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BANKRUPTCY LOAN MODIFICATIONS
Home Loan Modification and Bankruptcy to Prevent Foreclosure
The recent foreclosure epidemic has caused millions of American homeowners to scramble for more affordable home loan terms. Whether it's a rising adjustable rate, loss of income, loss of equity or simply a poor decision to borrow money, people need loan revisions and very few people are able to accomplish that with the traditional method of mortgage refinancing. Mortgage loan modifications occur when a mortgage lender agrees to modify terms in accordance with their borrowers request. Most loan modifications happen after a borrower requests a payment reduction and the loss and mitigation department of the lender agree to the terms. Loan modifications have become a critical tool employed to prevent foreclosures.
Bankruptcy is a legal action filed by a consumer who is unable to pay his or her monthly debt payments. Bankruptcy formally stops all civil proceedings against the debtor while in bankruptcy. According to BK law, lenders must suspend their legal actions and this includes foreclosures. However, the lender still has the option of filing for an exception from the automatic stay. If the relief is granted the lending company is authorized to proceed with the foreclosure action. Bankruptcies do not always prevent or delay foreclosure and it does not necessarily enable the homeowner to remain in possession of the home unless the pay the deficiency owed to the lending bank. However, in most cases a bankruptcy will delay the foreclosure.
There has never been a better time to be delinquent on your mortgage. The foreclosure epidemic has created tremendous leverage for homeowners, because banks do not want more homes. Liquidity has become a serious issue with banking institutions; therefore they are negotiating and offering home loan modifications with lower payments for homeowners.
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