What is a Loan Modification?

It is incredibly easy to become confused when it comes to the financial details of home loans and mortgages. Lately, many people are throwing around the term ‘loan modification.’ This article will explain the basics of modifying loans, when it may be a good idea to do so, and when you should use caution.

Simply, a loan modification is exactly what it sounds like: changes will be made to your loan terms. The question most people have is – how will these changes help me? Ideally, home loan terms are altered in order to make loan payments more affordable for borrowers. This is beneficial to lenders as well, because they want to keep borrowers paying on the loans instead of having them default.

If you are in danger of defaulting on your home mortgage and the word ‘foreclosure’ has been brought up more times than you’re comfortable with, moving forward with modifying your home loan may work for you and allow you to avoid foreclosing and losing your house.

The benefits of loan modifications for qualified borrowers are:

  • You may be able to get out of default and avoid foreclosure.
  • Any late fees you may have incurred may be waived.
  • Interest rates may decrease.
  • New monthly payments will be less than 31% of your gross monthly income.

In order to qualify for a governmentally approved loan modification programs such as HAMP, you must prove financial hardship that has severely affected your ability to stay current on your loan payments. Additionally, you must show that you will be able to pay the new, lower payments once they are modified. Lastly, your current monthly mortgage payment should be more than 31% of your gross monthly income.

It is extremely important that you are cautious as you move forward in the loan modification process. Because of the large number of distressed homeowners, many illegitimate “loan modification firms” have been caught running fake loan modification scams, after which, borrowers end up with no loan modification and they land in foreclosure anyway.

Your best bet when you find yourself in financial straits is to contact an experienced real estate or credit counseling attorney who can fight for the loan modification that you need to keep your home. Your attorney will be able to guide you even if you do not qualify for a modification, as there are other options that may help you get back on track financially, such as bankruptcy or a short sale. Be proactive and retain an attorney today before your home enters into foreclosure.


Photo credit: Marc Falardeau

Legal Representation for the Small Business Owner

Every business owner, whether large or small, should have the safety net of a well-qualified attorney standing by in case they are needed.  However, many smaller business owners tend to get so embroiled in getting their business off the ground that they put off finding legal representation until it is actually needed. Looking for a trustworthy and appropriate attorney when you’re in crisis mode is not ideal, and will cause you to rush the process, likely landing you a sub-par lawyer who overcharges.  Take the time now to  retain the services of an appropriate attorney or firm, so that you can easily and confidently turn to them in your time of need.

As you may have already realized, the task of finding a reliable, successful, and cost-effective attorney can be daunting.  There are so many attorneys who want your business! How in the world should you even begin to narrow down the prospects, especially when your other business duties are taking up so much of your time?

Use your networking skills to ask around for names of attorneys who possess the most important qualities you are looking for when it comes to representing your business in any future matters that may arise.  For example, you may need help with planning the growth of your business, the writing, review, and revision of letters and contracts, and representation in court on the off-chance that you or your company ends up getting sued. Take down a number of recommended names from your most trusted peers who also run small businesses.  This will ensure that all of the attorneys on your list are familiar with problems that are common to small business owners.

In order to narrow the list of recommendations down to a reasonable number of candidates, have your assistant (if possible) do some investigation into each attorney’s experience, education, and wins versus losses in the courtroom.  Also consider having your assistant call each firm and ask about retainer fees and if a lower rate can be negotiated if a long-term relationship develops. You’ll want to inquire about any differences in fees for court representation versus office time, and what additional fees/costs will be your responsibility.

With a manageable list of appropriate local attorneys, take the time to interview the top three or four personally.  While anyone can look good on paper, it is important to feel a connection with someone who you may be dealing with regularly for many years, especially regarding something so important – your livelihood. Ensuring a good working relationship from the start establishes well-defined parameters, expectations, and how routine matters will be handled.

If you find yourself in an unexpected legal bind without an attorney, you’ll obviously need to find one – fast.  Although it’s best to have someone retained ahead of time, sometimes you can be caught unaware and unprepared for a crisis. If this occurs, act fast but responsibly by looking for attorneys who specialize in the area you’re having a problem with at the moment.  Worry less about connecting with them on a personal level and more about whether or not they can get the job done in the short-term.  You can always look for long-term representation after your emergency matter has been settled if this particular attorney doesn’t mesh well with your business or your personality.

*Photo credit: DonkeyHotey

Mortgage Help for the Self-Employed

There is no doubt that it is infinitely easier to qualify for a loan if you are employed in the traditional sense and trek into an office everyday.  However, many self-employed individuals need to apply and be approved for mortgage loans. Although you will have to jump through a significant number of hoops, mortgage approval can be obtained as a self-employed entrepreneur, as long as you are working regularly and you can prove that your debt/asset ratio is low.

The most important thing we advise you to do is make sure that your credit score is as high as humanly possible.  Many lenders will take one look at the fact that you are self-employed and decide that you are not worth the hassle of all the added paperwork and time that will be involved in getting you approved. That being said, if your credit score makes their eyes pop out of their heads, they will be likely to give you a second look. Stay up to date on all of your obligations and bills AT ALL TIMES. Talk to your credit repair attorney for the best ways to boost your credit score quickly.

Expect a longer application process than the standard applicant. Lenders will need you to prove that you can afford the loan and that you are not involved in anything shady, like drug deals or fraud.  Your bank accounts, credit reports, past taxes, birth certificate, and many other documents will be scrutinized carefully and by a number of people.  Be sure that you have enough money in your bank account to pay for closing costs, because lenders may require you to pay a higher down payment due to the fact that you are considered a riskier borrower.

Traditional employees simply need to provide lenders with the previous year’s W-2 form to show proof of income.  Since self-employed individuals do not have W-2s, be prepared to be able to show significant proof of the financial success of your business, which may include previous tax returns, business licenses, written statements from your accountant, profit/loss statements, and balance sheets.

If you’re a relatively new entrepreneur and are having difficulty providing many of the above forms of documentation but are still in need of a mortgage loan (in situations like divorce or relocation), consider having a co-borrower who is a W-2 employee join you on the loan documentation so the lender feels more confident about approving you. This could be a spouse or close relative who is positive this is something that they are willing to do.  You must BE SURE that you are not going to default on the loan in this case.  To do so would leave your cosigner with full responsibility and could ruin an important relationship.

For more helpful information about getting approved for a mortgage when you are not the ideal candidate, contact an attorney who is knowledgeable in credit counseling. Whatever you do, don’t give up on owning a home simply because you don’t work a traditional job! You are already used to putting forth a greater effort to accomplish most things, since you’re an entrepreneur. Don’t let this be the hurdle that makes you fall.  Get a running start, and you’ll fly over this obstacle too.

Photo credit: Philip Taylor PT

Are Financial Worries Keeping You Up at Night?

If you’re like the millions of Americans who have trouble falling asleep at night, there’s probably something on your mind that is preventing you from having a restful night. Since insomnia can really start to cause some problems with your overall physical and mental health, it’s best to try to get to the bottom of your worries, if they are the main culprit for your restlessness. Many people worry excessively about the state of their financial affairs due to the serious effect money (or a lack thereof) has on everyday life.

Money problems can also be a huge source of tension among married couples, causing stressful arguments that leave spouses going to bed frustrated and laying awake instead of sleeping. Cumulatively, a lack of sleep will eventually cloud your judgement, and you may end up making financial choices that are not wise in order to give yourself a temporary band-aid. If you are feeling the effects of financial stressors in your life, act now before you’re two months behind on sleep and on the verge of divorce.

Do you have an overwhelming amount of credit card debt that you have accumulated during financial duress? Turning to a credit card to make purchases during times of unemployment or underemployment is something that many people do. At the time, it may seem like your only financial option and the only way to put food on the table for your family. After several months of swiping that credit card through store after store, though, your minimum payment may be more than you can handle. This is when your spending has officially caught up with you and may be threatening to overwhelm you.

If you’re up to your eyeballs in credit card payments, then in all probability you are having trouble affording all of your monthly bills as well. Is your rent or mortgage in arrears? Are you in danger of having one or more of your utilities turned off? How close are you to losing your home to foreclosure?  These are all thoughts that are probably swirling through your mind as you try to fall asleep at night. Without further knowledge or help, it may very well seem to you that there is nowhere left to turn and that all is hopeless.

The good news is that there actually are solutions to your seemingly insurmountable financial woes.  While there is no magic bullet that can make all of your debt disappear instantly, working with an attorney who specializes in credit repair is a very good idea. He or she will be able to set you on a course toward financial freedom.  Be prepared that the journey will not be short or necessarily easy, but with dedication and by working closely with your attorney, your credit score can once again begin to rise.

Say goodbye to those sleepless nights as you take charge of your money problems instead of vice versa. Go to bed in peace knowing that you are moving in the right direction and that you have a plan for your financial future.

*Photo provided by Schmirn