“I’m in Default on My Mortgage, Now What?”
If you are in default on your current mortgage payments remember that you must, according to Massachusetts law, be afforded a “right to cure.” In Massachusetts, mortgage lenders must provide you written notice of the fact that you are in default, and that notice must give you a 90-day period to cure the default. This 90-day period is known as the “right to cure” period. During the “right to cure” period the mortgage borrower is given the opportunity to make all arrearage payments or apply for a loan modification.
Modifying your Mortgage in Massachusetts
In Massachusetts, a mortgage can be modified with a mortgage lender through a process called loan modification. While loan modification may not always be available, where it is available to a borrower it can be an invaluable tool. With a loan modification a homeowner may be able to revise the current terms of the mortgage to terms more favorable given the present circumstances of the homeowner. For example, it may be possible to lower an interest rate, or change the amount of the current monthly mortgage payment by paying out the amount owed to the lender over a longer time period.
The loan modification process can be intimidating and confusing. It is helpful to have an attorney familiar with the process assist in modifying an existing home mortgage loan. Still, there are a number of things to understand if you are considering applying for a loan modification in Massachusetts.
Loan Modifications as a Way Out
There are many reasons that one may have difficulty making mortgage payments on a home. Loss of a job or death or illness of a providing family member are some of the most common reasons that a mortgage owner may be unable to continue making payments on a home mortgage. When a tragedy occurs making continued mortgage payments impossible, a loan modification may be the best option.
Keep in mind that if a lender agrees to a discussion about modifying a mortgage, the lender is going to present loan terms that are generally favorable to the lender, not favorable to the borrower. While a borrower may seek a loan modification without assistance of an attorney there are many aspects of the loan modification process can be challenging, including: knowledge of the 90-day right to cure period and what rights the homeowner has during that 90-day period, how to prepare for a meeting with the mortgage lender to apply for a loan modification, and negotiation strategies.
Use the 90-day Right to Cure for Strategic Advantage
Remember that a mortgage lender has to give you, the borrower, under Massachusetts law, a ninety-day period to cure arrearages or to otherwise allow you to find another way to deal with the mortgage default. You might use the 90-day right to cure period to apply for a loan modification if a loan modification might allow you to pay the mortgage going forward at a new, affordable amount.
It is also the responsibility of the mortgage lender to provide you with detail of the total amount owed on the mortgage. That detail should include late charges applied to your account, costs associated with the account, and any attorney’s fees that may have been applied to the total amount owed. You are also entitled to know how much money is in escrow, and have a breakdown of the amount of money set aside for real estate tax or insurance.
Obtaining an accounting of amounts in arrears on a mortgage is a crucial step to ensuring that the amount the lender states you owe is accurate and truly representative of the amount owed on the mortgage. If after receiving this accounting you believe that the amounts represented in the report are inaccurate, you will have a sound basis for providing an explanation in writing as to your disagreement with the amount a mortgage lender claims that you owe.
Prepare for the Loan Modification Meeting
Bring all documents that have been provided to you by the mortgage lender as well as proof of assets, income, and other debt as applicable to your meeting with a lender regarding a loan modification. Being prepared for this meeting sends a message to the lender that you are prepared and take both your role as well as your own personal obligations to the lender seriously, giving you a strong starting position in the negotiation process.
Remember that the Loan Modification Process is a Negotiation Process
The lender holds the cards, that is, the mortgage lender controls whether or not to accept terms suggested in a loan modification application. A homeowner with a mortgage has a better chance of having a mortgage loan modification accepted when the borrower clearly understands the position of the lender as well as their own position. It is not enough to plead with a mortgage lender for leniency or modification of a loan simply because of a change in financial or other life circumstances. At the end of the day the mortgage lender has a financial interest in your property, so your best chances of success in obtaining a loan modification is to demonstrate to the mortgage lender that you appreciate the interest that the lender has, and that a modification in the current loan will benefit both the lender and yourself.
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