Most homeowners who have defaulted on their mortgage have heard the term or tried for a “Modification of Mortgage,” in short a modification. A modification is a change of the terms of the original mortgage agreed to by the lender and borrower. A Mortgage modification is likely to include the following:
Reduction in interest rate
Reduction in Principal Balance
Reduction in Late Fess or Penalties
Lengthening the term of the loan and/or
Capping the Monthly income based on a percentage of household income.
In Bankruptcy a homeowner is more likely to receive a mortgage modification based on the Net Present Value or NPV test. Part of this test involves quantifying the likelihood of borrower default on the mortgage loan. Lenders consider bankruptcy a positive for a mortgage modification in that the reduction of other debts such as credit cards, personal loans, medical bills, etc., increases the likelihood of future timely mortgage payments.
Once a Mortgage modification is approved, the process is not over, the Bankruptcy Court must approve the mortgage modification. In the Eastern District of Pennsylvania Bankruptcy Court, the approval process is done by way of Court Motion.
Sadek Law Offices, LLC has helped 1,000’s of homeowners through difficult financial times and would be happy to speak with you about your situation. You may call our law office at 215-545-0008 to discuss your situation.