It is not easy nowadays to be in a financial bind especially if the person has a home to pay for. If one’s mortgage is not restructured, this means the person may lose his or her home to foreclosure. This problem is prevalent nowadays, even in Long Island, New York. It is also essential for a person with financial difficulty to avail of loan workouts, one of which is a Long Island loan modification or alteration. A loan workout is used by a borrower and a servicing/lending institution to avoid foreclosing the property that is secured by a delinquent deed of trust/mortgage.
Loss mitigation is when a third party helps the homeowner. It works to agree on mortgage or loan terms for the homeowner and will also prevent looming foreclosure. Such terms are normally obtained by short sale negotiation, a Long Island loan modification or alteration, cash for keys negotiation, deed in lieu of foreclosure, or other kind of loan workout like a partial claim loan.
These options all work to help out the borrower to avoid foreclosure on his or her home. These options stabilize the loss risk the investor/lender is in danger of materializing. The various options can be availed by homeowners in getting the homeowner to timely pay and fix the potential loss the investor/lender projects that incur during the foreclosure process and the property’s auction sale.
A Long Island loan modification is when a mortgage of the homeowner is modified and both homeowner and lender are bound by the modified terms. Some of the more general modifications are reducing interest rates, making interest rates fixed instead of variable, lowering the principal balance, forgiveness of payment fees and defaults, extending to loan period, and recapitalization of the accrued outstanding fees, interest, principle, or a combination of such.
Another kind of loss workout is deed in lieu (DIL). This is a disposition option wherein a borrower deeds collateral property voluntarily in return for a release from all mortgage obligations. The DIL may not be taken from borrowers who can pay their mortgage obligations.
In a short refinance, the lender or banker reduces the mortgage balance to allow the homeowner to refinance with a new banker or lender. Such principal reduction is meant to comply with the Loan-to-Value regulations of the new banker or lender. In a short sale, the lender reduces the mortgage principal balance to allow the homeowner to sell his or her home for the home’s actual market value. It especially is applicable to homeowners who owe more on the mortgage than the property’s value. If there is no principal reduction, the homeowner may not be able to sell his or her home.
Another kind of loss workout is the partial claim. Here, a mortgagee will get funds on a mortgagor’s behalf in an amount needed to reinstate a loan that is delinquent. The mortgagor will then draft a promissory note and a subordinate mortgage that is payable to the United States HUD (Housing and Urban Development. The ‘partial claim’ or promissory notes currently assess no interest and are not payable or due until the mortgagor either no longer has the property or pays off the initial mortgage.
In a Long Island loan modification or any other loss workout, one should know its benefits. The obvious benefit is the foreclosure prevention as loss mitigation works to either draft a solution that is easy for the homeowner or relieves the mortgage obligation of the homeowner. The lenders would also benefit through mitigating the losses incurred through foreclosure. To understand more about availing of loss workout, one should confer with his or her lawyer to know the available options.