How Can I Get a Loan Modification and Eliminate My Second Mortgage?

One of the crucial trickier aspects of loan modification involves second mortgages. Before the market plummeted, many lenders offered 100% financing programs, during the 80/20 program. A first mortgage can be given for 80% of the sales price and a second mortgage could be given for the additional 20%. When lenders started foreclosure proceedings, the second mortgages were often written off as losses since property values declined so quickly. So that it will stall foreclosures, many owners would file bankruptcy just before the sale date, which in essence held up the foreclosure for a couple of months. Bankruptcy laws allow judges to approve certain loan modifications and even give them authority to remove or ” strip” the second mortgage lien. This process is just approved under certain circumstances. It’s miles available to those looking to reorganize their debts under a Chapter 13 bankruptcy. A Chapter 13 allows the court to reorganize a persons’ debt, but they can’t change a homestead mortgage. There are particular sections of bankruptcy laws that clearly state that a debt or lien is simply secure to the extent of the asset’s value. If there is a second mortgage that exceeds the worth of the property, than that debt technically is unsecured. When you purchased with a 100% financing program, or when you obtained a second mortgage in advance of the market crash, you’ve got an excellent chance of getting if removed. The court will probably require an appraisal to make your mind up the current property value and that’s possible that your second mortgage company might file a motion opposing it. It’s not the norm, however it can happen. Upon getting the court’s approval and have made your payment plans you will get a discharge from the court which in essence extinguishes the second mortgage.Many laws vary from state to state. Before filing any type of bankruptcy, it’s on your best interest to refer to an attorney that specialize in bankruptcy. Everyone’s situation is different and there is not any one size fits all plan when modifying.