Tens of thousands of financially strapped homeowners who have asked lenders to lower their mortgage payments are instead winding up with higher monthly payments and larger debts on their homes.
Homeowners who were hoping for lower payments are discovering to their dismay that lenders roll late fees, back taxes or other costs into the principal, sometimes turning a difficult payment into an impossible one. That is one reason that many reworked mortgages are sliding back into default.
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This is truly unfortunate! If you elect to appoint the best representation for your loan modification then your mortgage professional should have proposed that late charges (on P&I), principal and interest can be negotiated as a zero percent balloon payment placed at the back end of your mortgage term. This positions the borrower to plan to pay the defaulted amounts rather than worsening the situation.
This is a much better approach then baking all of these back charges back into the principal and increasing your mortgage payment. Please be advised that back taxes and homeowners insurance that may have been escrowed will most likely need to be paid in order for your lender to extend a better loan modification.
Yes, Uncle Sam is a superior lien holder but not before the expenses of the foreclosure. That is right; Attorney’s are paid even before the tax man in a foreclosure.
If you are employed and are experiencing a reduction in household income, it is still likely that you can execute a successful loan modification. Simply because you are not making your mortgage payment, does not mean that all of a sudden you have all of this disposable income to continue as usual. I know this is not the guidance most want to receive, however, you executed your mortgage and your note. This is recorded as the lenders security interest on the property and promise of repayment. There may not be a better recourse if you do not have a strategic plan and the appropriate loan modification representation. Further, if your home is sold in a foreclosure sale and does not cover the original amount of the loan, without an exculpatory clause letting you off the hook for any short fall between the loan and the foreclosure sale price, you should expect your lender to file a deficiency judgment making you accountable for the difference.
This is simply another reason to NOT engage your lender directly without a seasoned professional. Some will have you believe that attorneys are the best route and in some cases they are; however, unless they are a real estate attorney without common knowledge of mortgages and specifically loan modifications they will soon come to determine this is an entirely separate segment of this industry.
Most attorneys’ I have come into contact with are front ending the loan modification service to the borrower and sourcing the processing and negotiation to a third party processing organization.
For those that have not been employed, others who have recently lost their jobs and those at risk of losing employment status there is not a definite path as of yet but there has been much discussion how this may be addressed.
I’ll keep my ear to the ground and report accordingly.
1st-Trust.Net, The Loan Modification Corporation is a borrower focused firm which represents homeowners. Ask us about our no modification, no cost policy.
Thank you for your consideration.
Mr. Sharaf