Legally reviewed by Allen A. Kolber, Esq. - The Law Offices of Allen A. Kolber, Esq., P.C.
Key Takeaways
- The 2% rate and 40-year term came from HAMP, which ended in 2016.
- The settlement conference is mandatory only if you live in the property.
- Your lender must negotiate in good faith or face tolled interest and penalties.
If your family is behind on mortgage payments, you may need a loan modification. Loan modifications are a means for you to work with your lender to better match your mortgage payments with your financial situation. The primary fear of homeowners is a foreclosure on their house. Where will you live? How will your lifestyle change? Will you have to move? Fortunately, there may be something you can do to sleep soundly at night once again. If you believe it is time to apply for a loan modification, here are some of the questions you may have:
Am I Eligible for a Loan Modification in New York?
In New York, a residential foreclosure action is subject to a mandatory settlement conference before the bank can move forward with the foreclosure and subsequent sale, so long as the case involves a home loan and you reside in the property being foreclosed. Investment properties and owners who do not live in the residence will fall outside of the rule.
During this settlement process, you may apply for a loan modification and require the bank to review your financial ability to determine whether you qualify for one of the government loan modification programs or a bank’s internal loan modification. Some of the documents you will have to provide to the bank are as follows:
- A current utility bill proving you reside in your home
- Personal or business bank statements
- Paystubs from each wage earner in your family
- Financial statements or profit & loss statements
- Personal or business tax returns
- A hardship letter to explain why you cannot currently pay your mortgage
The hardship letter is intended to explain the reasoning for your current financial situation. Applicants are required to detail the reason for their inability to pay the mortgage.
What Must the Bank Do at the Settlement Conference?
While the aforementioned list only applies to you, the rule runs both ways. Your lender is required to bring:
- The payment history
- An itemized list of what it would take to cure and pay off the loan
- The mortgage and note
- A description of the loss mitigation options available to you
If the lender has already denied the modification, it must also bring the denial letter and the figures behind that decision.
Both Sides Must Negotiate in Good Faith
In the event the court determines that your lender has not negotiated in good faith, it must, at a minimum, stop the accrual of interest, costs, and fees during the delay caused by the lender. Additionally, the court may impose a civil penalty of up to $25,000, and award you your damages and attorney’s fees. Neither side can bill the other for attending, and simply refusing an offer does not constitute bad faith.
What Happens to the Foreclosure Case?
Once a modification or settlement has been fully executed, the lender will have 90 days to file a notice of discontinuance and clear the lis pendens from your property record. Separately, if you attend the conference without having filed an answer to the complaint, you are presumed to have good reason and are granted 30 days to file one without giving up your defenses.
How Can a Loan Modification Benefit Me?
Many older articles detail a 2% interest rate and 40-year terms, which stem from the federal HAMP program, which stopped accepting applications at the end of 2016.
For a loan owned by Fannie Mae or Freddie Mac, the Flex Modification program that replaced it will work towards a payment reduction of 20% by:
- Adding arrears to the balance
- Establishing a new fixed rate
- Extending the term
- Setting part of the principal aside
Loans backed by the FHA, VA, or USDA must adhere to the rules of their respective agencies, so what you are offered will ultimately depend on who owns your loan.
What Banks Offer Through Their Own Programs
Some of the banks’ internal programs may lower your interest rate, forgive excess principal, fix an adjustable rate, or place your defaulted payments at the end of the loan, to be paid when you sell the house or refinance. Ultimately, a loan modification may be just what you need to get back on track towards financial stability. If you think you are ready to request a loan modification, please do not hesitate to contact our experienced bankruptcy firm.
When individuals are facing financial troubles, one of the areas that might affect them is their mortgage payments. There are some options that they have to assist with this situation. Loan modifications are something to consider. With this, your loan can be adjusted to better fit your financial situation and to allow you comfortability to pay at your own pace. Financial situations are always rough. They have the ability to impact all aspects of our lives. That is why it is important to know and understand processes that can help with your finances. Our professional attorneys can guide you toward a resolution to ease your stress.
There is a difference between loan modification and mortgage refinancing. They are not the same process, but they both have the ability to aid during times of financial distress. Mortgage refinancing is when an individual seeks a new loan instead of adjusting an existing loan. Loan modification adjusts a present loan to improve upon the situation that the debtor is in.
Why Might My Application Be Denied?
For the loan modification process, banks can refuse applicants for many reasons. Banks may not approve a loan modification if the homeowner cannot prove sufficient income to pay their monthly mortgage. This decision can have a big impact on the applicant. When banks are reviewing applicants’ files, they have a set of guidelines to follow in order to determine if an approval is the right decision. If the mortgage can be returned to a current status, then the loan may be modified. If it cannot, then the bank may take possession of the house and cut its losses.
During this time, it is helpful to have a professional attorney on your side. They can better prepare you for the process. With legal counsel, you may have a chance at getting a loan modification approved.
Contact Our Experienced New York Firm
The thought of bankruptcy can be scary. Fortunately, with the help of an experienced attorney, it does not have to be. 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. We will have your back every step of the way.
