What is the Difference Between Loss Mitigation and Loan Modification?

large family home

If you are having trouble paying off certain debts and are worried about the foreclosure of your home, your head may be spinning with all of the available bankruptcy options to choose from. For one, you may be wondering how loss mitigation and loan modification prevent foreclosure differently, along with which option best suits your current financial situation. Read on to learn the distinctions and how a proficient Rockland County foreclosure defense attorney at The Law Offices of Allen A. Kolber, Esq. can help you determine what is in your best interest.

How can the Loss Mitigation Program prevent the foreclosure of my home?

Whether you’re filing for Chapter 7, 11, 12, or 13 bankruptcy, you may be eligible for the Loss Mitigation Program. Under the current Bankruptcy Code, your foreclosure case must be addressed through this program if you request it. With this, you and your attorney will work with the bank to adjust to a more favorable payment plan that better suits your financial situation. Importantly, the bank cannot proceed with the foreclosure and sale of your home at this time. Once this is in the works, then you may apply for a loan modification.

For more, contact a Rockland County loss mitigation attorney.

How can a loan modification prevent the foreclosure of my home?

Essentially, a loan modification allows you to adjust their loan payment schedule for their home that better matches your current financial situation. Typically, this means that you will make less expensive mortgage payments over a longer period of time.

The two types of loan modification programs are bank-run and government-run. Using a bank-run loan modification can lower your interest rate, fix your adjustable rate, or waive the excess principal. On the other hand, a government-run loan modification program will allow you to extend the period of your loan to a 40-year plan, which lowers the cost of your monthly payments and drops the interest rate of your loan to 2% for 5 years.

Below is a list of documents you must provide to the bank with your loan modification application:

  1. Financial statements or profit & loss statements.
  2. Personal or business bank statements.
  3. Paystubs from each wage earner in your family.
  4. Personal or business tax returns.
  5. A current utility bill proving you reside in the home.
  6. A hardship letter to explain the reason for your default and your current ability to pay the mortgage.

For more, contact a Rockland County loan modification attorney.

With all that being said, though these are helpful ways to ensure your loans are paid off, you will not qualify for these programs if it is resolved that you still will not be able to pay them off. To better determine your eligibility, do not hesitate in consulting with one of our talented attorneys today.

Contact our experienced New York firm

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.