Question: How can I compel my mortgage lender to modify my existing loan with terms that will relieve my financial hardship? I have submitted five requests and each time they have responded by proposing to place delinquent payments on the back of the loan, refused to reduce the principle balance and increased the monthly payment. The principal on my loan is currently $100k more than the market value of my house. I am requesting of them that they reduce my principle balance to within 10% of current market value, and reduce the interest rate to reflect a monthly payment at or near $1,5k. A number of other homeowners have informed me they were able to achieve similar terms. My lender has been calculating our debt to income ratio using our gross income which is approximately 1/2 our net income in determining our ability to pay! How can we qualify for the HAMP program, or compel our lender to grant us an in-house modification that will relieve our financial hardship? What are the options that may fit our situation?
Response: In order to qualify for HAMP, the bank must look at your gross monthly household income. If you applied 5 times and were offered loan modification terms that have increased your monthly payment, then 31% of your gross monthly income must show affordability of such modified amount . It is also possible that the packages were filled out incorrectly, as is often the case. In order to continuously be reviewed for HAMP, you need to show a change in income. For example, when you last applied, you did not have rental income but now you do, or vice versa. Also, capitalization of all the arrears is the first step to mortgage modification. If you owe more than $100,000.00 in arrears, they must get added to the unpaid principal balance, including foreclosure fees and costs, and that becomes your new principal balance. When you do not have sufficient income, then your lender may elect to forgive some of your principal, or at the very least, it may defer up to 30% by adding a balloon payment to your agreement that would mature in 30-40 years. If your income is enough to show affordability without having to decrease your payments to 2%, extending the term to 40 years, or deferring some of the principal, then you are unlikely to end up with better terms under HAMP. Traditional modification may be another option if your net income outweighs your expenses (expenses include the mortgage payment that you are no longer making). You should consider speaking to a professional in order to determine what option will work best for you.
In the legal blog, Attorney Svetlana Kaplun addresses typical questions our firm has received from our clients, or come across from homeowners related to foreclosure, foreclosure defense, loan modification and bankruptcy topics.
The information contained in the legal blog of Attorney Svetlana Kaplun is for informational purposes only, and should not be construed as a legal advice on any subject matter. Please read our full disclaimer or contact the Law Office of Svetlana Kaplun, P.C. by telephone at 718-444-1115 for more information. Copyright © 2013 Law Office of Svetlana Kaplun, P.C.
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