Advice on Mortgage and Loan Modifications in New Jersey
Homeowners in Mercer, Middlesex, Ocean Monmouth Counties can modify their loans in a variety of ways. Each option has a list of requirements and a set of eligibility rules. Additionally, each option has different benefits for the lender and different benefits for the debtor.
Some of the options include:
- Getting a loan modification including a (Home Affordable Modification Program) modification before bankruptcy
- Getting a loan modification or HAMP modification during bankruptcy
- Using Chapter 13 bankruptcy to force a loan modification where the debtor has five years to pay the arrears
- Using Chapter 7 bankruptcy to reaffirm the debt
The laws regarding these issues can be complicated. Thus, it is likely your best bet to consult with a mortgage and loan modification attorney who can help you determine your best course of action.
How is a Mortgage Different than a Loan?
A loan is an agreement by a consumer to pay for the item purchased such as a house. A mortgage is an additional agreement where the consumer agrees that the lender has an interest in the house. Furthermore, the lender can repossess the house to pay the loan balance, if the debtor/consumer defaults on the loan.
What are the Debtor Benefits of Loan Modification?
If you opt to modify your loan, you can reduce payments through one or a combination of:
- Lower interest rates
- Extension of loan term (arrears are added to the end)
- Possible principal reduction
General Eligibility Factors for Loan Modification
Some of the eligibility requirements and factors that lenders consider are:
- Proof of income and an ability to make the payments
- The amount of the mortgage and loan
- The condition of the property
- The financial status and financial hardship of the consumer
- The ratio of debtor’s expenses to debtor’s gross monthly income
- The criminal record of the debtor
- NPV – Net Present Value. Mortgage companies use the NPV test to decide if a loan can be modified. The test is a series of calculations the lender makes to analyze the possibility of a default. The factors include:
- The value of house now
- What the house will likely be worth in a year
- Whether the debtor can pay the arrears
- The cost of foreclosure and the value of the home in foreclosure
What is the Home Affordable Modification Program (HAMP)?
HAMP is a federal law that allows qualified homeowners to have their mortgage and loan modified if they are at risk of foreclosure. Thus, the aim of the law is to encourage lenders to make it easier for the debtor to qualify for loan modifications. This is because there are some government-based financial incentives for the lender.
You may be eligible for the HAMP if:
- You defaulted on your loans before
- Your aim is to lower payments (principal, taxes, insurance and interest) to 31 percent of the homeowner’s income
- Your loan balance does not exceed $729,750
- The home is your residence
- The property is a 1 to 4 unit property
- The mortgage was in place before January 1, 2009
- The hardship must be documented
Chapter 13 Loan Modifications
Chapter 13 is a bankruptcy remedy that allows qualified debtors to force a loan modification on secured obligations. Then, Chapter 13 allows the debtor the option to add the arrearages to the back of the loan and to continue the core loan payments. Debtors then have 5 years to pay the arrears without interest.
Garland & Mason, L.L.C. Can Help You Modify Your Loans
Are you ready for a fresh start? Contact or call Garland & Mason, L.L.C. at (732) 358-2028 today to start your journey toward financial freedom. We offer a free initial consultation with an experienced loan modification attorney. Our office is handicap-accessible. It is conveniently located just fifteen minutes from the New Jersey Turnpike and the Garden State Parkway. Parking is free.