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By Logan Weinkauf
Founding Attorney

A loan modification (also known as refinancing) allows a homeowner to renegotiate the terms of their mortgage and avoid foreclosure. It has the potential to offer relief to homeowners in financial distress. For most of us, the mortgage check is our biggest debt.

Loan modification can be complex, and with this article, our Massachusetts loan modification attorney hopes to demystify it.

What Are the Benefits and Drawbacks of Loan Modification?

Refinancing or loan modification involves the restructuring of the terms of a debtor’s loan in ways that benefit the borrower. It is generally used in the context of a home mortgage, and will typically take thirty to forty-five days to complete. According to the Consumer Financial Protection Bureau, by modifying your home loan, you can often reduce your monthly payments if you get a loan with a lower interest rate. You may also want to refinance if you are going through a divorce.

However, there are several downsides to consider:

  • Over the long term, you will likely end up paying more because principal reduction isn’t guaranteed
  • It will probably have a negative impact on your credit score
  • It may extend the repayment period by ten years or more
  • It may require a large balloon payment at the end of the mortgage term

It’s important to weigh the pros and cons of loan modification before pursuing it. Consulting an attorney is advisable.

Knowledge Required for Loan Modification

Massachusetts has a ninety-day period called the “right to cure” period. When a homeowner receives the requisite written default notice, the right-to-cure period begins. That gives the homeowner the chance to catch up on their back payments or apply for a new mortgage.

Applying for a new mortgage typically involves similar steps to those you encountered with your original loan application. This process will almost certainly require a fresh appraisal of your home. Additionally, you will need to gather financial documents such as recent pay stubs, W-2 forms, and bank statements from the last few months. It’s crucial to start the application process as soon as possible and secure your mortgage rate promptly. Since rates are subject to fluctuation, locking in your rate early prevents the possibility of facing a higher rate later.

Many homeowners are not aware that the lender who holds their mortgage is obligated to give them a detailed explanation of their loan. That explanation should include the costs, late charges, and any attorney’s fees. You have the right to ask for an explanation of anything confusing. If you see something that seems unreasonable, you can contest it in writing.

Complications When Qualifying for a Loan Modification

In some instances, it may be difficult to get a lender to consider a loan modification. If that happens, enlisting the help of an attorney may mean the difference between losing and keeping your home. Understanding your personal financial situation will be important in negotiating your options and a skilled and experienced attorney will not shy away from an honest assessment. Give us a call today for a consultation.

About the Author
Logan represents individuals and small businesses in the U.S. Bankruptcy Courts in Boston, Worcester, Springfield, and nearly every county court in Massachusetts. He approaches each case with empathy for the people behind the case. He works efficiently to deliver cost-effective solutions. He has advised people and businesses on creditor and debtor matters across diverse areas of law, including corporate law, real estate, and family law issues. This puts Logan at the leading edge of debtor’s rights, asset protection, and litigation. Logan is a trusted advisor to individuals, families, entrepreneurs, and business owners.