During the recent government shutdown in the United States, thousands of federal workers went without pay. Lives do not stop just because the government has shut down. Groceries still need to be bought and bills still need to be paid, including mortgages. Fortunately, there are options when it comes to continuing to pay a mortgage even when a paycheck has stopped. The two most common routes that homeowners opt for are a mortgage modification and a mortgage refinance. Refinancing a mortgage, however, can be problematic for those individuals who may not have enough equity or who have low credit scores.

What is a Mortgage Loan Modification?

The key difference between a mortgage modification and a mortgage refinance is that to refinance a loan, you are essentially seeking a new loan. A loan modification physically changes the terms of your existing mortgage. Your ability to obtain a mortgage loan modification in the state of New York depends on the lending institution that services your loan. That being said, most servicers have very similar qualifications when seeking approval for a mortgage modification and likely include the following.

• Evidence that you have experienced a documents hardship or change in financial circumstances.
• Documentation that you have missed three payments or more, meaning your account is at minimum 90 days delinquent.
• The property for which you seek a mortgage modification is the property which you own and occupy as your primary residence.

Keep in mind, even if you meet all of the qualifications above, you still must prove to the bank that you will be able to afford the newly modified terms of your loan. In order to make this determination, the bank will review your income and your debt-to-income ratio. A loan modification starts to sound a lot like a mortgage refinance, but the key difference is that you are not applying for a new loan. You are simply seeking to modify the terms of a loan to which you already have. Why would a bank agree to modify a loan on which you are behind? Simply put, when you request a mortgage loan modification, the bank fundamentally performs a cost-benefit analysis. If it makes more business sense to modify your loan, enabling you to pay rather than face an expensive foreclosure—then it makes more business and financial sense for the bank to proceed with modification.

What's Next? Call a New York Real Estate Lawyer

If you have experienced a hardship or your financial circumstances have drastically changed, you may be considering a loan modification. Our real estate at the Law Offices of Melvin Monachan, PLLC are highly knowledgeable and ready to answer any questions you might have about the intricacies of mortgage loan modifications. Reach out to your loan servicer with confidence by using our online form to set up a free consultation today!