Experienced New Jersey Loan Modification Lawyer | Straffi & Straffi Attorneys At Law

There are many legitimate ways in which a borrower can fail to make payments on their loans. The borrower could have had an illness or personal injury, lost their primary source of income, experienced a death in their family, and so on. In the case of homeowners who have an outstanding mortgage on their home, this can be a serious matter. In addition to financial hardship, the threat of foreclosure can cause significant stress and anxiety that may further hinder the borrower’s capacity to repay their outstanding debt.

When there is a great risk of a loan default, it may be beneficial to explore ways to restructure your debt to give you more time to repay them. A loan modification is a version of debt restructuring that allows individuals to avail of measures to change how they repay their debt. To learn more about loan modifications, it is important to consult with an experienced New Jersey loan modification lawyer. At Straffi & Straffi Attorneys at Law, we may be able to help you negotiate the terms of your loan and explore your financing options.

Contact us today at (732) 341-3800 to schedule a free consultation with one of our skilled New Jersey loan modification attorneys. 

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What Is Loan Modification?

Debt restructuring is the process of modifying the terms of loans and other kinds of debt an economic entity has in order to avoid bankruptcy. Debt restructuring can apply to whole economies of countries, to corporations, and to the average homeowner. During the 2007/2008 housing crisis, financial institutions made use of debt restructuring strategies to ease the impact of residential mortgages on homebuyers and small-scale lenders.

Your loans have terms indicating how much of your loan should be paid and when. Loan modification allows you to change the terms of your loan. Depending on the circumstances of your loan and your agreement with the lender, a loan modification can give you more favorable interest rates, a change in the type of the loan, and more flexibility and time in terms of repayment.

Debt restructuring and loan modification can apply to most kinds of debt. For individual homeowners, a loan modification can help, specifically, in the form of mortgage modification. 

Changes to loan terms may be possible with the help of an experienced NJ loan modification lawyer. With the help of a skilled attorney, you may be able to negotiate more favorable terms on your existing loans. Federal government assistance programs are also available to some borrowers.

It is important to consult with a skilled attorney regarding your financial options before you make any decisions. At Straffi & Straffi Attorneys at Law, we may be able to assist you in determining the best possible option for your specific situation. Speak with an experienced New Jersey bankruptcy attorney today.

Call us today at (732) 341-3800 to schedule a free consultation with one of our experienced New Jersey loan modification lawyers.

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How Can Loan Modifications Help Against Foreclosure? Is Mortgage Loan Modification Possible in NJ?

The Covid-19 pandemic has severely impacted the financial resiliency of Americans. The lesser your wages and your disposable income, the easier it is to pile up debt. Losing your job makes you even more financially vulnerable. The unemployment rate peaked at 14.8% in April 2020 from 3.5% pre-pandemic. The highest in more than 70 years. US consumer debt also increased by $800 billion in 2020, an annual increase of 6% compared to 2019, the highest in a decade. Among the different types of debt, mortgage debt increased by 7%.

In New Jersey, the average mortgage debt is $270,000, significantly higher than in most states. In places with high home values, mortgage debt is more common. New Jersey has a typical home net worth of $348,800 which is a good $100,000 more than the average US home. Given the state’s median household income of $85,751, the home affordability ratio for New Jersey is 4.1, higher than the national ratio of 3.7:1. According to a report by Experian in 2020, 65.6% of New Jersey homeowners have a mortgage on their home.

Even though the government has executed measures to protect both borrowers and creditors from the impact of the pandemic on the economy, it can still be hard for the average borrower to bounce back. Homeowners in particular are at great risk of losing their homes to foreclosures.

Loan modifications are particularly helpful to mortgage borrowers. Lenders become more willing to negotiate a modification if it becomes evident that a loan modification would be less costly than allowing a foreclosure to happen or if the debt was to be charged off. Given that mortgages are secured debt, lenders have more assurance that there is intent to repay the debt. 

Loan modification can involve a variety of strategies that would allow a borrower either more time or less opportunity to rack up further debt.

  • Reduced interest rates – Getting a reduction in interest rates may allow a borrower to catch up on their payments without being buried in further debt
  • Longer repayment periods – Changing the terms of your loan from a 15-year plan to a 30-year plan, for example, can bring your monthly payments down to a more affordable rate
  • Change to a different type of loan – For mortgages, a loan modification can involve a change from an Adjustable Rate Mortgage to a Fixed Rate Mortgage
  • Combination – Includes one or more of the other loan modification strategies to restructure the borrower’s debt

It is important to remember that loan modification is different from declaring bankruptcy. Loan modification allows a borrower to prevent going into default. Defaulting due to a loan can prevent a borrower from accessing further credit and can result in legal repercussions. If the debt is secured, the collateral property may be in jeopardy and can be repossessed.

When borrowers default on a loan, the following can happen:

  • The borrower’s credit score can be severely impacted and they can bet negative remarks on their credit report
  • Reduced likelihood of being approved for loans in the future
  • Increased interest rates on any new or future loans
  • Garnishment of wages and repossession of properties

To avoid defaulting on a loan, it is important to consult with an experienced New Jersey loan modification attorney who would be able to help you explore strategies that would fit your financial situation. At Straffi & Straffi Attorneys at Law, our practice is dedicated to helping our clients find their financial footing. Our skilled New Jersey loan modification lawyers may be able to help you negotiate friendlier terms for your existing loans.

Contact us today at (732) 341-3800 to schedule a complimentary consultation.

How Do You Win a Loan Modification?

Winning a loan modification isn’t just about applying; it’s about strategically demonstrating your need and ability to continue making payments under new terms. 

Here’s how you can enhance your chances of success:

  • Strong Documentation of Hardship: Convincingly prove that you’re facing significant financial hardship due to circumstances like illness, job loss, or a natural disaster. This isn’t just about stating the hardship but providing undeniable evidence such as medical bills, layoff notices, or bank statements showing a sudden financial downturn.
  • Ensure Eligibility: Verify that your property qualifies by confirming it’s your primary residence. Investment properties often do not qualify for modifications.
  • Timely Communication: Initiate contact with your loan servicer at the first sign of financial trouble. Proactive communication shows responsibility and may provide more options before the situation worsens.
  • Complete and Accurate Application: When submitting your loan modification application, double-check all entries for accuracy and completeness. Any errors or omissions can delay or negatively impact the process.
  • Financial Transparency: Provide a clear and honest overview of your financial situation. This includes not only your current income and debts but also realistic projections of your future financial scenario.
  • Negotiation Skills: Be prepared to discuss and negotiate the terms of the modification with your lender. Understanding what you can realistically afford and presenting it clearly can make a big difference.
  • Adherence to Trial Payments: If you are granted a trial modification, ensure that you make each payment in full and on time. This period is critical as it demonstrates your commitment and ability to handle the new payment structure.

By focusing on these areas, you position yourself as a credible candidate who not only needs a loan modification but is also capable of sustaining the new agreement, thereby “winning” the modification and securing your financial future.

How to Win a Loan ModificationDescriptions
Strong Documentation of HardshipProvide compelling evidence of financial hardship, such as medical bills or layoff notices, to support your case.
Ensure EligibilityConfirm that your property qualifies for modification, especially if it’s your primary residence.
Timely CommunicationContact your loan servicer promptly when facing financial difficulties to explore modification options early on.
Complete and Accurate ApplicationDouble-check all details on your application to avoid delays or complications in the approval process.
Financial TransparencyOffer a clear and honest picture of your financial situation, including current income, debts, and future projections.
Negotiation SkillsBe prepared to discuss and negotiate modification terms with your lender, presenting your affordability clearly.
Adherence to Trial PaymentsMake all trial modification payments on time and in full to demonstrate your commitment and capability to meet obligations.

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How Can an Attorney Help Me Reorganize My Loan and Mortgage Structure?

The process of modifying your loan or mortgage structure can be complicated without the help of a skilled attorney. An attorney would have to evaluate your financial situation to determine whether getting a loan modification is the right choice for you.

A loan modification is helpful for borrowers who:

  • Are facing a long-term financial hardship
  • May not be eligible for refinancing
  • Are behind on mortgage payments or are likely to fall behind

A loan modification can have long-standing benefits. It can:

  • Remove delinquency status from your lending company
  • Make your monthly payments more affordable
  • Permanently change the structure of your original loan and allow you to have a fresh start
  • Minimize the negative impact on your credit score
  • Retain the ownership of your home

Before you can enter negotiations, it is important to first check if you would be able to qualify. House flippers or real estate investors are not likely to obtain loan modifications compared to homeowners whose primary home is at risk of foreclosure.

The NJ Department of Banking & Insurance recommends sending a letter to your mortgage company or bank notifying them about the difficulty you are experiencing in paying your loan before you are more than 30 days default on a payment. However, although loan modification is a strategy primarily used by borrowers who are already in default, financial delinquency is not a requirement to be eligible for a loan modification. You are more likely to enter negotiations with good standing when filing a mortgage modification before defaulting.

Knowing who you owe for the loan is important to know to whom you should be sending your loan modification application. If your loan is backed by the government – i.e. under the FHA, VHA, Fannie Mae, Freddie Mac, etc. – loan modification programs would be publicly available to you. If not, your loan modification program will be based upon an agreement between the Servicer (who sends you your monthly statements) and the owner of the loan. You may need to send a Request for Information to the Servicer to determine the owner of your loan for you to be able to see what type of loan modification you can get.

If Servicers for federally backed loans do not follow the loan modification guidelines, they can be sued or a defense to foreclosure may be issued. Especially for Borrowers at the end of a Forbearance or for Borrowers affected by the Coronavirus Emergency, Servicers are required to follow the loan modification guidelines strictly. For loans that are not federally backed, it will be necessary to take a look at the borrower’s financial situation to determine the kind of loan modification strategy that will match the one that their loan owner is likely to accept. With this information, alongside the hardship letter and the borrower’s information, we may be able to create an application to modify the loan. In most cases, this application must be submitted at least 37 days before the Sheriff Sale.

The Servicer is required to review modification applications within 30 days of receipt. If the Servicer delays or is not able to declare a decision, a lawsuit may be filed against them for violating the rules. Winning the lawsuit does not automatically mean that a modification is granted, however, there is also a possibility to win a settlement with a modification.

A trial payment plan may also be required to see if the borrower does have the capacity to pay. The terms for these trial payments may be different from the actual modification plan, however, it is necessary for the borrower to continue paying the trial amount even after the trial is over and before the permanent payment plan is finalized. If your application has been denied and you do not receive a trial payment plan, your attorney should be able to determine whether it is appropriate to bring the matter to court after reviews of the process so far. Even if the denial was lawful, there may still be available options that your attorney can bring to your attention.

When you receive your permanent modification, you should have your attorney review the document for any errors and make sure that it is legally binding. At this point, it is also important to confirm whether the foreclosure has been dismissed. Before you make any decisions, you must discuss your options with a skilled New Jersey loan modification lawyer.

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Seeking the Help of an Experienced New Jersey Loan Modification Lawyer

The process of applying for an NJ mortgage and loan modification can be daunting. It is important to consult an experienced New Jersey loan modification lawyer who would be able to help you navigate the complicated legal landscape. At Straffi & Straffi Attorneys at Law, we understand how frustrating it can be for regular NJ homeowners to have to jump through many hoops to obtain a loan modification even amid financial hardship. We offer our strategic knowledge of financial law and are willing to engage in aggressive litigation if necessary to protect our client’s best interests. We may also be able to help you avoid loan modification scams.

For more information on how a loan modification can benefit you, contact us today at (732) 341-3800 to schedule a free consultation. You may also visit our Toms River, New Jersey office or fill out our online form.

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