What is a Loan Modification?
A loan modification is a private renegotiation of your mortgage loan on terms that you can afford. It is not bankruptcy, and it is not mortgage refinancing. You may wish to avoid bankruptcy because of the blemish it will place on your credit record. Moreover, since a mortgage refinancing requires you to relinquish your current mortgage and replace it with another mortgage, you may find yourself with insufficient credit to qualify for refinancing. Under these circumstances, your best option may to ask your lender to voluntarily modify the terms of your current mortgage.
Incentives to Negotiate
Your lender may be willing to accept a loan modification rather than invest the time and expense necessary to foreclose, especially if the sale of your home at a foreclosure auction is unlikely to bring a high enough price to fully pay the remainder of your mortgage. Of course, you will have to negotiate with your lender to receive a loan modification. Mortgage lenders can be tough to negotiate with because as business people, their eye is always on the bottom line – is the lender likely to profit more in the long run with or without a loan modification? For this reason, you need to retain the services of a savvy loan modification attorney who has experience negotiating with lenders. A good loan modification attorney will negotiate on your behalf and use the lender’s incentives to negotiate as bargaining leverage to secure loan modification terms that you can live with.
Effects of a Loan Modification
In a loan modification negotiation, loan terms can be amended in a variety of ways. Your lender might agree to:
- Lower your interest rate;
- Waive already-accrued late penalties;
- Decrease your monthly installment payments;
- Reschedule your installment payments to eliminate a preexisting delinquency;
- Reduce your loan balance by forgiveness of principal, interest or both; and
- Reorganize your payment schedule to work around temporary financial difficulties – for example, lower payments now might be offset by higher "balloon" payments later.
Why Retain an Attorney?
Although many private companies offer loan modification services, retaining an attorney is normally the more sensible option. Negotiations take place "in the shadow of the law," and a licensed attorney should have a thorough understanding of the legal background underlying the negotiations. A good attorney will also have the expertise to delay or cancel a foreclosure sale, or to file for bankruptcy if loan modification negotiations break down. In exchange for agreeing to a loan modification, many lenders require debtors to sign a form releasing the lender from any legal claims related to the loan. This is where an attorney really comes in handy, because under certain circumstances you could be signing important rights away by doing this.
Moreover, an attorney is bound by professional attorney-client privilege obligations requiring absolute confidentiality – your attorney cannot divulge any information about the negotiations or the content of a loan modification agreement without your permission. Finally, an attorney is subject to the fiduciary duties of loyalty and care towards the client. Violation of any of these obligations can subject the attorney to professional discipline by the state bar association.
Contact Nancy Neal Joyce Now to Learn More About Your Case
Nancy Neal Joyce has accumulated years of experience negotiating loan modifications for her clients, and she is adept in the use of bargaining position to extract significant concessions from mortgage lenders. If you are considering seeking a mortgage loan modification, feel free to telephone her Livonia, Michigan office at (734) 427-7772.
