There are some circumstances where a homeowner should say no to a mortgage modification. Sometimes, the terms of the mortgage modification aren’t beneficial to the homeowner. For example, the new monthly payment may still be too high, and even with the newly reduced payment, the homeowner would still struggle to make it. The time period of the modification may be too short or too long for what the homeowner needs, or it just might not make sense for the homeowner to agree.
If the homeowner would still be struggling, even with the mortgage modification, it may make sense to try to sell the home before foreclosure proceedings begin. This way, the homeowner could find something that they could better afford given their new circumstances. However, this can be very disruptive to the homeowners’ lives, so the homeowner may want to try to do everything they can to make the mortgage modification work.
Sometimes, it makes more sense for a homeowner to file bankruptcy than to agree to a mortgage modification. This may be the case when there are two mortgages on a home. If the homeowner files for bankruptcy, the second mortgage may be forgiven, and then the homeowner can apply for a mortgage modification. In this situation, the timing is extremely important, because if it is done out of order, then certain options may be permanently taken off the table.
There also may be potential tax ramifications to a mortgage modification. If, as a part of the mortgage modification, some of the principal amount is forgiven, it may be considered taxable as income and thus may need to be reported.
The Mortgage Modification Center
Mortgage modifications can be complicated and homeowners may need professional representation to understand their options. If you have any questions regarding your mortgage modification, please contact the Mortgage Modification Center at (401) 467-7998 for your free initial consultation.