Mortgage Modifications and Chapter 13 Bankruptcy
Modifications of your mortgage payment(s) so as to make them more affordable for you are very difficult to obtain. There are many hoops through which you must jump and questions you must be able to answer in order to modify:
- Can you afford the new proposed figure according to your current debt to income ratio?
- Lowering your payment will add time to your mortgage and, consequently, interest amounts which are always higher at the beginning of a mortgage. Can you handle that in the grand scheme of things?
- Obviously, you must be behind in your current mortgage. Are you aware that purposely not paying your mortgage so that you can try to qualify for a modification can backfire on you because modifications can take an incredibly long time to be approved and, if you are not approved, will you be able to catch up on your payments or will you have walked through the foreclosure door?
- Modifications only apply to homestead properties. Does your mortgage issue involve an investment property? If so, no-no.
- Are you aware of the new HAMP (Home Affordable Modification Program) guidelines:
- Unpaid mortgage balances should be $729,750 (single family home) or less
- Mortgages must predate January 1, 2009
- Monthly payments must be more than 31% of your pretax income
- You must qualify for financial hardship while simultaneously showing you could pay a new proposed mortgage figure
Filing for Chapter 13 protection can be advantageous if trying to modify your mortgage. As of April 1, 2013, a new modification program makes qualifying for a modification not such a far-fetched idea with little chance of success. Loan modification requests outside of Chapter 13 paperwork focus on your current credit report, i.e. your current debt to income ratio to compute your monthly debt. If a significant portion of that debt is recalculated vis a vis a Chapter 13 filing, the picture changes. The loan modification program entered into in conjunction with a Chapter 13 filing shows much more realistic figures which can shine a more favorable light on your request.
The new streamlined modification program involves mandatory mediation meetings. Representatives will discuss your Chapter 13 financial situation (figures) with HAMP officials. Be aware that if a modification agreement cannot be reached with HAMP, your representative can pursue possible available modifications with private financial institutions. There are required timelines for these negotiations and court-ordered supervision. These timelines and imposed supervision are to your benefit so as not to leave you hanging indefinitely.
This new program is certainly worth investigating with the assistance of a professional. The possibility of a restructured, more affordable mortgage, in conjunction with the other benefits secured through a Chapter 13 bankruptcy filing, can go a long way toward future financial solvency and re-growth. You can lose nothing by investigating the specifics of the program which is now available to the residents of the state of Florida. It is certainly more pro-active than just losing your home because you did not try.