Loan Modifications

Longa Law Firm is committed to helping our clients find the best solution to reducing their monthly mortgage payment, mitigate their losses, stay in their homes or avoid foreclosure.  Have you requested a mortgage modification, but have been unable to get your lender to help you?   Are you facing unexpected expenses due to medical costs, unemployment, or a change in jobs?  Are you current on your payments but worried that you won’t be able to afford them much longer?  It is best for you and the lender to work out an alternative arrangement as soon as possible and before you start to incur additional late fees and missed payments.  Bankruptcy is not your only option.  In fact, we see it as your very last option. 

Foreclosure avoidance options, such as mortgage modifications, short sales and deeds in lieu of foreclosure, require a lot of negotiation and coordination between the lender, servicer, real estate agents, buyer, and seller.  Longa Law can facilitate this process for you.  To get started, we will need to gather facts about your situation to determine if you are a good candidate for a loss mitigation or modification plan.  We will review the information you provide us and let you know if we think we can help you.  The initial review process and consultation is offered at no cost to prospective clients.  To begin, please contact our office and a new client packet will be emailed to you.

LOAN MODIFICATIONS

A loan modification permanently changes the terms of the loan.  A borrower can apply for one of the lender’s modification programs or for a modification under the Making Homes Affordable Home Affordable Modification Program (HAMP), if qualified.  A borrower is allowed to have emergency funds of at least three times your monthly debt payments.  Always keep liquid assets separate from other money assets, such as sellable stocks, bonds, mutual funds, money market funds, and CDs of any maturity.  Retirement accounts, whether self-administered or employer administered, and deferred compensation plans or stock options are excluded.

To qualify for a mortgage modification under HAMP:

1. The property for the mortgage must be owner-occupied with one to four units;
2. The unpaid principal balance must be less than or equal to:
   • 1 unit = $729,750
   • 2 units = $934,200
   • 3 units = $1,129,250
   • 4 units = $1,403,400
3. Have a first lien mortgage that was originated on or before 1/1/2009;
4. Have a monthly mortgage payment, including taxes, insurance, and homeowners association dues, that is greater than 31% of  your monthly gross (pre-tax) income; and
5. Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

HAMP modifications are desirable because the goal is to get the monthly payment (including taxes, insurance, and HOA fees) at 31% of monthly gross income.  To do this, the lender must follow certain steps in order of succession until the monthly mortgage payment is reduced as close as possible to 31% without going below 31%.  The first step is to determine the remaining amount of the loan and other amounts owed to lender.  Second, reduce the interest rate to as low as 2 %.  Third, extent the term and re-amortize over a longer period, if necessary, up to 480 months (40 years) to reduce the monthly payment.  Lastly, if the amount is still above 31%, there is an option for a principal forbearance, where the lender reduces the portion on which interset is charged. 

SHORT SALES

A Short Sale is a sale of real property in which the proceeds from selling the property are not enough to cover the balance of debt secured against the property.  Many people believe that in a short sale, by definition, lien holders will agree to release their lien on the real estate and accept less than the amount owed on the debt.  Unfortunately, in Florida, this is very often not the case.  In fact, if there is a deficiency, which is the difference between the amount owed and the amount the property is sold for, then the lender may hold the borrower liable for the full deficiency.

If you are unsure if you are protected in your short sale or if you want to stay in your home, but have not pursued other options, consult with an attorney.  Beware of any advice you receive from a non-attorney who stands to profit from the sale of your property.  Often homeowners receive untrue and misleading advice. I have heard, “don’t worry the bank won’t go after you” or “the buyer will sue you if you don’t agree.”  Remember that Realtors, Mortgage Brokers, and short-sale companies are not able to provide legal advice.  The real estate and financial markets are rough now, so there’s money to be made off of short sales.  The banks win, the realtors win, the buyer wins, but sometimes the seller ends up having lost the home while still in debt to the lender for the full deficiency. 

Moreover, do not think that the bank won’t come after you for the deficiency.  The lender will have many years to pursue a deficiency against the borrower. It may be a better bet to negotiate another option with your lender or reduce your exposure before you agree to sell the property.

Read your agreement with your representative to make sure you have the final say to reject any short sale.  Ask whoever is representing you to request a full deficiency waiver.  Your bank may not agree to this, but there is no harm in asking.  And contact your friendly, neighborhood attorney at Longa Law to review the documents before you agree to something you may later regret.

It is best to have an attorney negotiate the short sale for you and provide you with legal advice regarding the sale of your property. 

DEED IN LIEU OF FORECLOSURE

A deed in lieu of foreclosure allows the homeowner to convey title to the home to the lender of servicer in exchange for a release of the debt.  In order to do a deed in lieu, the home must be in good condition and free from any liens.  This is often a last resort for homeowners prior to considering bankruptcy.  We recommend that homeowners try to negotiate a deficiency waiver, promissory note, or reduction.   Longa Law can also negotiate pre-foreclosure deficiency promissory notes for clients. 

Please understand that this information is not legal advice.  For specific legal advice regarding your situation, please consult with an attorney.  Best of luck to you in these difficult times.  We look forward to possibly helping you improve your situation.