Do You Need a Lawyer for a Loan Modification? When Legal Help Can Save Your Home

If you're struggling to keep up with your mortgage payments, a loan modification might be the lifeline you need to avoid foreclosure and stay in your home. A mortgage loan modification is a permanent change to the terms of your loan that can make your monthly payments more manageable by reducing your interest rate, extending the loan term, or even forbearing part of the principal.

While you can apply for a modification on your own, there are situations where hiring an attorney can significantly increase your chances of success, especially if your loan servicer violates mortgage servicing laws or you've been wrongfully denied a modification. Understanding when legal help is necessary can be the key to saving your home from foreclosure.

What Is a Loan Modification and How Does It Work?

A "loan modification" is a permanent restructuring of your mortgage loan where the lender changes one or more of the terms to make your payments more affordable. With a modification, the lender might agree to do one or more of the following to reduce your monthly payment:

• reduce the interest rate
• convert from a variable interest rate to a fixed interest rate
• forbear some of the principal balance, or
• extend the length of the loan term.

To get a modification, you must usually submit an application to your servicer, along with supporting documents, like recent pay stubs and bank statements.

When Should You Hire a Loan Modification Lawyer?

If you're considering applying for a loan modification, you'll need to decide if it is worth paying an attorney to help you with the process. While you have every right to apply for a modification on your own, in some instances, hiring an attorney just might make the difference between getting your mortgage modified and losing your home to foreclosure.

Here are some situations, with more details below, where you should consider hiring, or at least consulting with, an attorney:

• you're not sure if a modification will help you avoid a foreclosure (and you want to learn more about your legal rights)
• you don't understand how to fill out the loss mitigation application
• your servicer violates federal or state laws during the modification process
• your servicer fails to comply with state foreclosure laws, or
• your servicer denies your request for a modification, and you want to make an appeal.

Common Situations That Call for Legal Help With a Loan Modification

Some circumstances make hiring an attorney not just helpful but essential. For example, if your loan servicer violates loss mitigation laws or you're facing imminent foreclosure, having legal help can significantly improve your chances of getting a modification (or finding another way to avoid foreclosure). Understanding these common situations can help you decide when to seek professional legal guidance to protect your home.

You Don't Know What to Do in Your Situation

If you aren't sure what to do (say you're facing foreclosure, but you aren't sure if a modification is right for you) and want to know about all of your options, an attorney can help you understand your legal rights and give advice about the best course of action in your situation. Depending on your circumstances, the attorney might recommend pursuing a mortgage modification, fighting the foreclosure in court, or giving up the property in a short sale or deed in lieu of foreclosure.

You Don't Know How to Fill Out the Modification Paperwork

Hiring an attorney might be a good idea if you want a mortgage modification but don't understand the application process or are in a complicated situation. For example, it might be worthwhile to hire an attorney if you've spoken to your loan servicer about a modification but are confused about:

• how to fill out the application
• what documentation you need to submit along with an application, or
• how to explain your financial hardship or situation in the application.

An attorney can help you fill out paperwork and make sure you present your situation in the best light possible. You can also get free help with your application package from a HUD-approved housing counselor.

Your Loan Servicer Violates Federal or State Loss Mitigation Laws

If your servicer doesn't comply with federal laws or any applicable state laws that govern the loss mitigation process, an attorney can help you enforce your rights. For example, under federal law, the servicer generally can't start a foreclosure until you're more than 120 days delinquent on the loan. This period before foreclosure starts is supposed to provide you with sufficient opportunity to seek an alternative to foreclosure, like a modification.

So long as you send in a complete application, the servicer also can't start the foreclosure while your application is pending. If your servicer starts the foreclosure early in violation of the law, an attorney can help stop it.

Because it's very difficult to get your home back after a completed foreclosure, you want to deal with violations of loss mitigation laws before the sale. Having an attorney on your side gives you a better chance of getting results before your home is sold.

Your Loan Servicer Violates State Foreclosure Laws

State law governs the foreclosure process. If your servicer violates state law while foreclosing on your home, your attorney might be able to use the violation or violations as leverage in getting you a loan modification.

Keep in mind that servicers often make mistakes when servicing loans and in the foreclosure process. A lawyer could uncover errors that you won't even notice.

Your Servicer Denies Your Modification Request, and You Want to Appeal

If the servicer denies your modification request, in many cases, you'll also get some time to appeal. An attorney might be able to help you in showcasing why the servicer made an error in denying your application so that you're more likely to get approved for the modification in your appeal.

When You Might Not Need a Lawyer

The following are a few situations where you probably don't need to hire an attorney to assist with the modification process.

You Have a Good Understanding of the Mortgage Modification Process

If you've spoken to the servicer about getting a modification, done your homework to educate yourself about the process, are confident the servicer hasn't violated the law, and feel you have a good understanding of what goes into the application, you likely can submit all of the necessary documentation and navigate the process adequately on your own.

You Want to Submit a Modification Application to Gain Time in the Home

If your main goal is simply to gain some time before the foreclosure is complete (perhaps you need time to come up with the funds to reinstate the loan or refinance), you can probably submit a modification application confidently without getting an attorney's assistance. While the application might not be perfect, it can still buy you some time. And who knows, you might actually get a modification that lowers your monthly mortgage payment.

Final Thoughts: Should You Hire a Mortgage Attorney for Help?

Deciding whether to hire a lawyer for help with a loan modification depends on your unique circumstances. If your case involves legal complexities, loan servicer misconduct, or the risk of foreclosure, having a qualified foreclosure lawyer on your side can make all the difference. However, if your situation is straightforward and you feel confident navigating the process, you might be able to apply for a modification (and hopefully get one) on your own.

Ultimately, even briefly consulting with a foreclosure lawyer can provide peace of mind and help ensure that your rights are protected during the mortgage modification process.