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Arlington heights foreclosure attorneyThe COVID-19 pandemic has caused financial difficulty for many families throughout the United States. Many businesses have been forced to close or scale back their operations, resulting in widespread job losses or reductions in work hours. Many people who are struggling to pay their regular expenses have defaulted on their mortgage payments, putting them at risk of losing their homes. Fortunately, federal and state governments have placed a moratorium on foreclosures, ensuring that families will not be forced out of their homes in addition to the other difficulties they are facing. While the current foreclosure moratorium lasts through June 30, 2021, the Consumer Financial Protection Bureau (CFPB) has proposed an extension of the moratorium through the end of the year.

Details of the CFPB’s Proposal

Based on an analysis of data by the CFPB, around three million homeowners in the United States are behind on their mortgage payments. While the foreclosure moratorium has allowed many of these homeowners to receive forbearance on mortgage payments, the CFPB estimates that this forbearance period will end for around 1.7 million homeowners in September of 2021. This could result in a massive wave of foreclosures that could cause millions of families to be displaced from their homes.

To address this issue, the CFPB has proposed an extension of the prohibition against foreclosures through December 31, 2021. This would give homeowners more time to figure out how to pay off the amounts they owe and resume ongoing payments. The CFPB is also proposing a streamlined process for allowing lenders to offer loan modifications to homeowners. This would reduce the amount of paperwork required to make these types of modifications, allowing homeowners to begin making affordable mortgage payments more quickly. The proposed rule would limit modifications to agreements that would not increase the amount of a homeowner’s monthly payments and that would not extend the term of a loan for more than 40 years after the date of modification.

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Lake County loan modification attorneyAny family can experience financial difficulties that cause them to be unable to pay some or all of their ongoing expenses. Those who are struggling to make ends meet may face the possibility that they could default on their home mortgage, which could result in foreclosure. Fortunately, families in these situations have options, including applying for loan modifications that may reduce the amount of their payments and ensure that they can cover these and other regular costs. Homeowners will want to understand their options for modifying a mortgage loan and the steps they can take to ensure that these modifications will be approved by their lender.

Applying for Mortgage Modifications

There are multiple types of modifications that may be available to ensure that a homeowner can continue making mortgage payments. The loan’s interest rate may be lowered, or a loan may be converted from an adjustable-rate mortgage to one with a fixed interest rate. The term of the loan may be extended, allowing it to be paid off through lower payments over a longer period of time. In many cases, it is in a lender’s best interests to work with a borrower, since they will be likely to suffer financial losses if they need to foreclose on a home and place it up for sale.

To qualify for a loan modification, a borrower must usually have missed at least one payment, and they must have experienced financial hardship that has made it difficult or impossible to meet their obligations. Applicable forms of hardship may include an illness that has resulted in significant medical expenses, a long-term disability, the death of a family member who provided income used to pay ongoing expenses, or a natural disaster that has resulted in catastrophic property loss.

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Libertyville IL foreclosure defense lawyerOver the past decade, the threat of foreclosure has been ever-present for many homeowners. Those who are struggling financially may be concerned that missed or late mortgage payments will result in the loss of their home. However, many homeowners who have refinanced their homes or obtained additional mortgages may be unsure about how these loans will affect their financial situation, including whether mortgage lenders may foreclose if a person is in default on a second mortgage. By working with a bankruptcy attorney to understand these issues, homeowners can determine their best options for defending against foreclosure and managing their debts.

Defaulting on a Second Mortgage

A mortgage is a secured debt, and this means that if a homeowner defaults on the debt, the lender can foreclose and repossess the house. This is true not only for the initial mortgage on a home, but also for any subsequent mortgages or home equity loans. However, during foreclosure, the first mortgage will take priority, and lenders of second or subsequent mortgages will only receive payments if the amount obtained through a foreclosure sale exceeds the amount owed on the first mortgage.

If a home is “underwater,” meaning that its current value is less than the amount owed on the initial mortgage and any subsequent mortgages, lenders may not want to foreclose on a second mortgage, since they will likely not receive full payment of the amount owed. However, these lenders may pursue other options for repayment, such as filing a lawsuit against the homeowner to collect the amount owed. In many cases, homeowners may be able to negotiate with these lenders to determine how they can become current on a loan, since other options may not be financially beneficial for the lender.

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McHenry County foreclosure defense attorneysThe impact of COVID-19 has been widespread, with public health concerns as well as an economic downfall. In response to stay-at-home and quarantine orders issued by local governments, non-essential businesses were forced to close. As a result, many people throughout the United States have lost their jobs. This has resulted in a record-setting number of unemployment claims, but it also left millions of people facing housing insecurity because of lost income. For families, even one parent losing his or her job can be devastating if they rely on that income to pay their rent or mortgage. When too many payments are missed, the lending institution can take possession of the home through legal foreclosure proceedings. If you are facing foreclosure on your home, you may be eligible for a loan modification. 

What Is Involved in the Foreclosure Process? 

Foreclosure is a legal process by which a lender attempts to recover the balance of a loan from a borrower who has defaulted on the loan. Usually, this means that the borrower stopped making payments to the lender, and foreclosure works by forcing the sale of the asset used as the collateral for the loan. In Illinois, foreclosures are judicial, which means the lender (the plaintiff) must file a lawsuit (a complaint) in court. The complaint is served to the borrower, along with a summons that typically provides 30 days for the borrower to file an answer.

CARES Act 

In response to this housing crisis, the federal government implemented certain protections for tenants and mortgage loan borrowers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Renters who were residing in properties that had federally backed mortgages could not be evicted or fined for nonpayment of rent for 120 days between March 27 and July 24, 2020. After the four months were up, landlords were permitted to give tenants 30 days’ notice to vacate the premises. However, agencies including the Federal Housing Finance Authority (FHFA) and Federal Housing Administration (FHA) have now extended their single-family moratorium on evictions until December 31, 2020.

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Lake County loan modification lawyerAcross the country, moratoriums have been placed on eviction and foreclosure proceedings as a result of the COVID-19 crisis. At the end of August, the Federal Housing Finance Agency (FHFA) announced that it was extending the foreclosure moratorium for federally-backed single-family home mortgages until the end of the year at the earliest. The moratorium was set to expire on August 31, but the FHFA recognized that many homeowners still face serious struggles when it comes to making their mortgage payments. While non-federally-backed mortgages are not directly affected by the moratorium, most private lenders have followed suit and are holding off on foreclosure proceedings for the time being.

If you have fallen behind on your mortgage due to difficulties caused by the COVID-19 lockdown, you are probably not going to face foreclosure in the immediate future. You will, however, need to get caught up, as foreclosure will be a possibility at some point down the road. In order to bring your mortgage current, you will most likely need to request a loan modification. Most lenders are willing to work with borrowers who ask for a loan modification, but the application process can be challenging and confusing. In fact, it is not at all uncommon for a borrower’s first request to be denied. The good news is that a loan modification denial is not the end of the story.

A Denial Is Not All Bad

Being told no always hurts a little, but having your application for a loan modification denied can be scary. After all, if the lender will not agree to modify your loan, how will you ever get your mortgage back on track? The most important thing to do after a denial is to keep the bigger picture in mind.

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