The good news first: The bankruptcy court in New Jersey has a loss mitigation program that helps Debtors in bankruptcy cases get swift answers on whether they are eligible for a mortgage modification and hopefully prevents the three year long document losing circus that many of my clients have been dealing with by trying to get a modification on their own.
So how does loss mitigation work in the bankruptcy court?
1. My office will file a Chapter 7 or a Chapter 13 with a plan indicating you wish to request loss mitigation through the court.
2. We will prepare and file a notice of request loss mitigation for your case. This has to be done quickly as it is due before you have your 341 hearing.
3. Once the order allowing loss mitigation is approved the mortgage company’s attorney will reach out to my office with a packet that will be submitted through a loss mitigation portal online with a direct contact person. This presumably should help with the lost paperwork problem. (We hope.)
4. Once we have submitted all the initially requested documentation the mortgage company will more likely than not come back with more documentation requests. This is where it is in your best interests to get me the paperwork ASAP! I usually get nastygrams from the other side if it takes more than 48 hours to get them documentation they request. The faster we do this, the faster we get a decision.
5. Once the paperwork is all submitted, the mortgage company sends it to an underwriter and makes a decision that is reported back to me. If it is the decision you were hoping for my office will file a motion to allow a loan modification, in a 13 we will modify your plan to reflect the modification, and you move on with your life in your home!
Things to bear in mind during this process:
– The above process is when things go smoothly.
This is not always the case. Sometimes, getting a modification can be difficult. Paperwork the mortgage company requests can be hard to find or has to be produced by our office. Your case will not be as simple as just handing over your tax returns.
There is a lot of back and forth between my office and the mortgage company representative. It is VERY VERY important that if you are in this process that you respond quickly to my requests for documentation.
– Please keep your expectations realistic and don’t lose perspective.
Principal reduction modifications are INCREDIBLY rare. I have seen three in my entire career. A lot of bankruptcy attorneys joke that having a client get offered a principal reduction modification is like seeing Bigfoot. There are a few fuzzy videos out there but most of us have only ever caught him out of the corner of our eye once or twice.
If you are only a few months behind, your payment may go down but if you are more than 100K behind on your mortgage and your mortgage company agrees to modify your mortgage, your monthly payment MAY go up and not down. This is because your missed payments are capitalized into the new loan and you will be charged interest on this amount. It is important to remember that your mortgage will be current when this is all done so try to focus on the fact that you are keeping your home and not on the payment.
The Good News
The silver lining of all of this is that the New Jersey loss mitigation program has seen great success. I have been able to get answers for clients on modifications within two months of filing for them. TWO MONTHS. That is light years faster than outside of the program. This is a great program and absolutely worth the time of any client trying to save their home.
Interested in how we can help you with your mortgage modification? Give us a call at 732-302-9600 or fill out our online consultation form and we will call you!
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