Mar 15, 2020 | Foreclosure Blog
How is a Financial Hardship determined?
A hardship determination is made to ascertain whether you have had a change in circumstances that caused financial problems. Banks want to see certain “kinds of hardships”. Common financial hardships include: illness of a borrower or family member, loss of hours or employment of the borrower or a family member, failed business or reduced income, divorce or marital separation, medical bills or other unseen financial obligations, death of a borrower, co-borrower or family member, or seasonal income fluctuations. These hardships are normally explained as a part of a Modification Application in the form of a Hardship Letter.
How to Write the Best Hardship Letter
A good Hardship Letter should not paint too bleak a picture. It should be a brief story with a bad past and newly improved circumstances. A temporary bad circumstance that’s now permanently better is the best presentation in a Hardship Letter.
No good hardship letter should paint too bleak a picture. It should be a brief story with a bad past and newly improved circumstances. A temporary bad circumstance that’s now permanently better is the best presentation in a hardship letter.
- Banks mostly like to see certain forms of hardship. The best form of hardship is one that is/was temporary and whose solution can be documented.
- It is important that a hardship be presented as solvable and not permanent or impossible to overcome. Banks respond best to financial solvable hardships and not personal disasters.
- Many financial hardships occur to financial contributors to the household and not the borrower or co-borrower. It is imperative to properly explain and document hardship requests that involve multiple sources of household income, including seasonal downturns in household income.
CALCULATING AND DOCUMENTING THE PERFECT MORTGAGE MODIFICATION REQUEST
While a bad hardship letter can cause a Modification Application to be denied, a great hardship letter won’t assure a successful Modification approval.
As experienced home saving attorneys, we know: it’s all about perfect math, hitting the proper income ratios and fully documenting those numbers. Regardless of any hardship letter, too little income won’t work and too much income won’t work either. You’re either too broke to be modified or too wealthy to be granted a Modification. Perfect numbers and ratios substantiated by perfect documentation is the key to a successful Mortgage Modification Application.
With over 35 years’ experience, we understand the income to payment ratios Banks want to see, and the documentation they require to prove those ratios. We understand just how to thread the needle. Perfect math and perfect preparation are the key elements to all our successful Mortgage Modification and Foreclosure Mediation solutions.
At the Law Offices of Neil Crane, LLC, we offer a free initial consultation. Please do not hesitate to call us today at 203-230-2233, or complete our online contact form to discuss your questions and concerns with an experienced attorney. When you call us, you will always speak to a live person, not a voicemail. We are here to listen to and assist you.
Mar 15, 2020 | Foreclosure Blog
Principal reduction is the process wherein the Lender agrees to take less than the borrower’s full obligation to the Lender on a permanent basis. Principal reduction is extremely rare. Lenders rarely if ever forgive principal on first mortgages in Connecticut. Don’t expect or demand principal reduction, as Lenders very rarely entertain it and often find it a very off-putting and unreasonable request.
Any type of principal reduction is always very rare and only normally done by cash settlement of defaulted second mortgages in circumstances where the value of the house is far below the size of the mortgage. Principal reduction is most likely to occur through negotiations if the borrower can make a substantial cash payment in exchange for a release of a second mortgage. Principal reduction on second or junior liens or encumbrances is available under Bankruptcy Law or through a settlement process for a reduced one-time cash payment at a discounted number related to the value of the house. It takes experience, specialized legal/bankruptcy counsel to assure the best results in principal reduction. Homeowners in trouble rarely have the cash available for this option, nor would they be well-served to utilize such an option since other non-cash offers are often legally available under Bankruptcy protection.
Principal reduction is generally reserved to circumstances that involve government assistance to the lender and a secondary benefit to the borrower. Principal reduction rarely if ever saves homeowners in trouble.
Don’t Expect or Demand Principal Reduction
Most modifications do not come in the form of principal reduction to troubled residential mortgages and an insistence on this type of relief by the borrower is likely to undermine the entire mortgage modification process.
Expecting or demanding principal reduction on a first mortgage is very unlikely to be acceptable to any lender. It was once more available when government programs rewarded Banks and Lenders with payments to the Bank in exchange for granting forgiveness to homeowners. This was rare then and not available now. A Borrower’s request for forgiveness needs to come in the form of a change in rates or terms of the loan.
Requesting appropriate and customary relief with a specialized attorney and a proper request for likely attainable outcome is the best approach with all Lenders in all Mortgage Modifications.
Don’t fall victim to an unfair and predatory Mortgage Modification. Get smart. Get legal representation.
Contrary to principal reduction, almost every Mortgage Modification creates increased principal, not principal reduction. As novice homeowners without specialized legal representation try everything to save their homes, they also fall victim to unfair and predatory Mortgage Modifications.
These are Modifications that drastically extend the term of your mortgage, usually to forty (40) years with a new amortization that greatly benefits the Lenders and puts the borrower into a hugely more expensive long-term loan. It creates homeowners who will never own their homes. They’ll struggle for years, if not decades, as they tread water and never get ahead, create equity, or own their home.
To learn more about Principal Reduction vs. Mortgage Modification, call our experienced team of CT mortgage modification attorneys at 203-230-2233 and speak directly with our attorneys on your options during the Mortgage Modification process at one of our location in Hamden, Connecticut; New Haven, Connecticut; Waterbury, Connecticut; Rocky Hill, Connecticut; Ridgefield, Connecticut; and Bridgeport, Connecticut.
Mar 15, 2020 | Foreclosure Blog
“Trial modification” or Forbearance has become a very common and often short temporary mortgage solution. While the government has encouraged banks to offer temporary mortgage modification through the payment of monetary rewards to the Banks and Lenders, the practice often leads to a false sense of a “solution” and instead increased home loss. Trial or temporary modification is the process by which a Bank or Lender grants an “interim” or temporary solution or forbearance, whereby they take lesser payments on a temporary basis. It is not a permanent solution and can serve to create an improper sense of security and an increasing balance on missed or reduced back payments. By offering a temporary “peace” the bank reaps significant financial rewards from the U.S. Government, and the homeowner gets temporary relief while often falling further behind.
Forbearance or Trial Modification usually involves a mortgage that is well behind on payments. It allows the Borrower to make temporary payments at a set amount. These usually call for three or six months of payments and in no way obligate the Bank to produce a permanent Mortgage Modification.
Trial Modifications (Forbearance) rarely set out the terms of the permanent Modification. They often call for a set arbitrary payment with no statement of the true eventual terms of any permanent Mortgage Modification. Trial Modifications are very enticing to novice homeowners begging for a resolution to somehow save their homes.
If a trial Modification fails to become a permanent Modification for any reason, the homeowner is left in a worse position with a larger arrearage and no guarantee of a second chance at Modification. Make sure any trial or permanent Mortgage Modification is analyzed and approved by a qualified attorney. It is perhaps the most important legal document you can sign.
Homeowners in trouble need to be careful of trial modifications. If a modification isn’t permanent, it’s rescindable at will by the Bank. The Bank then follows up with a full demand for all payments which are due immediately. Don’t get trapped. It’s a serious problem that requires prompt legal advice.
- Hundreds of Connecticut families lose their homes as a result of forbearance / trial modification every year.
- Any modification that doesn’t have clear written terms and a finish date at the end of the loan is a temporary modification only.
- Modifications that are not in writing are temporary and rescindable at the will of the bank. Be careful.
- Modifications that are not reflected in continuing accurate monthly mortgage statements are incomplete and usually temporary.
- Modifications that require further paperwork, further review, further submission, or additional court orders are usually temporary, and always worrisome.
- Trial Modifications give a false sense of security that leads to increased home loss.
Connecticut Attorneys Working for CT Homeowners
Our office has maintained a focused practice dedicated to our local clients since 1983. We are not a countrywide internet company. We are experienced Connecticut lawyers with a commitment to hardworking Connecticut residents seeking to save their homes and obtain relief from overwhelming debt.
The best way to learn about mortgage problems, foreclosure, modifications and overall financial security is to speak with an attorney today. Contact us for a free consultation by calling our office at 203-230-2233, or filling out our online contact form.
