Middletown, New York Attorneys Explain Home Mortgage Modifications and Loss Mitigation
At the Orange County law firm of Hayward, Parker & O’Leary Esqs., our attorneys pursue all bankruptcy and alternative means to solve your debt issues. While bankruptcy judges may not modify home mortgages except in a cram-down or strip-down situation, they may restructure them to let the borrower pay over the course of a Chapter 13 bankruptcy plan. Additionally, a bankruptcy court–sponsored loss mitigation program lets debtors and creditors attempt to work out a mortgage default with greater transparency and accountability than is often available through mortgage industry loss-mitigation programs outside of bankruptcy. The main loan modification programs available are the Home Affordable Modification Program (HAMP) Tier 1, HAMP Tier 2 and the Second Lien Modification Program (2MP). An experienced loan modification attorney can greatly expand debt relief options for White Plains, Newburgh and mid-Hudson Valley residents.
What is HAMP?
Administered by the U.S. Treasury, HAMP is available to NY homeowners both in and outside of bankruptcy. If the borrower is eligible for Tier 1 of HAMP, their interest rate could be reduced, resulting in a monthly payment targeted to be 31 percent of gross monthly income. At the Tier 2 level, the mortgage is adjusted to between 25 and 42 percent of the borrower’s gross monthly income.
The HAMP process is extremely technical and resembles the process for securing a new mortgage loan. Tax returns and credit reports are obtained, employment and permanent income are verified, an appraisal is conducted, and the net present value (NPV) test is performed. The NPV test determines whether the lender benefits more by modifying the loan than by denying the modification and going forward with foreclosure. If modification results in a more favorable NPV, the borrower is offered a three-month trial modification. When all payments are made in full and on time, a permanent modification is then offered to the borrower.
Who is eligible for the 2MP?
If your lender participates in the 2MP program and you are in good standing on your HAMP modification, you may be able to modify your second mortgage through 2MP. If you have already received a HAMP modification, under 2MP your lender must:
- Offer to modify or extinguish its second mortgage.
- Dismiss pending foreclosure action on the second mortgage
2MP permits reductions in mortgage interest rates and extends the length of time you have to repay the loan. Amortizing second mortgages interest rates can be reduced to one percent. Interest-only mortgages can be converted to amortized payments at one percent or may remain as interest only at a two percent interest rate. Regardless of the option selected, after five years the second mortgage is reset to the terms of the HAMP-modified first mortgage.
Contact us for alternative debt solutions like mortgage modification
From our Middletown, New York office, our attorneys at Hayward, Parker & O’Leary Esqs. have helped thousands of White Plains, Newburgh and mid-Hudson Valley residents modify their home mortgage. To schedule your free consultation and escape your debt burden, please contact us online or call us at 845-343-6227 today.