Several relief options are available to homeowners who find themselves unable to make mortgage payments, yet do not want to let their home go into foreclosure. If owners have enough equity in the property, they can sell it. If the debt against the property exceeds its fair market value, owners can negotiate a "short sale" with the lender -- a transaction in which the proceeds of the sale are less than the amount owed. Owners can also apply for a mortgage modification.
Mortgage Loan Modification Programs
According to the FDIC, a mortgage modification revises the borrowers’ home loan to provide an affordable, sustainable payment plan. Modification options include adding delinquent payments to the principal balance on the loan, temporarily reducing the interest rate until the borrowers’ cash flow improves, extending the term of the loan for additional years or some combination of the three.
Generally speaking, mortgage modifications are based on a change in the borrowers’ circumstances. The borrowers must explain and document the hardship that caused them to fall behind on their mortgage payments. Examples of acceptable documentation are proof of divorce, unemployment, reduction in job hours, decrease in the value of the home and increase in the monthly home mortgage payments.
Who Must Sign
All of the borrowers whose names appear on the mortgage loan must sign an application for modification. If a husband and wife bought the home in both their names, then both spouses must sign the application for loan modification. If only one spouse financed the house, then only that individual must sign the loan modification documents. However, if the mortgage lender needs to obtain copies of joint income tax returns from the Internal Revenue Service or get copies of bank statements in both spouses’ names from their bank so it can verify information in the loan modification application, the second spouse must sign a release giving the IRS or the bank, as the case may be, permission to release his or her tax returns or statements.
If a Spouse Won't Sign
Generally speaking, if both the husband and wife are listed as borrowers on the mortgage loan, both must agree to cooperate in the mortgage modification application process. There may be exceptions in cases where one spouse has abandoned the other, where the couple is in the process of getting a divorce or where the couple is already divorced and a judge has ordered the home sold. An individual who wants to apply for mortgage modification and needs the signature of an uncooperative spouse should consult an attorney to find out what options are available based on the state where the individual lives and the circumstances surrounding the refusal to sign.
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