We all have clients that are facing foreclosures these days. For some, mortgage modification may be the answer. I work with several foreclosure defense attorneys, and they have been quite successful in negotiating mortgage modifications as well as getting short sales approved for my clients. For those of you who do not know how a mortgage modification works, here is an example.
The lender agrees to take the amount of arrears and either lowers the borrower’s interest rate for a set period of time while either applying the arrears and other fees to the back end of their loan or extending their loan term. For example, let’s say the borrower is behind in their mortgage payments $5,000, and their interest rate was 7.5%. The lender may decide to lower their interest rate to 5% for a period of 5 years and then add the $5,000 arrears to the loan. The borrower still owes the money, but now they are no longer in default on their loan payments, and they get to keep your home by stopping the foreclosure process.
Keep in mind that mortgage modifications are only good if there is a temporary hardship situation, and the borrower is confident that they will be able to continue paying their mortgage if adjustments are made. If they cannot afford the new payment, they might want to consider other alternatives such as selling the home, doing a short sale, a deed in lieu of foreclosure, or consulting with a qualified foreclosure defense attorney, and if necessary, filing bankruptcy. In any event, I recommend discussing the idea of mortgage modification with your clients as an option and referring them to a qualified mortgage modification negotiator.
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