Mortgage Restructuring Help
As a homeowner, the string of events that can ultimately result in mortgage foreclosure and eviction are especially traumatic. For relief, it is possible for you to negotiate a mortgage restructuring, or loan modification, within the pre-foreclosure stage of the foreclosure process to save your home. Be advised, however, that the bank operates to serve its own best financial interests and is under no obligation to approve of any loan modification package.
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Mortgage Restructuring
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A mortgage restructuring is a permanent change to your mortgage contract, which is designed to help you keep your home. For affordability, you should work to restructure your mortgage to charge payments that are less than 30 percent of your gross income. When restructuring the mortgage, the bank may agree to offer an extended term. For example, you may have 20 years left to pay off $250,000 on a 30-year mortgage. Through mortgage restructuring, the bank could extend your maturity date and allow you an additional 15 years to pay off the $250,000.
Mortgage Default
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You will be unable to negotiate a mortgage restructuring until after home loan default. Your full mortgage payment is due on the first of the month. After 30 days of missed payments the mortgage falls into default and the foreclosure process begins with the pre-foreclosure stage. In pre-foreclosure, you generally have 150 days to secure a loan modification or to sell your home to avoid further damage to your credit.
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Personal Finance Package
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You will put together a personal finance package to prove your case for mortgage restructuring. The package of banking statements and loan documents should verify that you have used all available resources to keep the existing mortgage current. Prior to the negotiations, you should sell off investments within taxable accounts and withdraw banking deposits that are in excess of six months worth of living expenses to raise cash for mortgage payments. You should also research home values within your immediate area. Your chances for mortgage restructuring improve, if your property value has declined and you owe more on the home than it is actually worth. The bank may then offer a mortgage write-down, where it reduces your mortgage principal to match your property value.
Pre-Foreclosure Sale
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To keep your options open, you should also put the home up for sale while working through mortgage restructuring negotiations. In pre-foreclosure, you should offer your home at a 10 percent discount to comparable real estate. The discount should help to effectively compensate a prospective buyer for any minor repairs that he will need to pay for---due to your lack of funds for maintenance.
Foreclosure Auction
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The lender will publish a notice of sale in the local newspaper, after 180 days of missed payments with no mortgage restructuring or home sale. The notice of sale schedules a time for your home to be auctioned off, which usually occurs within the next 30 days. Immediately after the auction, you will be subpoenaed with an eviction lawsuit and ordered to vacate the property.
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