In a word, forbearance saves you from foreclosure for a certain amount of time, allowing you more time to pay what is owed. After consulting a loan modification consultant, they will contact your lender in order to request for forbearance. Apart from this, forbearance also has several other meanings and you may consider it if you have a mortgage loan.
A full moratorium on payments
You can ask your loan modification expert for a full moratorium on payments if he/she is capable of doing it. This will give you enough time to arrange the due money or find another way out. If your lender accepts it then getting a full moratorium on your payment would not be hard.
Repayment of a reduced amount
With the help of your loan modification attorney, you can settle for a reduced amount of repayment making an agreement with your lender. Your attorney can arrange a positive-amortizing or a negative-amortizing whichever suits your interest the best. In many cases, paying reduced amount means that the borrower pays only the principal amount borrowed.
Payment of interest
You can avoid a foreclosure by immediately paying the interest. This doesn’t solve the problem but provides you more time to arrange more money. If you have direct contact with your lender then this option would be the most suitable one for you. But you must arrange the remaining due within the time your lender has given you; otherwise, you might get back to the same situation again.
Reduce the loan rate
Sometimes, forbearance allows you to reduce the loan rate depending on the will of the lender. Instead of reducing the loan amount, the lender will charge less interest on it which is basically the same as reducing the loan amount. In this way, you still have to pay the due but a much lesser amount.
Split the loan
There is always the option of splitting the loan. Here, you have to pay a part of the loan within a short period of time and the other part is paid later when you manage the rest of the due amount through selling an asset. This process is also called split mortgage process.
The abbreviation of HAMP is Home Affordable Modification Program. If you are unable to pay your installments and facing foreclosure, the HAMP can be your savior. If you know a loan modification officer, you can ask him about HAMP and even take his help to avail services from HAMP. But to avail the facilities, you need to meet certain criteria and the process is rather complex. To get help from HAMP, it is best to hire a loan modification company as they have a lot of experience and can give you the right advice.
Facilities offered by HAMP
Following are some basic features and facilities that you can get through HAMP.
- You can postpone foreclosure and get more time for repayment.
- You can only avail the services of HAMP on your first residence, but second or third residences are not eligible.
- HAMP can help you reduce the principal due on the mortgage
- You can save about $500 per month if you avail help from HAMP.
Except these, there are a few other facilities that HAMP offers and you can know about these from the loan modification inspector.
Eligibility to avail services from HAMP
Before moving any further, check whether you are eligible to avail any help from HAMP or not. You must fulfill the following requirements to proceed with HAMP.
- You are way behind paying your mortgage and not in a condition to pay soon.
- You are facing financial crisis and having difficulties regarding your payments.
- You took your mortgage loan before 1st January 2009.
- Your loan must be limited to a certain amount set by the law. If mortgage amount exceeds, you can’t avail any services from HAMP.
Apart from these, there are certain criteria related to income and monthly expenditure you can know about from your lawyer.
But HAMP is not always available in all states and many mortgage companies don’t participate in HAMP. With some mortgage companies, like Bank of America, Wells Fargo, CitiMortgage and others you can avail HAMP services if you’re eligible. But if your company is not associated with HAMP, there is nothing you can do. You have to look for something else to modify your mortgage loan.
Principal reduction basically means you have to pay less amount of money than you really owe. You do not have to pay the interest but only the actual amount that you borrowed. The good news is you have to pay less. If you are facing foreclosure then your loan modification attorney can help you get principal reduction on your mortgage loan. But you can’t just avail this facility whenever you want. You need to meet certain criteria and the lender must allow it.
Will of the lender
Any type of reduction depends on the lender to whom you owe money. If the lender is willing to allow principal reduction, only then you can get it. No loan modification company can help you if the lender never allows it. But they can try their best to convince the lender. As such companies are market experts, they usually succeed in achieving their goals. If you know the lender personally then you can contact him/her for allowing principal reduction on your mortgage loan. But if the lender is a financial institution, it would be best to let the loan modification consultant handle it. Remember, despite all your intentions, the will of the lender is what matters most in this case.
Other ways to avail principal reduction
When foreclosure is close because you’ve missed your mortgage payments, you can go for a loan modification company and try to reduce the principal amount or look for a way to pay less than what you really owe. As only the money lender can allow you to pay a reduced amount, there is nothing much you can really do about it. But there are few ways through which you can quickly repay your debt and reduce the amount payable with each installment.
- The biweekly payment method can help save a lot of money if followed regularly.
- You can pay some extra amount with each installment to reduce the principal amount yourself. The extra amount you pay goes towards the principal due.
- If you can, try to pay a lump sum as soon as possible. This will reduce the principal amount and you have to pay less interest.
Through most of the mortgage modifications, you may just change the payment plan or get a lower percentage of loan rate which might definitely help you save some money. But there is a certain program that you might find helpful regarding mortgage modifications. If you have a loan modification lawyer, ask him/her about the Home Affordable Modification Program. Not all the states have this program, but if you live in where it’s applicable and meet the required criteria then you can really save some money. However, if you have money for making the payment but still want to get the advantage of this program, then it’s not for you.
Requirements of availing HAMP
You can contact a loan modification company to know the requirements of HAMP and how to avail their services. After having a long conversation with their representatives, you will understand the necessary requirements to get benefits from this program. Some of the requirements are mentioned below:
- The property under mortgage must be your primary residence. It can’t be your second or third home.
- If you are falling behind your monthly installments on a regular basis.
- You are facing a financial crisis due to which you can’t pay your mortgage.
- If you spend more than 31% of your monthly income for housing expenses.
These are just the basic requirements, there are also some money-related requirements that are essential in this case. You can know about them from your loan modification consultant.
There are some other mortgage modifications which you may also avail with the help of a loan modification officer, but these may not be as good as HAMP. Given below are some facilities that can be obtained when you are facing foreclosure.
- You can arrange for paying only the interest on the loan to avoid foreclosure for some time.
- You can get a full moratorium on payment and get more time to repay the due.
- Close the deal with a reduced payment amount, like positive-amortizing or negative-amortizing.
- If your lawyer can reduce the percentage of the loan rate then it will definitely save some money.
- The split mortgage is another good option to avoid foreclosure.
People want to modify their mortgage loans for many reasons, but it’s only possible if your previous agreement allows you to do so. If the future modification was included in your primary deed then you can modify on your own without any outside help. But if not, you may have to take help from a loan modification company or a loan modification expert to avail it.
If you’ve decided to modify the mortgage loan, check out the following factors before you sign up for your modification agreement.
- Arrange all the documents related to the loan and additional documents that are needed for modification.
- Determine whether the modification might help reduce the amount of interest.
- Get help from a loan modification attorney to review the new contract on your behalf.
- If you are raising money to quickly repay the due, make sure you continue doing this. If not, you may face foreclosure because of the modification.
Making new payment plans
A new payment plan is needed if you are taking necessary steps to modify the mortgage loan. If you have good knowledge on this factor and can do it yourself, it is okay. Otherwise, it is best to take help of a loan modification lawyer. Tell him what you need from this new deal and he will make a payment plan according to that. But to follow the new plan, your lender also needs to approve that.
Changes that can be made
There is a limitation to modify mortgage loans. However, everything still depends on the wish of the lender. As you are already under an agreement, if the lender says no then there is nothing you can do to modify your loan.
- You can always reduce the amount of monthly payment. But you may have to pay longer in this case.
- If the lender accepts, you can have the loan rate reduced.
- If you’ve missed your last payment then the lender might have charged a late fee. You can avoid that with modification.
- Delay of foreclosure is the most important facility that you can get through a modification.
Foreclosure occurs after being unable to make mortgage payments . It also depends on your lender and the terms and conditions of your agreement. If you miss a single payment, you will surely get a notice that you’ve missed your last payment. If you have your own loan modification attorney, ask them for help.
Only 2 months to settle things
Different states have different laws but usually, you have only few months in hand to settle your dues. Otherwise, you have to prepare yourself for some trouble ahead. If you miss making your mortgage payment and don’t contact for 2 months, the bank will get serious and start taking actions against you. So if you have missed your last payment, you better pay it before it gets too late.
An early reminder
If you ever miss your payment, the bank will send you a reminder within a few days but won’t take any hard steps yet. If you are having problems regarding arranging the money, you must notify the bank that you’re going to pay but it could be late.
On the 36th day
If it has been 36 days since you’ve missed your payment then it’s expected that you’ll get a call or a visit by the bank’s loan modification officer. You can discuss with him how you can pay if you are willing to do it now. He will also give you valuable information on foreclosure and how to avoid it.
On the 45th day
If you haven’t cleared your payment even after receiving two reminders from the bank, the bank will start taking it seriously. If you are still not thinking about repayment then foreclosure is closing in on you. The loan modification inspector will send you a written statement regarding the matter and also provide you information on how to avoid the foreclosure. If you wish to save your property and stay in the same house then you must take necessary steps. If the house goes into foreclosure, you might have to leave your house.
If you are getting foreclosure notice for your property, it would be wise to negotiate as soon as possible in order to save your property. If the bank gets more involved in the process, the chances of avoiding foreclosure might be reduced significantly. But you can always take some advice from loan modification firms and decide what you should do next. In most cases, banks never negotiate directly with the borrowers.
Contact through their website
Contacting the bank online is the easiest and simplest way if you are interested to negotiate. If you are willing to buy a house with foreclosure deal then this might be worthwhile. But if you are a borrower facing foreclosure and wish to negotiate your loan then you should not hope much. Instead of contacting the bank, you can contact the lender. If anyone can save you from this trouble, it is only the lender himself/herself.
Contacting the listing agent
No bank is directly involved with foreclosure sales and conducts its business through third parties. Your local real estate agents or listing agents are assigned to close the deal. If you are a potential buyer, contacting the listing agent would be the best idea. But as a borrower, you do not have any loan modification options available for you.
Asset management company
Banks also give the foreclosure deals to various asset management companies to process. Banks always try to avoid direct contact with foreclosure by any means. The loan modification professionals cannot help you much if the bank has already given the foreclosure deal to the company. But while it comes to buying from a foreclosure sale, you will get lots of options provided by an asset management company.
If you can convince your lender to allow you some more time by paying a partial amount of the loan with the help of a loan modification attorney, you might get some more time. But you have to pay back the rest of the due amount on time; otherwise, you will be close to experiencing foreclosure again.
If the due date has passed for repayment of your mortgage loan even after receiving the pre-foreclosure notices, there is not much hope for you to avoid a sheriff sale. However, you can still seek for a loan modification company to get the best help. If you are also facing foreclosure on your doorstep, here are some ideas that might help you a bit.
Avoiding sheriff sale with chapter 13 bankruptcy
This is maybe the most effective way to postpone the foreclosure. Many borrowers who face foreclosure on their properties due to mortgage loans file a chapter 13 bankruptcy. The bankruptcy trustee then takes over the case. You can also seek the help of a loan modification attorney for further assistance regarding the case.
Pay the Debt
How about paying the debt you owe to stop the sheriff sale? This is the only way if you don’t want to face further hassles. If you’ve received a pre-foreclosure notice then you must know by now how much you need to repay. If you can arrange the money within the due date then no one will take your property from you.
Mortgage Assistance Programs
If you live in any of the states which have mortgage assistance programs, you can get help from there. When you contact the mortgage assistance programs, like California Mortgage Reinstatement Assistance Program, you may get money to pay off the due debt.
Sell the property yourself
If you don’t see any other way, sell the property yourself. But before doing so, it is advised to consult a loan modification specialist to find out if there is any different way available for you. Unfortunately, if you still cannot get any help from there, sell the property yourself.
Convince the lender for more time
If all the doors are closed, the only way to avoid foreclosure is to convince the lender for more time. If you are in direct contact with the lender then this might be possible. If the lender allows you some more time to repay your debt then no one can force you further and take your home from you.
If you are defaulting your mortgage loan, you may have the possibility of facing foreclosure on your mortgage property. It depends on your lender whether you will get the foreclosure notice or not. But it is advised to get help from a loan modification expert if you are having any issues regarding foreclosure. But before doing anything, get some ideas regarding foreclosure.
The foreclosure process?
In the foreclosure process, if you’ve taken a mortgage loan for a property and have failed to repay it, the lender can file a complaint against you in response to which the court can auction the property to repay the lender the due amount. Although you will receive a pre-foreclosure notice to pay the due within a limited period of time, the above-mentioned action will take place if you fail to do so.
There are 3 types of foreclosures but the process for all of them is basically the same. As soon as the property has been auctioned, you will have a very short time to leave the place. The 3 types of foreclosures are discussed below.
In the Judicial Foreclosure process, the lender seeks help with the judicial system. The loan modification inspector looks into the matter and the borrower is given the notice to repay the loan within 30 days. If the borrower does not respond to the notice or does not pay the due, the highest bidder will get the mortgaged property through an auction organized by the court.
Power of Sale
The Power of Sale foreclosure process is also called Statutory Foreclosure. In this case, instead of the judicial system, the foreclosure process is governed by a loan modification company or mortgage company. Once the borrower fails to meet the payments within the due date, the mortgage company organizes the auction. However, the judicial system reviews it to be sure that the process is legitimate.
This type of foreclosure is not seen much and only takes place if the due amount on the property is greater than the value of the property itself. If the borrower can’t pay after receiving the notice, the ownership of that property goes back to the lender again.
After facing foreclosures, mortgagors and homeowners usually get confused and disoriented at this point of despair. Here is all you need to do and you need to avoid while facing foreclosure. Most people are in need of urgent care at this time.
First of all, make sure you are in constant communication with your lender. Make sure you are the one giving him or her the calls and not vice versa. Although the least a mortgagor would like to do is to talk to the lender at this point. The best option one can do is to face and handle their “demons” straight away by offering a chance to communicate. You should decide to ask your lender to modify your loan. To be effective, you should have an attorney. You should allow the attorney to do the negotiation on your behalf. This will allow you to increase your confidence when you are in need of urgent help.
Search for an Opportunity
Secondly, make a pledge to turn your crisis into an opportunity. You may turn your foreclosure to a victory. Avoid giving up at this critical moment. Always stay and stand tall.
Do Your Research
Third is to research more about your situation and the options that can help you get through this stressful stage. Fourthly, you should make use of every resource in your house . Here you need to utilize every resource that you have and turn your house into a mold restoration center. You may decide to rent your extra rooms or the garage so as to generate more income. Finally, create a backup plan that is reasonable and exciting to you. Here you should be hoping and praying for the best but still preparing for the worst in case the urgent care center fails to deliver.
What to Avoid While Facing Foreclosure?
Avoid contacting your lender without the consent of your attorney. You should not sit back, give up and tell yourself that there is nothing you can do. Finally, never blame yourself for what has happened and think about your future.