If you fell behind on your mortgage payments and your mortgage lender is foreclosing on your home, it may be time to speak with a professional about what options are available to save your home from foreclosure. The first step is to sit down and speak with a bankruptcy lawyer. Many individuals are unaware that a bankruptcy attorney can help you get a loan modification. Modification of loans can stop a foreclosure, lower your monthly payments, and allow you to stop suffocating in debt. 
What Is a Mortgage Loan Modification?
When a person is unable to afford to make monthly payments on their mortgage, they may be able to apply for a mortgage modification.
Lender Modifies a Person’s Mortgage
A lender may modify a person’s mortgage to help them out with defaulted payments. When a person applies for a modification they are asking the lender to modify the terms of their loan. A lender may modify the terms to lower the interest rate, extend the repayment terms, or change the type of loan.
How Can Modifying a Loan Help Me?
The goal of a loan modification is to make monthly mortgage payments easier on the borrower. If you have not paid your mortgage in a few years, the bank may allow you to put a balloon payment at the end of your loan. This can allow you time to catch up on payments.
Some ways that a modification can help you are by:
- Lowering the interest rate on the mortgage loan
- Changing the loan from an adjustable-rate to a fixed mortgage rate
- Extending the length of the loan
- Adding the arrears to the back end of the loan (this is also referred to as a balloon payment)
- Deferring some of the principal balance
- Forgiving Some of the principal balance
Why Would a Lender Modify My Mortgage Loan?
To Avoid Foreclosure
A lender may modify a mortgage loan to avoid the foreclosure process. Foreclosure can be an extremely costly process. Banks want to get paid, and if they believe you can afford to pay them, they will be willing to give you a mortgage modification.
Should I Refinance My Mortgage Loan or Apply For a Modification?
Refinance
A refinance is a new loan. When a person refinances their mortgage they reduce the interest rate to make the terms more favorable. The refinance process is done directly with the mortgage lender.
A Person Must Have Good Credit to Refinance
For most individuals who are facing foreclosure, their lenders will not allow them to refinance this because it requires good credit to refinance. A lender will also not allow you to refinance if a home is “underwater.” A home that is “underwater” is a term used when the mortgage loan on a piece of real property is more than the value of the home.
Modification
A modification, on the other hand, changes the terms on the current loan. Thus, the rules are more relaxed than if, you were applying for a refinance.
Does Not Require Good Credit to Apply
A modification is not a new loan. An individual does not have to have good credit to apply for a mortgage modification. Further, individuals who have homes that are “underwater” can still apply for a loan modification. It can be a good way to save your home from foreclosure and start over.
Why Should I Hire A Bankruptcy Attorney to Help Me With My Loan Modification?
Attorneys Aid Individuals in getting Modifications for Loans
Bankruptcy attorneys work with banks hand in hand. Many attorneys have helped individuals get modifications which can be a long, confusing process. Many times when individuals try to apply for a mortgage modification on their own, the banks play games. In the past, we have had clients come to our office and tell us that the banks lost their paperwork, keep requesting the same information, and are not willing to extend a modification.
When a bankruptcy attorney is hired to help with the modification process, the games stop. Banks know that lawyers have proof of all the documentation and can fight the lender on your behalf.
Filing Bankruptcy Stops the Foreclosure Sale of the Home
If you are on the brink of a foreclosure auction, filing bankruptcy can stop the foreclosure sale of your home. Filing bankruptcy allows you to take advantage of the automatic stay. The automatic stay prevents creditors from foreclosing on your home as soon as your bankruptcy petition is filed. Filing bankruptcy can allow you to eliminate your debt through a Chapter 7 or Chapter 13 and give you some breathing room to make your mortgage payments.
How Does The Bankruptcy Process Work To Stop A Foreclosure?
Filing for Bankruptcy Forces Creditors to Stop Collection Efforts
When an individual files bankruptcy, creditors must stop pursuing any collection efforts against the individual. During this time, the bankruptcy lawyer will submit a request for loss mitigation with the Bankruptcy Court. If the judge allows the request for loss mitigation, the lender and debtor will work together to get a mortgage modification.
Modification Process Through Bankruptcy Court in Chapter 7 or Chapter 13
Doing the modification process through the Bankruptcy Court in Chapter 7 or Chapter 13 can make the loan modification easier and much more efficient. Judges oversee the whole process to ensure that the bank is working with the individual. This means they can’t play the games they normally would if you did it on your own. The judges usually try and push the banks to give individuals modifications to help them save their homes.
It is always advised that you get a bankruptcy lawyer to help you with the loan modification process. The process can take a few months and your lawyer will go to status hearings in front of the judge to give them updates on what is going on.
How Do I Enter Into a Modification Agreement?
There are three steps to obtaining a loan modification outside of the Court hearing.
1. Apply for Modification
The first step is to apply for the modification. This step can be quite confusing for people who have never completed the paperwork before. The mortgage modification package requests all of your financials. This will include bank statements, pay stubs, taxes, letters of hardship, proof of hardship, 450-T form, and more. A bankruptcy lawyer will be able to go through all the documents you need and make sure that the documentation is correct. Even the most minor detail left out can be a red flag and a reason for denial.
2. Enter into Trial Payments
The Next step, if you are approved a loan modification by your lender, is to enter into trial payments. The lender will want to see that you can afford to make and keep up with the payments. The lender will offer three months of trial payments to see if they should grant you a permanent modification.
3. The Final Decision
The last step is the final decision. If the lender grants you a modification it is vital that you get the agreement in writing. Review it carefully, and stay up to date on your monthly mortgage payments. Keep in mind, that most lenders will not give a second modification without substantial documentation showing why you should be granted another one.
How Do I Qualify?
Qualifying for a modification will depend on your lender. They will want to see that you can afford to make the payments. They will also want to see proof showing why you fell behind and what circumstances have changed.
Each lender has its requirements for approving or denying a modification. It is best to sit down with a bankruptcy lawyer that can review your finances and determine if you may be eligible for a loan modification.
Contact Us For More Details
If you are facing foreclosure or have questions about getting a loan modification, our bankruptcy lawyers can help you. We have helped many individuals save their homes by using the bankruptcy process. If your home is close to being auctioned off, or you have not paid your mortgage loan in months we can help you. Give us a call today at (973)-979-9078. Our bankruptcy lawyers help individuals in Staten Island, New York, and New Jersey file bankruptcy and save their homes.