How Loan Modifications Work in New York

Can mortgage loan modification stop foreclosure proceedings?

Typically a loan is secured to mortgage and purchase a home. If the home owner has defaulted on the payments and consequently, the mortgage company may begin foreclosure proceedings to enforce the mortgage lien on the home.  Loan modifications seem to be a viable option.

What is mortgage loan modification?

Simply stated, a mortgage loan modification entails changing the terms and conditions of the original loan or mortgage contract.  The modification may reduce the rate of interest that may be charged. A lower rate of interest will decrease the amount that has to be paid. The modification may extend the period of repayment. This will make the monthly payment smaller although the loan has to be paid for a longer period of time. A mortgage loan modification is essentially changing the old mortgage loan contract and a new one is entered into between the lender and the borrower.

This means that penalties and surcharges (for late payments, for example) will be added to the backend of the loan repayment schedule. Some mortgage loan modifications give the mortgage debtor a moratorium or a period of a few months that he does not need to pay the mortgage.  This gives the debtor time and opportunity to find the funds he needs to satisfy his mortgage debt.

Does a debtor need representation by the New York Loan Modification Attorney?

At first glance, it does not make much sense for a debtor who is having problems raising funds to pay mortgage debts to still retain the services of a lawyer.  However, mortgage loan modifications are usually obtained through negotiation.  And negotiations must conform to foreclosure prevention laws that protect mortgage debtors who are at –risk of financial hardship. Moreover, only a New York Loan Modification Attorney can discuss and evaluate which between mortgage loan modification and bankruptcy can work to your benefit.

Will filing a Chapter 13 bankruptcy petition result in mortgage loan modification and stop foreclosure?

Filing of a bankruptcy petition under Chapter 13 esults in an automatic stay—an automatic stay stops all cases for collection on debts filed by creditors of the petitioner.  This stay also includes foreclosure proceedings.  Under Chapter 13, when the debtor is behind in his mortgage payments, and he is still earning income, he can include in his repayment plan the arrearages on his mortgage payments as well as future mortgage payments.  When these are included in the repayment plan which the debtor files with the bankruptcy court, he can make payments on his mortgage arrears. Under the repayment plan, his monthly mortgage payments can be smaller than the monthly mortgage payments he used to pay.  This is in fact, a modification on the original mortgage loan. If the bankruptcy court approves the repayment plan (which includes the arrears and future mortgage payments), the debtor gains a mortgage loan modification.  If the bankruptcy court does not confirm the repayment plan, then the mortgage creditor can continue with foreclosure.  For this, the assistance of a New York Bankruptcy Attorney will be wise.

We at the Maxwell Law Firm PLLC, assist in client debt settlement, foreclosure defense, tax collection defense, filing for Chapter 7 and 13 bankruptcy, and mortgage home loan modifications. Contact us and speak to our competent and experienced New York Bankruptcy Attorney so that you can get the debt relief you are seeking. Please give us a call at 718-701-0095 to discuss your options.