At the Law Firm of Ira J. Metrick, we often receive calls from homeowners who had a prior modification, but defaulted due to loss of employment, health issues or because of an increase in their modification’s interest rate. Unfortunately, defaulting on modifications is a common situation that arises when your modification has a “step rate” feature. This means that the interest rate increases over the life of the modification. However, there are options available, including a new modification.
What is a Step Rate Loan Modification?
When you receive a loan modification, it can change the payment terms of your mortgage in one of several ways, including:
- Reducing the interest rate
- Extending the term of the loan
- Reducing the principal of the loan
If your loan modification reduces the interest rate of your loan, it may have a “step rate” feature. This means that the modified interest rate is only temporary. For example, the lower interest rate may be fixed for 1-5 years. Once that time period is up, your interest rate will begin to increase. When this happens, your mortgage payments may soon become unmanageable again, even though you’ve already had a modification. This can lead to you falling behind on your payments and your lender initiating the foreclosure process.
What Are My Options? Can I Get Another Loan Modification?
When you default on a loan that has already been modified, is it important to contact an experienced loan modification attorney to assess your options for preventing foreclosure and staying in your home, including:
- Applying for another loan modification. Regardless of how many modifications you have had, whether or not you can get another modification will depend on your lender and the modification programs that are available. We can conduct a thorough analysis to determine your eligibility for a loan modification and give you an estimate of what the new payment terms would be.
- Determining if your lender has committed any violations. We can analyze your situation to make sure that your lender has acted properly, including how your modification is being reported to the Credit Reporting Agencies. We can also determine whether your lender is authorized to pursue foreclosure and whether there has been a violation of the Fair Debt Collection Practices Act.