What are your long term goals regarding your home? Setting your goals is the most important part of the loan mitigation process. If you know your goals and options, your foreclosure defense lawyer can formulate an appropriate strategy. The terms you receive will depend on how well your foreclosure defense lawyer portrays your situation to your lender. Your foreclosure defense attorney should talk to you about your options, set realistic goals and formulate a strategy that reaches your goals.
Listed below are some elements included in the mortgage negotiation process and a brief explanation of how each element can help you resolve a troubled mortgage. Most often, Your foreclosure defense attorney’s goal is a loan modification that allows you to keep your home. An experienced foreclosure defense attorney can advise you regarding these elements.
Waiving or Reducing the Delinquent Balance:
If late fees and penalties comprise a substantial portion of your outstanding debt, your foreclosure defense attorney can negotiate to reduce fees and late charges or waive them entirely. Your foreclosure defense attorney can also negotiate to capitalize your arrears and add them to your principal balance. This solution simply gives you a fresh start with a new payment.
Reducing the Interest Rate:
Sub-prime, high interest rates are a big reason why so many people face foreclosure today. Interest rate reduction is the most common form of loan modification for reducing payments. Many loan modifications use a tiered interest rate which starts very low and graduates to a fixed rate loan at a competitive interest rate. A good foreclosure defense attorney can negotiate to have your rate reduced and can also raise legal defenses to abusively high interest rates.
Extension of Term:
Your lender can also extend the term of your loan, allowing you to spread out the payments over a greater length of time. For example, re-amortizing your 30 year mortgage as a 40 year mortgage will result in a significantly reduced monthly payment. Almost all lenders will agree to this change because they would technically make more money over the long run. For a good foreclosure defense attorney, it is a last resort option.
Modify Adjustable to Fixed Rate:
Many homeowners who fall behind have adjustable rate mortgages or a “balloon” payment they cannot afford. With a fixed-rate mortgage, mortgage payments will remain unchanged for the entire term of the loan and current interest rates are historically low. Any good loan modification today includes a rate fixing component for adjustable rate loans.
Reduction of Principal:
In some cases, it makes sense for your lender to reduce your balance. Increasingly common, principal reductions are usually granted when the costs of foreclosure are greater than the amount that the lender is able to write off. With dramatic government incentive increases in June 1, 2012, and the rise in strategic defaults by those with negative equity, principal reductions have increased in both frequency and size. Negotiating a principal reduction is the hardest loan modification element to obtain. An experienced foreclosure defense attorney is best positioned to make a presentation convincing your lender to grant a principal reduction.