Las Vegas was hit badly by the housing bubble, and now many homeowners are facing mortgage debt that’s greater than the value of their homes. People in these situations have several options, such as continuing to pay the loan, refinancing, or short selling the house or offering the lender the deed in lieu of foreclosure. One other option is getting a Las Vegas loan modification. Here are a few important facts about them.
- Aside from the handful of large banks that have been offering “option ARM” mortgagors significant principal modifications, according to the New York Times [http://www.nytimes.com/2011/07/03/business/03loans.html?_r=4&ref=mortgages], the vast majority of modifications apply only to the interest payments on the mortgages. Only about three percent of mortgage modifications involve principal reducations.
- Creditors will often extend the life of the mortgage, whether to make up for the reduced interest or the lost payments.
- The government’s Home Affordable Mortgage Program (HAMP) helps borrowers obtain mortgage modifications with their lenders. Data on the program suggest that the median reduction in monthly payments was 40 percent, which amounts to $520 each month.
- Even those who are ineligible for HAMP, for whatever reason, can still ask for a modification from their banks, which are often willing to cooperate.
- Any company that offers to help you with a mortgage modification and requires a fee in advanced is breaking the law. Modification scams do exist.
- Most importantly, the median HAMP modification still resulted in a mortgage worth 118% of the home, which means it only reduces the negative equity but doesn’t eliminate it. Until the equity turns positive, a single disaster such as a job loss can wipe out the benefits of the modification. Sadly, many modified loans fail.
Las Vegas mortgage modifications may be beneficial to homeowners. We encourage people in these circumstances to look at all their options but to consider the benefits of bankruptcy, especially because the automatic stay that goes into effect upon filing halts any foreclosure action against your home.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation.