In 2013, over 1.3-million homes were foreclosed on by banks or mortgage lenders. While this is the lowest number in the last six years, it's not much consolation to those who are behind on their mortgage payments and facing foreclosure themselves.
What many homeowners aren't aware of is the numerous government programs that exist in order to help you stay in your home, and repay the back payments - or forgive them entirely.
One of these programs is known as a loan modification, and depending on the terms of yours, you may be able to move missed payments to the end of the loan as well as lowering your monthly payment without any additional money from you. In fact, this method could save you thousands and keep you in your home while forgiving the debt and interest incurred previously. It's a great solution for those that know what to do.
If this sounds like you, here's what you need to know about modifying your mortgage.
Don't wait to get started.
Depending on your bank, they could start foreclosure proceedings with as few as three missed payments. It's important to get the ball rolling early.
Seek help if you feel you need it.
These procedures are relatively common, and although they'll take a lot of your time, many homeowners end up arranging the entire thing by themselves. I opted to hire Doan Law because I was attempting to modify the loan as part of a bankruptcy filing. In cases like this, when you're adding the mortgage to an existing or new bankruptcy filing, you'll definitely want legal help.
Make sure you're talking to the right person.
If you decide to proceed yourself, you'll inevitably be calling the mortgage company at some point. Generally, after you explain your situation, you'll be passed along to the collections department. Most people that start this process are passed off to collections, when what they really need is loss mitigation. Collections - in most cases - doesn't have the power to help you, and they're mostly there to collect a payment or let you know what sort of consequences you're facing if you don't pay.
Collect your paperwork.
After talking to a case manager in the loss mitigation department, you'll have to gather some paperwork. Generally they'll want paycheck stubs, tax documents, and a six month profit and loss statement that shows your income as well as your household expenses each month.
Write your hardship letter.
The hardship letter is extremely important to your case, as it's the only opportunity you'll have to add a personal touch to the proceedings. The letter should be detailed, but to the point and it needs to feature the chain of events that put you behind in the first place, as well as your plan to get back on track. Be as honest as possible in this letter as the bank will find out if you're lying to them.
This is the hard part. Sometimes these sorts of things take months, several more requests for documentation, and even additional proof of your hardship. Rest assured that during the loss mitigation process, your home is generally safe from foreclosure no matter what the outcome.
If the loan modification doesn't pan out, you may have the right to appeal the decision, but for that I'd seek legal counsel as it may be your last chance at keeping your home. Just remember, be as detailed as possible in both your correspondence with the bank, and your gathering of documents. Remain calm, courteous, and helpful throughout the process in order to give yourself the best chance for success. Good luck!