I have tried to make a specialty of helping homeowners seek mortgage modifications. The process is extremely time consuming. Most mortgage modifications take a year to complete. It usually doesn’t make sense to hire a lawyer to help you get a modification. However, in Maine, when a lender files a foreclosure lawsuit, homeowners are legally entitled to mediation. As one of only two bankruptcy lawyers who have been court appointed mediators, I have the knowledge to help you use the mediation process to fast track your loan modification application. Seeking a loan modification in the context of a foreclosure mediation can achieve the results you are seeking in a fraction of the time and at a fraction of the cost. If modification fails, we can also consider filing Chapter 13 to get rid of a second mortgage and/or get caught up with the first mortgage over up to 5 years.
Foreclosure Avoidance Options: Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to residents for foreclosure are many, including but not limited to short sales. Following is a brief explanation of these solutions:
Foreclosure Defense – In Maine.
Homeowners have a right to mediation in foreclosure. We can use that as a vehicle to get a loan modification that might otherwise take a year or more to be approved. We often modify a first mortgage through mediation, then file Chapter 13 to eliminate a second mortgage or home equity loan.
Consumer Law Violations:
Whether you are in bankruptcy or dealing with a debt collector, there are laws protecting your rights. Often creditors and debt collectors violate those rights. We can determine if you have a claim for monetary damages and pursue that claim on your behalf, frequently at no cost to you.
While I focus my practice on representing consumers, I also represent individuals who have claims against other people in bankruptcy. Just because someone files bankruptcy doesn’t mean an ex-spouse or wronged lender doesn’t have rights. However, there may be a very short time to take action to protect those rights.
A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will ‘reinstate’ a mortgage up to the day before the final foreclosure sale.
Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.
Mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.
Rent the Property
A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, can convert their property to a rental and use the rental income to pay the mortgage.
Deed-in-Lieu of Foreclosure
Also known as a “friendly foreclosure,” a deed-in-lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.
Many have considered and marketed bankruptcy as a “foreclosure solution,” but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.
If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.
Servicemembers Civil Relief Act (military personnel only)
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.
Sell the Property
Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.
If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.
For a more personally tailored evaluation of your options including these and others not discussed here, call us for a free initial consultation.