A loan modification can help you catch your breath when you're underwater on your loan. If your mortgage company refuses to offer a modification, though, you're not out of luck. You have several other options, and you may also want to consult an attorney. A consultation is usually only a few hundred dollars, and your lawyer can provide you with information about your specific situation.
If you want to get a modification, sue your lender or report violations of your rights, you need to document everything. Ensure all conversations are in writing, and consider recording phone calls. Every state has its own laws governing recording conversations, so check local laws and consider asking for permission to record the calls. Keep your records accessible, and be prepared to refer to specific documents when you talk to the bank, a housing counselor or an attorney.
FHA and VA Loans
Federal Housing Administration lenders have to follow specific FHA procedures, and this includes offering you a loan modification if you are eligible. VA loans, which are guaranteed by the U.S. Department of Veterans Affairs, afford similar rights. If you have such a loan and your lender is being cooperative, review the terms of your loan and check to see if the lender is ignoring any of your rights. Then contact the U.S. Department of Housing and Urban Development. HUD can put pressure on your lender to follow the law.
HUD offers free mortgage counseling for borrowers struggling to pay their mortgages. While there's no guarantee that this will help you obtain a modification, a counselor can tip you off to rights you didn't know you had, and may even be able to intervene on your behalf with your lender.
Refinancing Your Loan
When you refinance, you replace your current mortgage with a new one. This can give you access to more favorable terms and a lower monthly payment. In most cases, you can't refinance when you're underwater on your mortgage because banks often require 20 percent equity. However, some lenders are willing to refinance to financially strapped borrowers, so if you owe more than your home is worth, talk to your bank or credit union to learn if it can help you.
A mortgage audit can reveal errors in your original mortgage. This may enable you to sue your lender for violations of your rights. It won't, however, prevent foreclosure or ensure you get a modification. Moreover, the Federal Trade Commission points out that some mortgage audits are scams. Consequently, it's best to consult with an attorney who specializes in real estate. She may be able to sue your bank to recover some money that you can then put toward your loan. You might also be able to negotiate a settlement of the past-due amount.
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.