Mortgage Modifications Can be Helpful, but Not Every Homeowner Qualifies

Florida’s booming housing market does not mean that plenty of homeowners are not struggling to pay off their mortgages. Forbearance and other COVID-related programs have ended. The economy is still in a state of flux. For many Floridians, a modification to their mortgage loans is the best option.

What is a Loan Modification?

A mortgage loan modification is an adjustment to your existing mortgage. The modification is an agreement between the lender (mortgage company) and borrower (homeowner) to alter the loan’s terms so the homeowner can stay in the house. The most common modification to a mortgage loan is simply lengthening the loan’s duration, which lowers the borrower’s monthly payments.

Note: a loan modification is NOT the same thing as a mortgage refinance. Refinancing your mortgage means ending your current mortgage loan and starting up a new one (usually with more favorable terms, such as lower interest rates).

Why Would the Lender Agree to a Loan Modification?

As long as another homeowner is willing to pay the existing loan that the current homeowner cannot pay, it seems counterintuitive for the mortgage lender to accept the modification. To be fair, many requests for a mortgage modification are not accepted by the lender.

However, lenders who accept a mortgage modification application have made a calculation that they will make more money under the modified loan relative to a foreclosure. Foreclosure is a legal process that costs a lot of time and money. Plus, the lender has to pay for the property’s upkeep during the search for a buyer.

Do You Qualify?

Your lender will not grant a modification to your mortgage simply because you want to pay less each month. The bank might not even agree to a modification if you are having financial troubles. Getting your lender to agree to a modification means showing that you are experiencing financial hardship and that your hardship is likely to continue. A good rule of thumb is that your debt should exceed your adjusted gross income by at least 40 percent.

However, you also need to show that you have the resources available to make the payments under the modified loan. More than likely, your lender will scrutinize your available assets, your principal balance, and the current value of your home.

Contact an Experienced Real Estate Attorney For Help

Some lenders are more hesitant to accept a loan modification than others. While lending institutions care about dollars and cents, having a legal professional by your side to help negotiate absolutely helps. Our firm has helped countless Florida homeowners, and we would be honored to assist you and your family. Call us at (305) 227-4030 to discuss your needs today.