Loss Mitigation Program | Mortgage Modification in Bankruptcy
Are you in the dark when it comes to mortgage modification? Frustrated with high interest rates and/or declining home values? If you are trying to modify the terms of your mortgage, but have received little or no response from your mortgage company, contact our firm. We may be able to help.
Clear Communication between Lender & Borrower
In 2013, Foster Law Offices, LLC expanded our practice to include a legal staff that is exclusively dedicated to assisting our clients with potential mortgage modification through the Loss Mitigation Program that was created by the Bankruptcy Court for the Western District of Pennsylvania in late 2012.
The Loss Mitigation Program was created to provide clarity, while essentially “fast-tracking” the process for both the borrowers and the lenders. Following the “mortgage meltdown” in 2008, many mortgage companies created internal mortgage modification programs. However, many homeowners find the process overwhelming as they are faced with an endless “paper chase” and little or no results.
Home Affordable Modification Program
According to the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) watchdog group, individuals who chose to participate in the government sponsored Home Affordable Modification Program (HAMP) program are defaulting at an “alarming rate”.
HAMP was designed to help homeowners to modify their FHA-insured mortgages, reduce payments and avoid foreclosure. The watchdog group reported that as of the end of March 2013, over 312,000 program participants have defaulted on their mortgage – despite their enrollment and approval into the HAMP program.
The US Treasury is unable to provide a single reason as to why the default rate is so high; however, several participants report that they only received a temporary modification to their mortgage during their trial period.
Mortgage Modification in Bankruptcy
For the most part, it seemed as though the mortgage creditors wanted to provide some relief and the homeowners were looking for a lifeline, but the two interests could not come together for one reason or another.
We have met with many clients that were denied for mortgage modification. More often than not, they simply gave up after the endless, repetitive document requests.
A homeowner can find permanent relief that will allow them to keep their homes, rather than delaying a default. The Loss Mitigation Program was created in response to these chronic modification problems. Contact us today to schedule a free consultation and see if you qualify to apply for the loss mitigation program.
Loan Modification Process in Bankruptcy
Here’s how it works:
File for Bankruptcy
1. A client files for protection under the US Bankruptcy Code. Subsequently, the filing triggers protection of all assets. Further, it allows the debtor to address and possibly eliminate other debts. As such, the debtor can now allocate all available disposable income toward retaining residential real estate.
341 Meeting of Creditors
2. Within 30 days of the 341 Meeting of Creditors, our office would file a Motion with the Court to enroll into the Loss Mitigation Program. The mortgage modification is essentially under the bankruptcy umbrella. Accordingly, your assets and financial interests are protected while the modification is sought under the Court’s supervision.
Seek Program Approval
3. After the loss mitigation application has been approved, the court signs an Order with rigid guidelines for the borrower and the lender. As a result, your mortgage company must operate in good faith. During this time, they will examine the current status of your mortgage and your mortgage modification packet. Deadlines are clear for the lender and the borrower. These rules and directives make the mortgage modification process transparent for the borrower.
Clear & Consistent Communication
4. ALL correspondence goes through an electronic “portal” which the Court can monitor to ensure all parties are acting in good faith. The portal streamlines the process, reduces costs, and saves time for all parties.
The rules indicate that the loss mitigation period should be usually complete within sixty (60) days.The borrower or lender can seek additional time, if necessary. The deadlines and timing are crystal clear. Borrowers and lenders are highly discouraged from “dragging their feet” as there could be serious consequences.
Each mortgage situation is quite unique. Results are not guaranteed and vary based upon each individual situation. We have seen a variety of outcomes. Past clients have been approved for:
◦ A reduced interest rate for a short period, or for the life of the loan;
◦ Mortgage arrears moved to the end of the loan,
◦ Mortgage arrears occasionally reduced or even eliminated;
“Success” in the Loss Mitigation Program is a relative term. In other words, the result of the program could be the realization that the homeowner simply cannot afford the property under any reasonable circumstances.
When a homeowner enters the Loss Mitigation Program, he or she should expect a clear, expedited decision from the lender so they can move on with their life one way or the other. Nothing is more frustrating than being in mortgage “modification limbo” for months, if not years. The Loss Mitigation Program creates a level playing field for the homeowner, where you can make a realistic decision on residence affordability.
If you are interested in learning more about mortgage modification and the Loss Mitigation Program, contact us for a free consultation. A licensed Pennsylvania attorney will sit down with you to review your situation and determine whether bankruptcy and potentially the Loss Mitigation Program is an appropriate solution.
We have offices conveniently located in Erie, Meadville, Franklin, Mercer, Cranberry and Warren.