So, you're ready to apply for a mortgage loan modification. You've done a lot of research and think you should qualify, that there's no reason to believe you'll be denied. But before you get too excited about life with a modified loan and the reduced financial burden you'll have as a result, remember that a lien you don't even know you have will prevent you from getting that loan modification.
Don't lien on me
A lien is a “...form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation.” In plain language, a lien is a notification attached to your title stating that you owe money to a creditor. You need to have a clear title (no liens) to be able to sell your property. Creditors may be able to foreclose on your property to pay off the lien, but that would involve a lot of work and money. They really just want to make sure they get the money they're owed, so they put up a roadblock that makes it so you have to pay them before you sell, refinance, or modify the loan associated with the property.
A permanent loan modification is approved only after a thorough application process that requires the homeowner to submit many financial documents and a hardship letter. The borrower is also required to demonstrate their ability to pay the loan with a series of trial payments. The lender will run title searches to determine if there are liens and liens on the property, and if these are not satisfied or removed before the end of your trial payment period, your application cannot be approved. The lender may extend the terms of the trial modification period if the liens haven't been removed by the end of it, but permanent modification will not be approved.
The liens standing in the way of modification approval can surprise the homeowner because they often have nothing to do with their home, or they may be associated with the loan by mistake.
For example, Amerihope Alliance had a client whose title search showed that there were judgments on their property as a result of thousands of dollars of unpaid medical bills and child support. The medical bill could be taken care of by making small monthly payments that get the homeowner in good standing with the creditor. The homeowner fell behind on the payment and has to correct the problem to move forward. The child support judgment, however, wasn't our client's fault in the least. In fact, he didn't even have children! Somebody else with the same first and last name didn't pay their child support and it showed up on the title search for our client's home. The mistake is all the more egregious because the search shows that the person who was behind on their child support clearly has a different middle initial from our client. Once a mistake like that makes its way onto legal documents, it can take some work to get it corrected.
It doesn't really matter if a lien is your fault or not, or if the debt is even really yours or just somebody else's with a similar name. You have to do whatever it takes to get the lien removed if you want to get your loan modification approved. The homeowner who was considered behind on child support for his nonexistent children had to go to the child support office with a photo identification to show he's not the one responsible for the payments. The best attorney in the world can't do that on your behalf. There are some things you are responsible for, even when working with an experienced attorney.
Unfortunately, issues of mistaken identity are not uncommon. Another surprise lien can come from a former spouse whose name is still on the deed. You may be divorced and remarried, but if the name of your ex is still associated with your loan, their unpaid bills can result in liens on your title.
What are some common types of liens?
- Tax lien: Unpaid property taxes can result in a lien being placed on your home. Tax liens are usually given priority over other liens, and can actually result in foreclosure.
- Mechanic's or Construction lien: This type of lien comes from anyone who is not paid for their contributions of labor or materials to improve the property, such as contractors and subcontractors. Astoundingly, even if you paid all of your bills, but your contractor didn't pay their suppliers, you can find yourself with one of these liens.
- Homeowners association: There are instances of homeowners associations placing a lien on a house for failure to pay association fees. Your loan modification application will require a copy of your most recent homeowners association bill, so your lender should be aware if you are behind on your HOA payments.
The lien list goes on and on. A lien can be recorded for almost any type of unpaid bill. There are often liens on property that must be taken care of. It's just part of the loan modification application process. The personal and financial problems that lead to a person falling behind on their mortgage payments often bleed into other areas of their life. Missed mortgage payments often coincide with missed payments on cars, utilities, credit cards and everything and anything else that costs money.
An experienced foreclosure defense attorney can be very helpful when applying for a loan modification. There's a lot of paperwork required to apply, and the process can be complex. A law firm that is well-versed in all aspects of foreclosure defense and loan modification can assist you in coming to the best resolution to your home loan issues.
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