When Should You Seek Loan Modification?

 Posted on January 10, 2024 in Bankruptcy

Facing unmanageable mortgage payments leaves struggling homeowners weighing options. Attempting mortgage loan modification merits consideration for lowering payments to affordable levels long-term through adjusted interest rates, extended repayment terms, or reduced principal. Working with a Texas bankruptcy lawyer when modification makes the most strategic sense helps navigate the process proactively.

If You Have Missed Several Payments

Consistently falling behind on mortgage payments triggers late fees and credit score damage and brings you closer to potential foreclosure over time. Even just a few missed payments can quickly snowball out of control as penalties and arrears amount. 

Seeking loan modification early into delinquency makes strategic sense before amounts owed become an insurmountable obstacle to catching up. Most servicers must mandatorily evaluate homeowners for “hardship” assistance changes once two payments get missed, so filing paperwork around the third late payment mark maximizes responsiveness.

If Payments Reset Higher

Many homeowners eventually face shocking payment increases when introductory teaser rates on adjustable-rate mortgages expire after a few years, spiking the amounts owed. Waiting until payments surge to become completely unaffordable only causes more financial pain. 

Pursuing modification preemptively when facing imminent rate reset potential is wise to prevent devastating payment shocks as variable rates start adjusting upwards. This sustains continuity rather than allowing a budgetary blindside.

If Your Finances Changed

Most loan modification programs require demonstrating qualification based on documented “financial hardship” to justify mortgage changes. Income reductions stemming suddenly from job loss, unforeseen medical problems, a spouse’s death, divorce, or other unexpected life events can all potentially establish eligibility if adequately proven to impact ongoing repayment capacity. Seeking adjustments when finances first shift for the worse prevents missed payments down the road.

If You Are Upside Down on Home Value

If the current mortgage balance exceeds a home’s market value, this “underwater” scenario often blocks refinancing and sales options. Seeking principal reduction through modification in such cases aligns payments better with property worth. Easing constraints may empower future solutions.

To Avoid Foreclosure

Loan modification always merits urgent last consideration for struggling homeowners facing imminent foreclosure risk. Successful modification helps prevent the major credit damages, emotional turmoil, and extensive financial consequences of displaced foreclosure. If you get a court date, modification represents a final effort towards retaining homeownership rights.

Contact an Arlington, TX, Bankruptcy Attorney

Mortgage modification helps homeowners regain stable finances when payments become temporarily unworkable. Working with a Dallas, TX, bankruptcy lawyer can help determine if this is the best route for you. Call Acker Warren P.C. at 817-752-9033 for a free consultation.