Foreclosures are something no homeowner ever wants to experience. Fortunately, there are ways to keep your home out of foreclosure without filing for bankruptcy. Obtaining a mortgage loan revision that would allow you to keep your home or choosing a short sale to avoid foreclosure may be options for you.
According to the U.S. Department of Housing and Urban Development (HUD), loan modification is “a permanent change in one or more of the terms of a Borrower’s loan, allows the loan to be reinstated, and results in a payment the Borrower can afford.” Loan modification agreements with lenders can provide payment extensions, balance reductions, reduce monthly mortgage payments by decreasing interest rates, extend the term of a mortgage, switch interest rates from variable to fixed, and waive accrued interest and penalty charges.
The thought of hiring a bankruptcy attorney seems daunting for many people seeking a path to save their home. Some may attempt to negotiate with their lender without an attorney to save money. Others simply hope that the lender will offer the best deal so they can stay in their home. An attorney can help you avoid these common loan modification pitfalls.
Loan modifications are confusing. Partially because of the abundance of legalities in the paperwork, it’s easy to agree to something you don’t realize you’re agreeing to. In legal terms, what you do not know can hurt you. Contract agreements and legal codes are best interpreted by an experienced bankruptcy lawyer who fully understands the law. He or she will see potential pitfalls and fight on your behalf to remove barriers.
Loan modifications are a hassle. Completing all of the required documentation accurately and within a timely manner can be frustrating. The average homeowner does not have the knowledge or time to keep up with lender demands. What could take you hours or days can be completed in significantly less time by a lawyer. An attorney becomes your advocate and will commit to working towards a successful outcome.
Loan Modifications are a Scam. While there are legal loan modification companies, there is an equal amount – if not more – of scams from companies posing as legitimate services. Hiring an attorney can help you avoid the experience of encountering someone wanting to take advantage of your situation.
According to data from RealtyTrac, 5.1% of all single-family home and condo sales in early 2016 were short sales. Often homeowners are pushed into a short sale by personal financial troubles that make it impossible to pay their monthly mortgage. At the same time, they find it hard to sell at a price that would enable them to pay off their loan. A short sales attorney can work with your lender to discount the balance of your home loan to reflect market value. Then the home can be sold, the proceeds paid to the lender, and the debt balance written off.
While selling a home under such circumstances is hardly ideal, a short sale may be smarter than pursuing more drastic measures like bankruptcy or foreclosure. Here are a few of the benefits of a short sale:
- Short sales do way less damage to a homeowner’s credit report and credit score than a foreclosure. This means they’ll be in better shape to apply for a mortgage and buy a new home down the road.
- Homeowners have the dignity of being able to sell their own home. This is no small thing.
- Short sales enable homeowners to stay in the home until the sale is completed. Foreclosures force homeowners to vacate.
- While a seller typically pays all real estate agent commissions and other closing costs, in a short sale the seller pays nothing; the bank foots the bill.
To assess whether to approve your short sale, banks will require you to submit some paperwork, including your offer letter as well as a “hardship letter” explaining why you can no longer make your mortgage payments, along with financial documents such as income statements or medical bills to back that up. An attorney will be able to help you understand the terms of your short sale agreement. Every legal document is full of complicated jargon that many people find confusing, and it’s easy to miss important details that could cause trouble down the road.
Contact an experienced loan modification or short sales attorney at Penachio Malara, LLP for a free consultation. Our knowledgeable legal experts can provide reliable counsel about whether a loan modification can help you keep your home, or if a short sale might better serve your needs.