Massachusetts continues to experience a dramatic surge in foreclosures, often due to deceitful and predatory lending practices. Many foreclosures have resulted from loan practices and products that were destined to fail because lenders failed to reasonably assess the borrower’s ability to repay before lending money.
In addition to bringing litigation, our office has attempted to combat these unnecessary foreclosures by urging lenders to voluntarily restructure, or “modify” loans. Loan modifications can make unsustainable loans affordable by decreasing the required monthly payment amount. Unfortunately, distressed borrowers may have to convince their lender or servicer that a loan modification makes sense.
While each homeowner’s financial situation is unique, below are general guidelines on requesting a loan modification.
- Calculate your total monthly income and expenses, determine the monthly mortgage payment you can afford, and identify the current value of your home. The more organized your documentation is, the more persuasive you will be in discussions with your mortgage servicer or lender. If you are unsure of the value of your home, www.zillow.com or www.ziprealty.com, can provide you with a free, general estimate. Your city or town hall should also have this information. A website such as www.bankrate.com may be able to assist you in calculating an affordable monthly mortgage payment based on your income.
- Seek professional help. Discuss options such as a loan work-out, loan modification, forbearance agreement, a “short sale” or a deed-in-lieu of foreclosure with a housing counselor approved by the Massachusetts Division of Banks or a lawyer experienced in mortgage issues. Consider whether a chapter 13 bankruptcy petition is appropriate.
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