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Modification Tips and Tricks

tipstricks.bmpOver the past few years in our foreclosure defense and bankruptcy practice, we’ve learned a little bit about mortgage modification in Florida and here are some tips and tricks of which homeowners should be aware:

Call your mortgage servicer and ask about their HAMP program and participation. Any bank who accepted TARP bailout funds back in 2008, or who has signed a servicing agreement are required to consider any potentially qualifying borrower for HAMP. HAMP modifications often provide for interest rates of as little as 2% and are usually more beneficial than in house mods.

Under a HAMP mod, you don’t have to miss a mortgage payment to qualify. You can simply submit an affidavit of impending hardship. Use the words “imminent default”. This avoids the lender telling you that you have to be three months deliquent for them to consider a mod, and then changing the story when you call again in three months by now requiring you to be current to modify your loan.

Ask about the Principal Reduction Alternative (PRA) if you are upside down in your mortgage.

Ask about the Hardest Hit Funds (HHF) available in the states hardest hit by the recession.

A good resource for information is the Hope for Homeowners Hotline (1-888-995-HOPE). Another is to contact a foreclosure defense attorney to review your options early. The main website for HAMP is located at www.makinghomeaffordable.gov.

If you are considering a short sale, ask your servicer if you qualify for HAFA which provides for a mandatory deficiency waiver of the balance owed, plus a move out check in the amount of $3,000.

More programs are expected to be announced this fall including a possible refinancing of Freddie and Fannie owned loans to current market rates for underwater homes. Sometimes a homeowner should consider delaying the foreclosure to keep their options open in case a future program can help.

If your modification request is denied, you are entitled to a reason for the denial in writing, and you have the informal right to escalate or appeal the decision if you think it was made in error without submitting a brand new package.

If your modification is denied because you have too much other debt, consider filing a Chapter 7 bankruptcy and then re-applying. Consider filing a Chapter 13 though if you have a second mortgage that can be stripped. If your lender denies a modification in a pre-suit mediation in the state foreclosure action (here in Florida we have mandatory mediation now), don’t give up if you wish to keep your house. The chances for a successful modification in state court mediation are lower than 5%, whereas in bankruptcy in Orlando, Florida it is running 70% presently. The banks explain that their bankruptcy departments are smaller and are populated by their most experienced personnel thereby providing more personal attention and perhaps going outside the box in considering modification possibilities. In Tampa, Florida, the bankruptcy court just posted a new Chapter 13 plan this week for bankruptcy attorneys to use when clients are seeking a modification of their home mortgage.

Remember, ultimately if your modification is denied you may be several months behind and your credit may be affected if the servicer has been reporting any late payments to the credit bureau. You will have the right to catch up on your payments in a Chapter 13 bankruptcy if the mortgage company does not agree to some sort of forbearance or modification.

Lastly, don’t ignore the foreclosure summons just because you have requested a modification. Modification and short sales move along a separate train track from the foreclosure. You don’t want to be kicked out of your house right after a modification is denied simply because you didn’t know to respond to the summons. It is usually best to consult with a foreclosure defense attorney before a response is filed because you will waive defenses not raised in the initial response. We offer free consultations in the areas of bankruptcy and foreclosure defense if you have a Florida home and have further questions: Christie D. Arkovich, P.A.

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