Every January is an opportunity for people to complain about how horrible the previous year was. 2018 certainly had it's share of negative events, including Hurricane Michael hitting Florida and the worst wildfires in California's history.
But let's not forget that there were also good stories, like that dog who adopted a monkey. How awesome is that?
Besides looking back at the good and bad of the previous year, new year's is also a time to look ahead to the issues you care about in the coming year.
If you're behind on your mortgage, one issue you should definitely care about is loan modifications. What's going on with them in 2019?
Loan modifications still exist in 2019, and they're not changed from 2018. That's good because they're the only way for most people to keep their home after falling behind on their mortgage.
What Is a Loan Modification?
A loan modification is a permanent change to one or more of the terms of a mortgage, such as its monthly payment, principal balance, or term length.
When a homeowner stops paying their mortgage, the bank starts charging them fees, and won't accept mortgage payments again until the homeowner pays for all the missed payments and fees. If the homeowner can't afford that, they stay in default and will eventually lose their home to foreclosure.
A loan mod cures the default and returns the loan to normal servicing. Often this involves adding the missed payments and fees into the principal balance or the end of the mortgage. If you're in foreclosure and get a loan modification, you'll be allowed to start making monthly payments like normal, and the foreclosure case against you will be dismissed.
In-House Loan Modifications
In-house loan modifications are given by a lender according to their own guidelines. They're also called “traditional” or “proprietary” loan mods because they existed before the government's now-expired HAMP modification program.
To be considered for an in-house loan modification, you have to contact your loan servicer and follow their process for applying. It's possible that they could offer you a streamline modification that doesn't require you to submit any paperwork, but most likely you'll have to complete a thorough application that includes documentation of your income.
FHA Partial Claim Modification
If you fall behind on your FHA-insured mortgage, you could get something called a partial claim payment, which is a loan from the Department of Housing and Urban Development (HUD) paid to your lender in order to avoid foreclosure.
If HUD approves you for a partial claim and pays your lender to prevent foreclosure, you will sign an interest-free promissory note for the claim amount. The loan is like a balloon payment that doesn't have to be paid back for a number of years, or when the home is sold or refinanced. A partial claim is like a second mortgage.
Redefault and Remodification
If you default on your already modified mortgage (redefault), you may be able to get another modification (remodify). Some people have had four loan modifications! However, it could be harder each time because you'll be seen as a bigger risk for defaulting again. So it's important to get the best modification you can and do everything to not default again.
If you're behind on your mortgage in 2019 and want to avoid foreclosure and keep your home, a loan modification may be your only hope. However, they're not easy to get.
It's a good idea to have an experienced attorney who can help you get approved for not just any loan modification, but the best loan modification. Once you do that, you can stop worrying about foreclosure and get back to watching videos of monkeys and dogs.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net