
- Bank-Run: This may lower a debtor’s interest rate, fix an adjustable rate, or not require them to pay excess principal
- Government-Run: This allows a debtor to lengthen their loan to a 40-year plan that lowers the cost of their monthly payments and drops the interest rate of the loan to 2% for a 5 year period
How Do I Get a Loan Modification?
When a debtor wants to receive a loan modification, there is a process to be followed. The state of New York requires properties that may be foreclosed to be assigned to the Foreclosure Settlement Conference Part. During this process, the bank reviews the individual’s finances to determine if they are eligible for a loan modification program. This also allows them to figure out if a government-run or bank-run program would be a better fit for the debtor.
The debtor is required to provide the bank with specific documents regarding their finances in order to apply for a loan modification. This can include:
- Financial statements
- Personal or business bank statements
- Pay stubs from contributing family members in the household
- Tax returns
- A hardship letter explaining why the debtor cannot make their mortgage payments
- A current utility bill to prove residence
It is important to know that a bank will only approve a loan modification if they believe the debtor can make their payments through the updated plan.
Contact our Firm
If you are in danger of home foreclosure and need a loan modification, contact the Law Offices of Allen A. Kobler, Esq. today.
If you require the services of an experienced Business Law or Bankruptcy attorney, contact the Law Offices of Allen A. Kolber, Esq. today to schedule a consultation and discuss your options.