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Do I Qualify for Loan Modification?

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Loan Modification Attorney in New York

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Homeowners who are finding it difficult to pay their mortgage fall into two categories: t hose that are current on their mortgage payment because they are borrowing money from credit cards, friends, 401K and t hose who are eating just beans and rice so they can pay their mortgage.

Others have no resources to draw on and have now missed mortgage payment. The bottom line is that the mortgage is unaffordable and something has to be done.

At E. Waters & Associates, P.C., we can help you resolve your financial issues. Call our office at (888) 204-8456 to schedule your free initial consultation! If you'd like to learn more about your options, then jump to one of the sections below:

Your Choices If You Are Struggling With Your Mortgage Payment

If your mortgage payment is unaffordable, your options are:

  1. Sell your home and find a cheaper place to live. But this option has its problems –
    • First, selling a home in today's market is not easy and it's never a quick process. So, if you are behind on your mortgage and potentially facing foreclosure, you may not have time to sell your property before the bank tries to evict you.
    • Secondly, if your house is worth less than what you owe on the mortgage (the phase used for this is "the house is under water") then you can't sell it through the normal process. You would have to do a "short sale". A short sale is where you find a qualified buyer (at a price that reflects what it's really worth but below what you owe the mortgage company), enter into a sales contact with that person, and then ask the mortgage company to reduce the mortgage balance and sell the property to this person. Doing a short sale may save you from being liable to the mortgage company for the difference between the original mortgage and the reduced amount that the mortgage company agrees to take.
    • Thirdly, if you sell, you either have to purchase another home or rent. Purchasing a home requires a good sized down payment and excellent credit. If you rent, today's rental market is very expensive and you will probably be paying just the same for rent and you were paying for a mortgage. And you have the cost to move, utility deposits, etc.
  2. Walk away: the bank will foreclose and sell the property at an auction and hold you responsible for the difference between the mortgage balance and the foreclosure auction price.
  3. Deed in Lieu – You just sign the property over to the bank. This may or may not relieve you from your obligation under the mortgage.
  4. Cash for Keys – the bank may give you some money to move if you voluntarily leave and the home is in good condition.
  5. Refinance – This is where you apply for a new mortgage with a new company. This would require at least 30% equity in your property (for example: If your home appraises for $100,000, then the maximum mortgage you can get is $70,000). Refinancing requires excellent credit and substantial income to qualify. In addition, as with a new mortgage, there will be closing costs, appraisal fees, recording costs, title search fees and origination points.

Most of these options are undesirable. Homeowners want to keep their home. This is where the modification comes into play.

What is a Loan Modification?

A Loan Modification is a restructuring of the terms of your existing mortgage when your mortgage payment becomes unaffordable due to a hardship that has either decreased your income or increased your expenses. The modified mortgage stays with your current lender so there are no closing costs or points.

To get a reduced interest rate and a reduced payment your present mortgage payment must exceed 1/3rd of the mortgagor's (the person(s) on the mortgage) household gross monthly income. For example, if your gross monthly income (before taxes are deducted) is $1,000 and your mortgage payment is more than $333, then it is classified as unaffordable. If that is the situation, a modification can be negotiated that would reduce the interest rate down to as low as 2% if the loan is a conventional mortgage (if it is an FHA or a VA mortgage the rate can only be reduced to about 3.75%). The reduction of the interest rate will translate into a reduced monthly mortgage payment.

Can I do a modification myself?

The bottom line is that your mortgage company does not want to give you a modification. It loses them money so they will drag it out and try to frustrate you so you just give up.

We receive calls from homeowners who have gone through this process themselves only to get denied a modification. Now they're 6 months or more behind on their mortgage and facing the loss of their home in foreclosure. Even if you are one of those 10 out of 100 that gets a modification, how do you know that the mortgage company's offer is a good one? Most homeowners do not know what they are entitled to under the law so how can you evaluate if the offer is the best? Homeowners are not qualified to engage in a hard-ball negotiation with the mega-banks.

The bank will tell you that you don't need anyone to help you with a modification. They will assure you that they will help you through the process. The bank does not want you to have an advocate because if you do this process alone, they will have the upper hand and you will be at a serious disadvantage. They will hold all the cards and will take advantage of you. The only way to have a level playing field and a fighting chance and to get what you deserve is to have someone (other than the bank) help you.

Why use a Foreclosure Defense and Loan Modification Law Firm?

  1. First of all, when you are struggling with your mortgage payment and are late or behind, the risk is very high that the mortgage company will file a foreclosure action. Only a law firm can protect your home.
  2. Secondly, only a law firm will give you the highest level of confidence that you will not be ripped off. Anyone can open a modification business and claim to be a mortgage expert. There is no regulation of the mortgage modification business so people can say and do anything without consequence. That can't happen with a law firm. Attorneys are very highly regulated. If an attorney was to do or say something illegal or unethical, they can have their law license revoked and be prosecuted. Attorneys are sworn to uphold an ethical code and are fully insured for malpractice in case they mess up a client's case.
  3. Thirdly, the success of a modification is directly related to two things:
    • One is the financial proposal made to the mortgage company. When a homeowner files for a modification by himself, all he or she knows to do is to fill out the application that the bank provides and send in the documents they demand. When you use our law firm, we produce a detailed Financial Presentation. This presentation specifically spells out for the bank why you deserve a modification and why a modification will work. This is far more persuasive and compelling that just filling out an application. If you review this proposal you will see that it is a very complex financial analysis that explores every option for the bank and concludes that what is best for the mortgage company and the homeowner is a modification. A homeowner has no ability to do this form of analysis on their own.
    • The second advantage of hiring us is that we have the expertise to negotiate with the bank. A homeowner is not trained, has no background or knowledge about how to negotiate the complex terms of a mortgage modification nor does he/she know what they are entitled to under the law. The bank's first offer is NEVER their best offer. We typically refuse the first couple of offers from the mortgage company because we know that the homeowner is entitled to a better deal. A homeowner would typically take the first offer made to them.
  4. Fourth, the mortgage company has hundreds of thousands (some banks have MILLIONS) of applications for modifications. You are just a number to them. They don't care about you. After they hang up the phone with you, they have 100 calls waiting. Do you seriously believe that the mortgage company is working hard on your application? With a law firm, you get specialized attention. We know your name. A real person answers the phone when you call. Our sole purpose is to make you special to the mortgage company. We call our designated special agent inside the mortgage company to advocate for you, and just you. We make sure that your case stands out against all the others so you can get approved.
  5. Fifth, you have to ask yourself how important is your home? For most people, it is the most important asset they own. It is where they grew up or raised their children and where they hope to live the rest of their lives at. Is it not worth hiring the best person possible to save it and make the payment affordable? Ask yourself, if you need brain surgery, do you want to try to do it yourself or hire someone who is not a specialist? Now is not to time to try to price shop. Look at the long term. What you decide today will affect you and your lifestyle for the next 30 years.

Is there a guarantee for working with your firm?

It is illegal and unethical for a law firm to guarantee that a modification will be obtained. Take, for example, if you fall down and break your arm in a store and you go to an attorney to sue the store and you ask the lawyer to guarantee that you will win your case. He cannot, legally or ethically. The same with traffic tickets or criminal charges. No one can guarantee that you will beat the charge. Whether you win or lose is a function of how skilled your attorney is. It's the same with mortgage modifications. If a company is guaranteeing that you will get a modification and/or they will return your money if you don't get a modification, I would run as far and as fast as you can away from that company because it's a scam.

A modification does not have to be given by your mortgage company. There is no law that forces a company to give you a lower interest rate or a lower monthly payment. Whether you get a more affordable payment is based on the ability of the person you hire to negotiate with the mortgage company. And it stands to reason that a company that specializes in negotiating modification will be your best shot. We do hundreds of modifications a month and have excellent relationship with the people inside the mortgage company.

How much is the legal fee?

Before we can quote a fee for our services, we must do a complete financial analysis of your case to determine if you are a candidate for a modification. We verify that (1) your mortgage company will do a modification (many do not), (2) Does your mortgage payment exceed 1/3rd of your income, (3) If it does, what can it be reduced to and can you afford that payment, (4) Does your hardship qualify you for a modification, and (5) Can your home be protected from foreclosure. We do not charge for this financial assessment. We want to make sure we can help you before we even start to talk about money.

After we take all the critical financial information from you and our legal and underwriting committee reviews it, they will decide if you are a candidate for a modification and based on your particular circumstances, how many hours of work it will take our law firm to get you a modification. Most of the work is done in the first 4 months of this process so the bulk of the fee is payable in 4 equal monthly payments. If the modification requires an extra month or two to complete, the fee drops down to reflect the hours spent in completing the negotiations, defending you against any foreclosure lawsuit and stopping any foreclosure sale from happening.

Do I continue to pay the mortgage?

Once you decide to hire the law firm and we submit a modification proposal to the lender, they will normally decline to accept mortgage payments until the negotiation is complete. If you are behind on the mortgage when you initially contact us, the bank won't accept your payment anyway. Legally it is unethical for an attorney to advise a client not to pay their mortgage. That being said, most homeowners do not pay their mortgage during the modification process because the payment is unaffordable. Also, put yourself in the bank's position. If you are receiving payments from the homeowner at the same time that the homeowner is telling you he needs your consent to reduce the payment because he cannot afford to pay it. That would indicate to the lender that you do not really need help and they will decline your modification request.

As far as the effect on your credit rating, the common practice of the mortgage companies is not to report homeowners as late on their mortgage payment during the modification negotiation. Even if they did report you, your credit score is a function of how well you pay your bills. Once you get your new modified mortgage and pay it on time for 12 months, it will rehabilitate any negative marks on your credit. So, the worst case scenario is that you credit score would be lower for 12 months.

What can you expect from E. Waters & Associates, P.C.?

Once we review your case and our committee of attorneys decide that you are a good candidate for a modification, we will send you a retainer agreement which sets out the terms of our relationship as attorney and client. We will then ask you to provide us with about half a dozen documents that we need to draft your modification proposal for the bank – things like your proof of income, a copy of your mortgage statement, a copy of a utility bill and tax statement, and your tax returns.

When you make your first payment to the law firm, you will officially be a client of the firm, your mortgage company will be advised and directed not to contact you any further, and your home will be protected by the firm.

In the end, you will have your new modified mortgage which may include: (1) an interest rate as low as 2%, (2) a lower mortgage payment that is no more than 1/3rd of your income, (3) any missed mortgage payments will be folded back into the mortgage, and (4) if your mortgage is interest only, or an adjustable mortgage, or does not include your taxes or homeowners insurance, the new mortgage will be fully amortizing meaning that the mortgage will now include your taxes and insurance and be a fixed rate for 30-40 years. In very serious cases, we have even been successful in getting the principle balance of the mortgage deferred or forgiven.

If you have a second mortgage, the possibility also exists for us to either incorporate that second mortgage back into the first mortgage (if the same mortgage company has both mortgages), or we can get the lender to completely satisfy and discharge the mortgage for between 5% and 20% of the balance of the mortgage.

If temporary financial difficulties have forced you to fall behind on mortgage payments, you should develop an understanding of the foreclosure options available. Mortgage loan modification is one foreclosure option that can stop your home foreclosure and allow you to keep your house. If you want to learn more about this option, discuss your case with one of our firm's New York foreclosure defense & loan modification lawyers. Our firm's experienced attorneys, Edward J. Waters and Rashmi Attri are prepared to help you take legal action.

Types of Loan Modifications

If you have been served a notice of foreclosure, you should not wait to discuss your options with our firm. We know the laws that can work in your favor, including:

  • Truth in Lending Act
  • Home Ownership and Equity Protection Act
  • Deceptive Practices Act
  • Real Estate Settlement Procedures Act

Our firm has extensive experience ceasing foreclosure actions using the following two types of loan modifications:

  • Recapitalization Agreement
    Recapitalization agreement is a type of mortgage modification that can be negotiated with the lender for past due amounts to be added to the principle balance of the mortgage loan. This type of agreement requires the debtor to demonstrate that the problem which caused you to fall behind has been resolved.
  • Mortgage Pay Rate Reduction
    Another type of mortgage loan modification is the pay rate reduction. You can negotiate to stop foreclosure by demonstrating that you are unable to afford the monthly payments you are currently making. You must prove to the lender that you could make regular payments if they were slightly lower.

Mortgage Loan Modification Assistance

Are you in need of a New York foreclosure defense & loan modification attorney? At E. Waters & Associates, P.C., we are devoted to helping our clients navigate their difficult financial legal issues. Rather than handling the issue on your own, we can help you. Contact us today for help.

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