Loan Modification FAQ
The attorneys at Peters & Associates, LLP are pleased to provide the following answers to questions we frequently encounter as we help homeowners and businesses in Las Vegas, North Las Vegas and Henderson, Nevada negotiate loan modifications and workouts to lower their principal balance or monthly payments on their home or investment property mortgages. If you have other questions or wish to discuss the possibility of a loan modification on your first, second or third mortgage, contact Peters & Associates, LLP for a free consultation.
Q. Will I get a principal reduction?
A. That is one of our goals. If we can eliminate a second mortgage, that is a principal reduction. We have many tools at our disposal to settle second mortgages, and that is generally where we focus our principal reduction efforts. We may also achieve a principal reduction on your first mortgage. Although we have negotiated substantial principal reductions on many first loans, we cannot guarantee specific results, but we do offer a 100% money-back guarantee* in the event we are unsuccessful modifying the terms of your loan.
Q. What is lien stripping?
A. A home mortgage acts as a lien, or encumbrance, on the home, meaning that the loan is secured by the property. However, when the amount owed on the primary mortgage exceeds the value of the home, the holder of the first mortgage is undersecured, and the holders of any second or third mortgages are basically unsecured. It is possible, in that case, to strip away any unsecured junior liens through a bankruptcy or negotiated settlement.
Q. What is a cram down?
A. When the amount owed on the mortgage exceeds the value of the home, it is possible to "cram down" the outstanding balance to the level of the home's current market value through a bankruptcy. Cram down is another way of describing a principal reduction.
Q. What is bifurcation?
A. Where the mortgage is undersecured because the amount owed is greater than the value of the home securing it, it may be possible to bifurcate the loan. Bifurcation basically splits the loan into two loans, with a secured loan up to the value of the home and an unsecured loan covering the remaining balance. An unsecured debt may be discharged by a bankruptcy, subject to a debt settlement, or otherwise removed through the loan modification process.
Q. What Happened to the Housing Market?
A. Home values over the last decade rose at an unprecedented and unrealistic pace. In order to make these overpriced homes affordable, banks offered loans with low "teaser" rates that would later adjust, and readjust, with the interest rate climbing higher and higher. As people began to build equity in their homes, they were able to obtain second mortgages and home equity lines of credit (HELOCs) to generate disposable income to pay other bills. When the housing bubble finally burst, home values plummeted, and homeowners found themselves upside down or under water with their home loans, owing more on the mortgages than the home was worth.
*Please speak with an attorney for complete details
