Your Right to a Mortgage Modification

Special programs exist to help make your mortgage more affordable.  The type of modification program you might be eligible for depends on the type of your mortgage.

Home Affordable Modification Program (HAMP)
http://www.makinghomeaffordable.gov

HAMP Tier 1

  • HAMP Tier 1 is a Federal program
  • Many out of state banks (such as Wells Fargo, Bank of America, CitiMortgage, JP Morgan Chase) participate
  • Reduces your monthly mortgage payments (including taxes and insurance) to 31% of your gross income
  • Reduces your interest rate
  • Often extends the term of your mortgage – gives you more years to pay it off
  • To request a modification, go to:

http://www.makinghomeaffordable.gov/get-assistance/request-modification/Pages/default.aspx

A HAMP mortgage modification starts off with a 3-month trial period

  • Many mortgage servicers participate in HAMP
  • To see if your mortgage company participates, go to:

http://www.makinghomeaffordable.gov/get-assistance/contact-mortgage

 

HAMP Tier 2

  • New program for homeowners with mortgages “under water”
  • May help homeowners who did not succeed with HAMP 1
  • Basic idea – reduce interest rate to about 4%
  • Restructure the mortgage to make it more affordable


HAMP programs may have tax consequences – check with a tax preparation expert. In some cases, a mortgage modification, a short sale, or a deed-in-lieu of foreclosure can also result in tax issues.

Visit this website for more information: http://www.irs.gov/uac/Ten-Facts-for-Mortgage-Debt-Forgiveness

Check with a tax preparer or accountant

Read  IRS publication 4661, “Canceled Debts, Foreclosures, Repossession and Abandonment” for:

  • Mortgage modification
  • Short sale
  • Deed in lieu foreclosure

The $25 Billion Attorney General Settlement with 5 National Banks
http://nationalmortgagesettlement.com

  • Five of the largest banks agreed to offer mortgage modifications to homeowners
  • These banks are:
  •  Wells Fargo
  •  CitiMortgage
  •  Bank of America
  •  JP Morgan Chase
  •  GMAC
  • Homeowners may qualify if their mortgages  are “under water”
  • An “under water” mortgage is when you owe more on the mortgage  than the value of the house (For instance, your house is worth $50,000 – you owe $75,000 on your mortgage)
  • For mortgages which qualify – banks will lower monthly payments and forgive part of what is owed

 

MORTGAGE MODIFICATIONS IN GENERAL

The bank is required to give you a written response

  • The bank has 30 days to give you a written answer if you request the bank to modify your mortgage.
  • The 30 days starts to run when you have sent in all documents the bank requested
  • The bank must assign someone to handle you request to modify the mortgage
  • You have a right to the phone number and contact information of this person at the bank
  • You have a right to information from your bank about your mortgage account
  • Itemized statement of what you owe
  • Statement of your payment history
  • Exactly what mortgage company or bank owns your mortgage
  • Problems? Contact http://www.dfs.ny.gov


THE CHAPTER 13 BANKRUPTCY ALTERNATIVE

http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter13.aspx

What is a Chapter 13 Bankruptcy?

  • This is a bankruptcy proceeding based on a 3 to 5 year financial plan
  • Provides up to 5 years to pay off the amounts behind on a mortgage
  • Reduces your other debts to as low as 10% of the total amount owed
  • Eliminates most wage garnishments (other than child support)
  • Requires a regular source of income
  • Requires monthly payments to the Chapter 13 bankruptcy trustee

Special features

  • You must file copies of your tax returns and other financial information
  • You must start paying your mortgage again

Timing

  • In order to file – a counseling session is required
  • You can file, as a practical matter, up to several weeks before the scheduled foreclosure auction
  • Do not delay -  as delays may result in additional foreclosure fees and costs

Fees

  • Filing fee of $281 must be paid to the Bankruptcy Court over a 4-month period
  • The counseling agencies may charge $50
  • LAWNY does not charge attorney’s fees

Bankruptcy requirements

  • Bankruptcy is not appropriate for everyone
  • Time is needed to carefully review and prepare statements of assets, income & financial affairs
  • Full cooperation of client is needed in this process – keeping appointments, providing records, receipts, etc.

If you can no longer afford the house

  • Other options to foreclosure if you have decided to give up the house
    • Deed in lieu of foreclosure
    • Short sale
    • HAMP programs – if your bank participates in HAMP, it has “short sale” and “deed in lieu” options
    • For more information, go to Making Home Affordable.gov
    • Click on “Explore Other Programs”
    • Then click on “Home Affordable Foreclosure Alternatives”

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© Legal Assistance of Western New York, Inc. ®

This article provides general information about this subject. Laws affecting this subject may have changed since this article was written. For specific legal advice about a problem you are having, get the advice of a lawyer.  Receiving this information does not make you a client of our office.

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