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The vast majority of Americans have had their lives turned upside down by the coronavirus pandemic. They have not been able to perform their daily activities and go on any sort of vacation. Many people have also lost their jobs or faced some other sort of economic hardship. These individuals have been unable to pay all kinds of bills. Perhaps the most important bill for the vast majority of Americans to pay is their mortgage. These people want to do whatever they can to avoid foreclosure and stay in their homes. They may have to take extraordinary steps over the next few months in order to do so.

Access Temporary Mortgage Relief

One of the fastest ways to avoid foreclosure during the current COVID-19 pandemic is to access temporary mortgage relief. Millions of Americans have been thrown out of work or had their hours greatly reduced. These men and women are on hard times and a large number of American companies know this. Many mortgage companies have introduced a wide variety of plans to help people pay off their mortgages and stay in their homes. A lender has several reasons to take these steps. They want to retain customers and aid their image through such a stressful period. These companies also want to keep within government regulations. A large number of areas banned foreclosures and evictions for a significant period of time. Holding the court hearings and auctions associated with these events would have violated social distancing guidelines in places such as Long Island and New York and been dangerous for a number of people. In addition, the government also made billions of dollars in loans available to companies that have faced economic hardship from the pandemic. Many of the losses that mortgage companies suffer helping out their clients can be covered by a loan from the federal government.

Avoid Foreclosure

Home owners should try as hard as they can to structure their payments and stretch their budgets to where they do not have to foreclose on their house. Foreclosure is a terrible process that no family wants to endure. They are physically removed from their house with all of their possessions. Individuals have to find somewhere to live with little to no warning. They have a black mark on their credit that they cannot take off for several years. A person would often rather avoid all of their other payments then fall behind on their house. Avoiding many payments involve a company sending in threatening letters and bill collections phone calls. Not paying an internet bill may lead to an individual not having internet and having to go to the local cafe in order to get online. Having a car repossessed forces an individual to potentially take public transit to work. But all of these negative consequences pale in comparison to what would happen if an individual did not have their home anymore. Most people who suffer through foreclosure have to live in expensive motels until they can find an apartment of some kind. Many of the people who are foreclosed upon simply end up homeless. This is one of the worst financial tragedies that a person can endure and it does not have to happen in many cases.

Home Loan Modification

Some home owners will be eligible for home loan modification in order to help with avoiding foreclosure. This modification involves a home owner changing the structure of their loan to avoid current payments. It is particularly beneficial for individuals who are currently out of work but hope to go back soon. They can take the money they have now, save up, and eventually use extra income to pay off their mortgage at a later date. There are two main strategies that these companies have used to aid with this process. One of these is deferment. Deferment involves allowing a person to avoid a few mortgage payments now and simply tacking those payments onto the end of the mortgage. The bank may take a short-term hit but does not lose money in the long term. Individuals also expect to have more money later on and do not have to suffer any problems with their credit in most instances. The other approach is forbearance. In forbearance, an individual misses several payments and then have to pay them all back in a lump sum in the near future. If an individual can, they should emphasize taking deferment over forbearance in all cases. Many individuals cannot pay the lump sum involved in forbearance. But if it is all that a mortgage company will offer, it is certainly better than risking foreclosure with missed payments.

Filing for Bankruptcy to Prevent Foreclosure

In some rare cases, an individual's best option to avoid foreclosure is to declare some form of bankruptcy. This status is when a court declares that a person does not have the capacity to pay off their debts as they are currently constituted. There are two main options for an individual after the bankruptcy process. In Chapter 13 bankruptcy, a person sets up some sort of payment or refinance plan for at least a portion of their debt over a period of three to five years. In Chapter 7 bankruptcy, they often do not pay off a large number of their debts. Those debts are wiped clean. Bankruptcy is a problematic process for many reasons. First, it harms a person's credit immensely. They will often have this black stain on their credit report for many years. The records of their bankruptcy will be in the public domain for anyone to access. Also, there is no absolute guarantee that they will be able to keep their home. Some forms of bankruptcy do not allow a person to keep their home if they do not have a certain amount of equity. A person is basically trusting their attorney and a judge to make the best decision that helps them retain their home and avoid foreclosure. This risk is massive and is not a level of risk that most individuals should take on with their home.

Avoid Foreclosure Scams

Any individual who is potentially in the foreclosure process must look out for scams that try to take advantage of them. These scams come in many forms and mostly revolve around a person's desire to become whole with their mortgage company. Some scams promise to get an individual out of their underwater mortgage and many other debts. In a common form of the scam, the debt settlement agency advises that a person stop paying off all of their debts for a period of several months. Then, the agency advises that a person comes back with an offer to settle for all of those debts that they did not pay. The theory behind this is that the company will want something rather than nothing and negotiate with an individual. But banks often want to keep the mindset of people paying debts on time rather than gain every single time they can from a potential borrower. Therefore, they will simply foreclosed on an individual if they go too long without making their payments. This approach often costs a person several thousand dollars and is not particularly helpful in the long run.

Hire an Experienced Attorney for Guidance

Many of the options listed to help with foreclosure involve complex plans and the legal process. This process is especially true of bankruptcy. There are a number of concrete steps to take with bankruptcy that a person has to make sure that they follow. A lawyer can help with all of these steps. He or she can help a person settle their debts or argue their case in front of the judge. An experienced Long Island attorney can help you avoid potential foreclosure scams. Our team can represent you in any financial dealings that they have and can help shine the way forward on getting out of what looks to be insurmountable debt.

Take Action Today

Anyone who is looking at foreclosure is in a precarious position financially. They are understandably scared and perhaps desperate. These individuals are prime targets for a wide variety of scams and cons. They have to remain careful and diligent. They also need to secure the help of an experienced real estate attorney. For more information on how to avoid foreclosure during these difficult times, contact the office of Adam C. Gomerman today and speak with our experience Long Island legal team.
The thought of losing your Long Island home because of an unforeseen financial hardship can keep you awake at night. You might be struggling to make ends meet because of job loss or an unexpected financial setback. Anxiety sets in because you do not know how you are going to make your mortgage payments and cover your daily living needs. Take a deep breath. There are options available that will help you keep your home and gain control of your debt. You can choose to lower your monthly payments by obtaining a loan modification, refinancing your mortgage, or filing bankruptcy. Whichever option you choose, it is important to contact your mortgage servicer or bank as soon as possible. The longer you wait, the fewer options you have.

What Is Loan Modification?

A modification is a form of loss mitigation designed to protect both the borrower and the lender. The lender agrees to change the terms of the mortgage to make monthly payments more affordable. Lenders can permanently change the terms of the mortgage by:
  • Extending the duration of your agreement
  • Adding past due payments to the unpaid principal balance
  • Reducing your interest rate
  • Forbearing payments for a short-term
  • Changing your mortgage type (for example changing an Adjustable Rate Mortgage (ARM) to a Fixed-Rate Mortgage)
Some Long Island homeowners may benefit from the government-sponsored Flex Modification program created to assist borrowers who have Fannie Mae and Freddie Mac home loans. The program can reduce a borrower’s mortgage payment by around 20 percent by adding the past due amounts to the outstanding loan balance, modifying the interest rate, extending the loan terms, or setting aside some of the principal balance before recalculating the monthly payment. This is called a forbearance and is a temporary option to get you back on your feet. You may be eligible for the Fannie Mae or Freddie Mac Flex Modification program if:
  • The loan is a conventional first mortgage
  • The borrower has enough income to make the monthly payment, and
  • The loan was acquired at least 12 months before Flex Modification evaluation
There may be other programs offered by your state. For example, the New York State Mortgage Assistance Program (MAP) provides a zero percent interest deferred payment mortgage loan up to $80,000 to New York homeowners who have exhausted all other avenues of help. This program is available statewide, so it does not matter whether you live on Long Island or in Buffalo. According to the New York Housing Conference, you can use the funds to bring your mortgage current, get a modification, or pay off property tax arrears. Typical loan recipients are low- to moderate-income homeowners with an average household income of $53,311. Long Island residents can receive assistance and personal counseling through the Community Development Corporation of Long Island

Modification Eligibility for New York Homeowners

Eligibility varies from lender to lender, but the process begins by completing and submitting an application with the required documentation to the lender. The list of required documentation will vary but the following documents are generally required:
  • Proof of income and an expense finance worksheet
  • Tax returns for the last two to three years
  • Proof of additional income such as alimony, social security, disability, child support
  • Bank statements, and
  • Proof of your hardship which can be a hardship letter or affidavit
  • Proof of additional debt such as student loans, credit cards, and car loans
If find yourself having difficulty with the modification application or you feel your lender is not abiding by state laws, consider contacting our Long Island office and we can guide you through the process. You do not need to hire an attorney to obtain a loan modification, but employing a qualified professional can make the difference between keeping your home or losing it foreclosure.

Refinance

Refinancing your loan replaces your old loan agreement with a new one and can be completed by either your current lender or a new one. To qualify for a refinance, you must be creditworthy and not owe more than the house is worth. While creditworthiness is not a major concern with a modification, a lender or bank does require that you be able to make the new payments. Unlike a modification, you may have to pay closing costs and other fees to complete the mortgage refinance process.

Mortgage Modification and Bankruptcy

Chapter 7 and 13 are the most common types of bankruptcy filed by individuals. Chapter 7 bankruptcy is a liquidation process in which the trustee sells non-exempt assets and uses the proceeds to pay creditors. There are no provisions in a Chapter 7 bankruptcy that allows you to keep your home, but it gives you time to find other housing or enter a loan workout plan with your lender. There is nothing that states your lender cannot agree to a modification after you file a Chapter 7. However, this is at the lender’s discretion. A Chapter 13 bankruptcy generally allows you to keep your home and pay creditors under a court-supervised repayment plan over three to five years. Once the court approves the repayment plan, the lender cannot foreclose. Additional advantages of a Chapter 13 bankruptcy include:
  • Automatic stay (an injunction that temporarily prevents creditors from pursuing or continuing credit collection actions)
  • Extending your secured debt over the life of the repayment plan
  • Protecting third parties such as co-signers
  • No direct contact with your creditors. Payments are made to the trustee who disburses the payments to the creditors
According to the United States Courts, you do not need an attorney to file bankruptcy. However, due to the long-term legal effects surrounding a bankruptcy, hiring a bankruptcy lawyer who will work to protect your rights, recommend the best bankruptcy for you, and guide you through the process adds an additional blanket of security should a problem arise.

If you would like more information on the home loan modification process, or if you have questions regarding bankruptcy filing, considering contacting The Offices of Adam C. Gomerman. Our Long Island based team of attorneys has years of experience in advising clients on the home loan modification process and personal bankruptcy process.
How a Loan Modification May Help Reduce Your Monthly Mortgage Payments For homeowners struggling to keep up with their mortgage payments,there are programs available to help avoid foreclosure. However, because these programs are legal agreements, it is prudent for borrowers to consult a lawyer. One viable alternative to foreclosure is a loan-modification program that is an adjustment to the terms of the existing mortgage. Loan modification is designed to provide either temporary or permanent financial relief by reducing the amount of the monthly payments via a reduction in the principle, interest rate or by extending the term of the loan.

Loan-Modification Options

There are several forms of loan modification, with some being better than others. However, the lender that holds the mortgage may not provide all the available loan-modification types.

The full list of options include:
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