You have been great at making your mortgage payments on time for many years- but life happens. Now you haven’t been able to make your payments for a few months. You’re getting large packets of mail from your lender. You may have even received a Notice of Intent to Foreclose. You open a packet about loss mitigation and see the words “loan modification in Maryland.” Perhaps you are unsure of the difference between loss mitigation and loan modification. Even when you read every word, the process involved seems confusing.
Maybe you have completed the loss mitigation forms to see if you qualify for a loan modification in Maryland or mailed a loan modification letter to your lender. Still, your lender keeps telling you that your application is incomplete. You aren’t sure what to do to save your home. You fear that the only solution is bankruptcy. It may not be.
Since foreclosure is costly and inconvenient to lenders, many will seriously consider modifying a loan as an alternative option. Steiner Law Group has extensive experience with loan modification in Maryland. In many cases, modifying a loan is the only way to prevent your home from being foreclosed on without filing for bankruptcy short of paying the amount you’re behind in full. In this article, we will break down what a loan modification is, the different components of a loan, and the various programs to help you understand loan modification in Maryland.
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What is Loan Modification in Maryland?
Loan modifications are a long-term financial relief option when you cannot make future mortgage payments- or have already defaulted on payments. Modifying a loan changes the terms of the loan itself. It is NOT taking out an additional loan or a refinance. If a modification is approved by your lender, you can avoid foreclosure entirely without having to file for bankruptcy. Modifying a loan is a fantastic idea if you are unable to make mortgage payments, but can be very challenging to do on your own.
Modifying a Loan is a Complicated Process
Modifying your home loan is probably an option you have considered. However, the application process is complex and you find yourself drowning in complicated application forms, lists of requirements, and other documents from your lender. Maybe you have already filled out an application, but your lender is telling you that the application is incomplete or there are other issues with your home that need to be resolved before a loan modification can be considered by your lender.
You might even think you are still being considered by your lender for a loan modification, but one day you get a letter that says Notice of Impending Foreclosure Sale–this is what you want to avoid! Unfortunately, this happens more often than you might think.
Once you receive a Notice of Impending Foreclosure Sale, filing for bankruptcy will be your only viable option to save your home other than paying off the arrears owed in full.
That is why you should hire an experienced Maryland Loan Modification attorney- to ensure that this doesn’t happen!
When to Talk to a Loan Modification Attorney
While there are options for modifying a home loan in Maryland, time is not on your side! You simply cannot afford to sit back and do nothing. The sooner you ask for a modification, the more options will be available to you.
An experienced Maryland attorney will work with you to:
- Review your best options for modifying your home loan
- Advise you on what modification options that your lender has approved you for
- Help you gather all the right paperwork and materials for submission
- Track where you are in the process of modifying your home loan
- Handle all the various issues that may come up
- Get you the best deal possible to avoid both foreclosure and bankruptcy
Components of a Home Loan
In order to understand how modifying a loan works, it’s important to first understand how a mortgage loan works. A mortgage loan is generally made up of 3 components: Principal, interest, and loan term.
The principal is the original amount of money you borrowed from your lender. It is also the amount of money you agreed to pay back in full and is separate from the interest.
The loan term is the agreed-upon amount of time that you have to repay the loan. So if you agreed to pay the $250,000 that you borrowed from your lender over the course of 20 years, your loan term would be 20 years.
The interest rate is the money you pay your lender in exchange for the loan. The moment you take out a loan, it begins to accrue interest. In fact, most of your mortgage’s monthly payment is paid towards interest for the first several years of your mortgage.
Perhaps you got a variable interest rate. You start off with a good variable rate, but your lender has increased it. As inflation rates rise, so do interest rates. And while prime interest rates are increasing, your income is not. By working with an attorney, you can create a loan modification strategy to beat those rates! This is particularly important in the current economic climate where interest rates are higher than ever.
The Note is a promise that you will pay back the loan. It is also called the Promissory Note-the promise to pay. It is the “IOU” between a lender and borrower and also states that you are liable for paying back the debt to the lender. If you’re unable to make your mortgage payments, your lender has the right to sue you personally and garnish your wages and bank accounts- in addition to other collection methods.
Deed of Trust
The Deed of Trust is a document that you will sign when you close on a house that gives your lender the right to foreclose on your home if you don’t make your payments. The Deed of Trust is an example of a security instrument and is recorded in the land records in the county where your home is located.
Forbearance- Not a Loan Modification
While there are some similarities, forbearance is not a type of loan modification. Forbearance occurs when the lender temporarily reduces or halts payments for the borrower. Usually, this is a short-term agreement and is allowed to help you get through a temporary financial hardship. Forbearances were and continue to be very common due to financial struggles related to COVID-19. However, with forbearance, the lender expects to fully recoup the difference once the forbearance period ends.
Forbearance is different from modification options because loan modification in Maryland alters the terms of the loan itself. Forbearance, on the other hand, refers to creating a new agreement that temporarily suspends the original loan agreement. Another important consideration is that the forbearance agreement can be considered an admission of defaulting on a payment, even if it actually stops you from defaulting. If you then default after the forbearance period, your lender can take immediate legal action, since you made an admission of default.
Forbearance May Not Be Your Best Option
Forbearance may seem like a tempting option, especially if you have faced financial hardship due to COVID-19. However, it may be unsound unless you can guarantee you will be able to work out another arrangement with your lender after the forbearance period expires or make a payment equivalent to the amount of relief you received once the forbearance payment is over.
While forbearance offers temporary relief, it is not, by itself, a long-term solution. Once you have started to default on your mortgage payments you are more likely to default on another. If you want to avoid foreclosure and not declare bankruptcy, your best option is to seek a loan modification in Maryland.
Options for Loan Modification in Maryland
Here are some of the potential options for modifying home loans in Maryland. Steiner Law Group is an experienced loan modification law firm that will work with you to determine the best option for you.
Reduce Your Principal
Some options for a loan modification in Maryland will actually lower your principal balance. Essentially, you would be allowed to pay back less than you borrowed. Monthly payments will naturally be adjusted based on the decreased balance, so they usually become smaller.
Interest Rate Reduction
In Maryland, it is possible to get a modification to lower your interest rate. Interest rate reduction refers to either temporarily or permanently decreasing the interest rate on your loan. If, for instance, lower interest rates are available now than at the start of your loan, you may be able to modify to get a lower rate. This usually brings down monthly mortgage payments.
Loan Term Changes
You may also be able to modify your loan and extend your term. This will give you a longer period to repay your loan and will often decrease monthly payments.
Loan Structure Changes
Loan structure changes are a type of loan modification in Maryland that allows you to change your loan from an adjustable interest structure to a fixed-rate loan. This can be very helpful if your income type has changed. For example, if you now live on a fixed income and need a more predictable monthly payment, this will be a great option for you.
Reamortizing a Loan
Another option you have when falling behind on mortgage payments is to recast or re-amortize your loan. What this allows you to do is take your arrears and roll them into your principal. Monthly payments will increase, but you can avoid foreclosure without having to file for bankruptcy!
Which Option is Best for Me?
This is a question we hear often at Steiner Law Group. Our attorneys will work with you to figure out which option best fits your needs – and create a practical plan of action to provide you with immediate relief. Do not hesitate to contact us today or call us at (410) 670-7060.
Loan Modification Programs
There are various programs for loan modifications in Maryland depending on the type of loan that you have, and each program has different eligibility requirements, requires different documentation, and offers different benefits. Figuring out which program fits your needs can be challenging, and the right Maryland attorney can advise you on which program is best for you so you can keep your home with an affordable mortgage payment.
Options for FHA Loans
Federal Housing Administration (FHA) loan modifications are helpful in that they can be used when you don’t qualify for other programs. It utilizes a 3-month trial period so the lender can ensure you will be able to make continued payments. Like other forms of loan modifications in Maryland, it erases any late fees, charges, and penalties. It also fully reinstates the loan.
Options for FHFA Loans
If you have a Fannie Mae or Freddie Mac loan, you may be eligible for an FHFA (Federal Housing Finance Agency) loan modification in Maryland. The Freddie Mac Flex Modification offers a significant payment relief option. FHFA frequently offers modifications that will decrease your monthly mortgage payments by 20%. Other FHFA options permanently change the interest rate and/or term.
Options for USDA Loans
If you have a USDA-backed loan, then a USDA loan modification is likely the best option for you. It offers a fixed-rate option which will help to bring your loan current.
Options for Veterans (VA Loans)
If you are a veteran or surviving spouse of a veteran, you may be eligible for a VA loan modification in Maryland. Even if you did not take out a VA loan, you might still qualify. This plan lets you roll arrears and any related legal costs into the principal. You and your lender will work together to create a new mortgage payment schedule.
Each Program Has Its Own Strategy
Each program has its own unique strategy, benefits, and requirements. Steiner Law Group has experience with these programs. We will work with you to identify which program you qualify for and which is right for you.
Loan Modification Will Stop a Foreclosure Without Having to File for Bankruptcy
Even if you see a loan modification program that fits your needs and specifications, it can be hard to make sense of all the documentation your lender has requested from you. You make also hear all types of terms and phrases that don’t make sense, such as having an underwater mortgage. If you get told your mortgage is underwater, modifying a home loan is absolutely your best bet.
The longer you wait, the worse your options get. While Chapter 11 and Chapter 13 bankruptcy will stop your home from being foreclosed on, you don’t want to get there, and you don’t have to! Modifying your loan is a sure way to avoid both foreclosure and bankruptcy.
If you are like most people, you may feel nearly as confused now as when you started reading. If that is the case, we have your answer. This is a complicated process and can be frightening to do alone. These stacks of paperwork that your lender mailed you discuss complicated loan modification rules and regulations with lots of legal jargon. The thought of modifying a loan on your own seems daunting. And you certainly want to avoid that worst-case scenario – thinking you are being considered by your lender, but one day getting a letter that says Notice of Impending Foreclosure Sale.
Steiner Law Group is an experienced Loan Modification Law Firm
It is the job of an experienced attorney to help you iron out the details and lay out the best possible plan for you. Steiner Law Group has helped many clients throughout Maryland obtain loan modifications. Your home is at stake, you cannot afford to sit back and do nothing!
Which Decision is Right for Me? Speak with an Attorney
Steiner Law Group is here for you! For over a decade Steiner Law Group has been successfully helping hundreds of Maryland residents to get their finances in order and save their homes! Getting a loan modification in Maryland can be challenging-and doing it incorrectly or using the wrong legal counsel could cost you your home.
Unfortunately, the re-default rate on loan modification is high. This is often because people do not get the best deal possible for them. Sometimes payments are only reduced by a few dollars a month, which practically helps no one. Steiner Law Group will make sure that you get the best possible option for a loan modification in Maryland. Getting the right loan modification will make a real difference for your finances and can be the only thing standing between you and foreclosure or bankruptcy.
Contact Us Today!
At Steiner Law Group, we understand the challenges that come along with loan modification in Maryland and home foreclosure. We understand what you’re going through and we will hold your hand through the whole process, to make it as easy on you as possible! Don’t take chances with your second chance!
If you have more questions about loan modification in Maryland or home foreclosure, please schedule a risk-free consultation, contact Steiner Law Group, LLC online or call us at (410) 670-7060 to learn more.