Loan Modification Attorney – New Jersey
Today, the most widely used mechanism for resolving foreclosure actions and mortgage loan defaults in New Jersey, without bankruptcy, is through a loan modification. Due to the foreclosure crises and “Covid 19”, the mortgage companies are more willing to enter into a loan modification, than in years past. However, a mortgage company is not required to modify a loan and any loan modification is voluntary.
The likelihood of having a loan modification approved, substantially improves, if the loan modification is pursued within a chapter 13 bankruptcy case. The attorney and mortgage company use a web portal called “Default Mitigation Management” to administer the application. All documents and communications are documented through the web portal.
Typically, a loan modification incorporates an individual’s arrears into the loan payoff. As a result, there are no longer any arrears and the payments are considered current. Thereafter, the regular monthly mortgage payments must be kept current, like any other mortgage. Additionally, the total amount of the arrears must be paid, in a lump sum, by a specific date, when the house is sold, or when the homeowner obtains refinancing.
Depending on the circumstances, the loan may be modified as follows: extend the monthly payments, change the interest rate and/or put the arrears at the end of the loan.
Alternatively, the Housing and Urban Development Department may pay the mortgage company the total amount of the arrears, while providing the homeowner with a mortgage in the same amount. This may be accomplished with or without an additional modification to the loan. If there is no additional modification to the loan, the payments are deemed current to the mortgage company and the payment terms are the same.
In this situation, the homeowner need not make any payments to HUD, until a lump sum payment for the entire amount is paid. Monthly mortgage payment need not be paid to HUD. The lump sum payment may be due by a certain date, at the sale of the house and/or when the homeowner obtains refinancing. The agreement with HUD is basically a second mortgage, in the amount of the arrears.
A mortgage servicer provides the administration of the mortgage and the payments. All mortgage payments are made to the servicer, which are responsible for disbursing funds to certain entities, such as the tax collector and the homeowner’s insurance. Included in the servicer’s tasks is retaining an attorney and foreclosing on the property.
Each general servicer and/or the mortgage holder and/or mortgage owner sets forth the guidelines and requirements for obtaining approval of the modification. Generally, the criteria for approval are based on each company’s proprietary formula that is not privy to the public.
In general, the criteria is based on the debtors ability to make the monthly mortgage payments based on income, expenses, real estate value, status of loan, mortgage payoff and total debt. The servicer’s review the details of one’s financial picture to determine whether the debtor can afford the payments, based on their internal modification options.
Mortgages that are owned or backed by the government typically apply a separate standard to determine the loan modification approval criteria. Such government entities include, but are not limited to: Federal Home Loan Mortgage Corporation (Freddie Mac) Government National Mortgage Association (Ginnie Mae).
Years ago, the majority of loan modifications were generated by and through the federal law named, “Home Affordable Modification Program”, which was referred to as “H.A.M.P”. That program provided assistance to homeowners by providing subsidies that allowed people to modify their mortgages to prevent foreclosures and the loss of their home from foreclosures. Although the federal law expired, a number of mortgage servicers apply the same “H.A.M.P” criteria for determining the modification applications for approval .
The debtor or representative must request from the mortgage company the information packet or loan modification application for completion. The application requires detailed financial information, including monthly income, expenses and assets. The mortgage company requires copies of recent pay stubs, tax returns and a hardship letter that explains their financial situation. The mortgage company requires proof of the ability to make the modified mortgage payments. Please note that a person with substantial disposable income may be denied approval, because their financial situation is not a hardship.
The loan modification process may be extremely discouraging, as the programs are continuously changing, Also, there are an insufficient number of representatives to handle the applications. Furthermore, many of the servicer’s representatives are inexperienced. An individual may send their application and information numerous times until the correct representative receives all of the required information for processing. Furthermore, people have experienced difficulty with contacting a mortgage representative.
Contact a NJ Bankruptcy Lawyer
The NJ loan modifications attorneys at the Law Offices of Robert Manchel have been handling bankruptcy cases and helping homeowners deal with foreclosure for nearly 20 years and have, in that time, successfully represented thousands of clients. If you are dealing with foreclosure or considering bankruptcy, contact a New Jersey bankruptcy lawyer at our firm at 866.503.5655 for a free and confidential consultation.
Please find more information about loan modifications on our site or visit the Home Affordable Modification Program website.