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Loan Modification Process: Like a Ride on a Ferris Wheel

Posted on in Arlington Heights Foreclosure Attorney

For many homeowners, a loan modification request is much like a ride on a Ferris wheel. The lender offers assistance through HAMP or some other federal program, raising hopes and expectations. Then, the bank suddenly withdraws its offer, many times based on technical grounds, such as turning in documents a day or two late, a Debt To Income ration that is a few points too low or a Loan To Value ratio that is a few points too high. This rejection is followed swiftly by another assistance offer, and the wheel starts moving again.

All this time, the bank is generally not accepting partial payments, so the delinquency keeps getting higher and higher. Eventually, the Ferris wheel stops. The lender soberly declares that the delinquent amount is too high to be repaid. Foreclosure follows.

Chapter 13 Bankruptcy may offer distressed homeowners a way to get off the Ferris wheel and get on the tram that takes you where you want to go.

Bankruptcy Mediation

If you are behind on your home mortgage and file Chapter 13 Bankruptcy, the lender will generally file a motion to lift the stay to try and foreclose on the loan. Far from being a frightening setback, this move is one of the best things that can happen in your case.

The bankruptcy judge generally refers contested matters to mediation, either by rule or upon request from a party. At that mediation, the lender has a duty to negotiate in good faith. In other words, the bank cannot deny a loan modification based on a technicality. If you are a reasonably good candidate for a loan modification, based on your current financial means, the bank's lawyer would be hard-pressed to offer an explanation to the judge as to why mediation failed. Other options, such as a deed in lieu of foreclosure and a short sale, are also on the table.

As an added bonus, an attorney may be able to give you more time to pay the past due amount at a lower interest rate. As long as the debt repayment plan is fair to all the creditors, the judge will approve it in most cases.

If you need a loan modification to save your home, be sure you have the experienced Arlington Heights bankruptcy attorneys at Newland & Newland, LLP on your side. Call today for a free phone consultation.

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