In the U.S. alone, lenders currently hold over 83 million mortgages worth over $12 trillion.
Mortgages are the most common way to buy property, as they give home buyers the opportunity to acquire a home without paying the full purchase price in cash. Instead, the lender loans the buyer the money to buy the home in exchange for a security interest in the property, allowing the lender to foreclose on the mortgage and take possession of the property if you fail to make payments.
Neither you nor the lender wants a foreclosure, of course, as it means the lender can evict you from the home. Foreclosures also cost the lender money, and they do not guarantee that the lender will recover the outstanding loan amount.
Mortgage Loan Modification
You and your lender can avoid foreclosure by modifying your mortgage. A modification can adjust any of the terms of your mortgage, from its interest rate to its monthly payments, and if you can meet the terms of the modified loan, you and the lender get what you want. You stay in your home while your lender avoids spending money to take possession of the asset.
With that being said, however, loan modifications are not always possible. Depending on the economy, the lender might not have the ability to modify your loan, and you may face a range of options that may have a variety of consequences on your finances and credit rating.
How a Lawyer Can Help With Mortgage Loan Modifications
You do not need a lawyer to approach your lender for a mortgage loan modification, but in many situations, a lawyer can help you find a fair solution to your mortgage.
Some ways a lawyer can help include the following:
Providing Legal Advice
Before you ask your lender to modify your mortgage, you should be aware of all of your options. A lawyer with experience in mortgage modifications can outline alternatives such as:
- Selling the home to pay off the lender
- Declaring bankruptcy
- Defaulting on the mortgage
- Refinancing the mortgage
- Taking out an additional loan
Each of these has its benefits and drawbacks, and an experienced lawyer can explain your options so you can make an informed decision about your home.
Presenting Your Case
A mortgage combines features from several fields of law. It is both a contract and a property interest. In both circumstances, the law says the lender has no obligation to agree to a modification. In other words, the lender faces no negative legal consequences if they deny your modification application without even reading it.
A lawyer can help in two ways. First, they can get the lender’s attention and hopefully get you a fair application review. They often do so by pointing out all of the consequences the lender might face, such as the cost of a foreclosure.
Second, a lawyer can assemble all the documents to prove your grounds for requesting the modification. Lenders can dodge a decision on your application by sending it back to you for more documentation, but a lawyer can put together a complete application that will get a definitive yes-or-no answer.
Negotiating a Fair Modification
If the lender accepts your request to modify your loan, you must negotiate fair terms. Just as you cannot change the terms without the lender’s approval, the lender cannot change the terms without yours. As a result, both of you need to agree to the new terms to put the modification into effect.
A lawyer has training and experience negotiating deals, and they can negotiate with the lender to make sure the modification meets your needs and does not simply kick a default down the road.
Mortgage lenders have legal obligations under both U.S. and New York State law. A lawyer can make sure the lender has complied with both in its handling of your loan and any modifications.