Dealing With Lenders During Loan Workouts

In this troubling economy, many homeowners are faced with the difficulty of keeping up with their mortgage payments. In an attempt to stave off foreclosure, homeowners are looking at loan workout options to keep them in their homes, or in the alternative to settle with the bank before a foreclosure is completed.

Common Loan Workout Techniques:

Loan Modification - A temporary or permanent change in one or more terms of a mortgage loan (e.g. the interest rate, term of loan).

Reinstatement - Paying the outstanding delinquent balance on a loan (usually plus collection costs) and having the loan reinstated to its original terms.

Forbearance Plan - Lender allows you to reduce or suspend mortgage payments for a period of time. Often lenders will require a delinquent borrower to engage in a forbearance plan for 2-3 months before agreeing to modify a loan. The lender utilizes this time to evaluate whether the borrower will be able to sustain making payments on an ongoing basis.

Short Sale - Sometimes a borrower decides that they will be unable to sustain payments even with a loan workout. A short sale is a sale of a home to a third party in which the proceeds fall short of what the homeowner still owes on the mortgage. Nowadays, many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage.

Our office is available to assist you with each of these workout options, including representing you and your property in a short sale.

A word of caution. The loan workout process is a timely process and can be difficult to navigate through. If you are genuine in your desire to work out issues you are having with your lender, it is recommended that if you wish to remain in the property, you set aside a reasonable amount of money per month to apply towards a forbearance plan or a reinstatement. When the lender considers such options, the amount of available funds will be one of the first questions asked.

Further, when beginning the loan workout process, whether you retain The Law Office of Bradley D. Schnur, Esq. PC or attempt to tackle this tedious process on your own, it is recommended that you are prepared with the oft-requested paperwork including, three (3) most recent bank statements, past two (2) years tax returns, personal financial statement, hardship letter, and one (1) month of pay stubs. If you are proposing a "short sale," The Law Office of Bradley D. Schnur, Esq. PC can assist you as well - from finding potential purchasers to preparing the contract of sale, to representing you at the closing.

Please contact us at (516) 932-4400, e-mail us at info@bdslawoffice.com or visit our website with any questions or to schedule an appointment.