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What Is “Loan Modification” And How Do I Get One In Maryland?

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You have probably heard a great deal about loan modification and may have even applied for one.  There is a lot of information on the internet and TV about loan modification, but unfortunately, much of it is misleading.  The most important thing to know about loan modification is that it is a VOLUNTARY process between you and your mortgage company.  Your mortgage company does NOT have to modify your loan when you are behind or can’t afford your payments.  There is very little you can do to negotiate with them.  If anyone “Guarantees” that they can get you a loan modification, you should run away as fast as you can!  I have seen many people pay thousands of dollars to loan modification “consultants” and get nothing in return.  In fact, the problem has gotten so bad that new laws have been passed in Maryland to protect you from these scam artists.

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You may remember when you first bought your home, or when you refinanced it, you signed a bunch of papers.  Among these papers were two documents- a note and a deed of trust.  The note and deed of trust are agreements between you and the bank with the terms of the loan spelled out.  The note states how much you owe, what interest rate you are paying, how much your monthly payment is, and how many months you must pay until the loan is paid in full.   The deed of trust states what happens if for any reason you can’t make the monthly payments. In short, the deed of trust says “If you pay you stay and if you don’t, you won’t”.  The deed of trust allows the bank to sell your house to pay back some or all of the money you owe.

A loan modification is a voluntary agreement between you and the bank to change or modify some of the terms of the note. The most important thing to know about loan modification is that it is voluntary on the part of the bank.  This means that there is very little you can do to force the bank to work with you.  Unfortunately, there are many people out there who will “Guarantee” that they can get you a loan modification in order to get your money.  Once you have paid them money, in some cases thousands of dollars, these so called helpers will disappear and leave you worse off than before.  The problem has gotten so bad that the state of Maryland has enacted new laws to protect vulnerable homeowners from these rip offs.  This will be covered in detail in the next section.

A loan modification can change the interest rate you are paying, reduce your monthly payments, put any missed payments at the end of the loan or even reduce the amount that you owe.  Basically, anything that you and the bank can agree on can be changed.  The reason that the bank will agree to make some changes is that they may not want to foreclose on your home.  With so many people behind on the mortgages, it may make sense for the bank to work with you to keep you in your home.  If you can keep up with the payments on the modification, everyone wins.

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About the Author

Attorney James Logan provides dedicated and personalized legal representation for bankruptcy and foreclosure cases in Baltimore, MD.