Loan Workouts for People Facing Foreclosure or Repossession

One of the major components of President Obama’s economic recovery plan is the federal Home Affordable Modification plan. The plan aims to help those facing home foreclosure who have been unable to refinance or get a loan workout for their mortgage with their creditor. It caps mortgage payments at 31% of a homeowner’s gross monthly income, provides interest rate reductions and offers monetary incentives to creditors who participate in the plan. For each month that the homeowner makes payment on the modified loan, he or she receives additional credits towards paying off the loan balance.

The Home Affordable Modification plan may not be available to all homeowners, however. There are criteria involving overall debt, payment amount and income level. Even if you are not eligible for this program, a loan workout may be feasible. Loan workouts involve working directly with your creditor to make your payments more manageable. You may be able to lower interest rates and monthly payments on mortgages, car payments, or other loans.

Too often people wait until the last minute to seek professional advice. You may have fewer options available if you are already facing an imminent foreclosure or repossession. If you are concerned with your mortgage or debt payments, a Morris County bankruptcy lawyer can guide you through the loan workout process and help you achieve manageable payments.

More Information about Loan Workouts

The first step in seeking a loan workout with your creditors is to alert them as to why you are having difficulty making payments and to do so as soon as possible. The following are certain important details that you should provide to your creditors:

  • Details as to why you have fallen behind on payments (acceptable reasons include things like health problems, job loss, death in the family, or divorce)
  • Evidence supporting your argument that you can afford to keep your home or other items, but just need to re-work your current loan
  • Information on your income and other debts (creditors will usually obtain a credit report to see your financial situation, so be as truthful as possible)

Your creditor will likely seek new assurances that you can make payments on the restructured debt. It may seek new collateral or a co-signor. Additionally, the creditor may track your finances more closely, regularly checking in with you to verify income and debt levels.

When seeking professional advice relating to a loan workout, you should research the companies and attorneys involved and check with their prior clients. As the economic crisis lingers on, some companies have begun providing loan workout services that ended up hurting people more than helping. These services charge extensive up-front fees and then do little to help people modify their loans.

For professional and experienced guidance on how to seek a loan workout to your benefit, contact a Morris County bankruptcy attorney at Ast & Schmidt, PC for more information.

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