This is the fourth in a series of posts regarding the alternatives to bankruptcy. The series will discuss debt consolidation, debt settlement, mortgage modification, and debt management programs.
What is Mortgage Modification?
Many homeowners in California are in the unfortunate situation where they cannot afford their current monthly mortgage payments. It is hard to catch-up on payments once you get behind and then the foreclosure process starts and it can be overwhelming to figure out your options. A mortgage modification allows you to possibly lower your monthly payment, which can be accomplished through a lower interest rate, extending your loan out longer, or bringing your loan current (reducing the arrears due right now).
The Making Home Affordable Program
The Making Home Affordable program website has a huge amount of information available regarding the Home Affordable Modification Program (HAMP). This program lowers your monthly payment to 31% of your gross income, but there are a number of eligibility factors that you have to meet first. You have to actually use the house as your primary residence, you obtained your mortgage prior to January 1, 2009, you owe up to $729,750 on your home, and other guidelines available to review.
What Should I Expect During the Mortgage Modification Process?
Be prepared when applying for a mortgage modification. You will need to submit tax returns, paystubs, bank statements, and possibly other documents that show your monthly bills. Oftentimes, you will have to submit updated documents each month or submit multiple copies of the documents. It is also important to continuously follow up on the status of your mortgage modification. Give the company a call every week to find out where things are and if they need anything else.
Another thing to keep in mind is that the bank can foreclose on your house, even if you are in the middle of a loan modification. As long as they take the proper steps in providing notice and scheduling the sale, they do not have to delay a foreclosure sale to see how the loan modification works out.
Mortgage modification can also be used in conjunction with a bankruptcy filing. A modification may allow you to bring your loan current and start making payments again while you get a handle on other debts through the bankruptcy process.
This is just a basic overview of mortgage modifications and is not legal advice specific to your situation. If you are considering bankruptcy or alternatives to bankruptcy, you should speak with an attorney in your area for legal advice.