A 2012 report by Amherst Securities Group indicated that when principal reductions reduce a mortgage’s balance to near what a home is actually worth, homeowners are far less likely to fall behind on payments in the future and far less likely to lose their homes. In fact, only 12 percent of borrowers who had their principal reduced re-defaulted on their mortgage payments in 2011. This is lower than the 23 percent re-default rate among those who received an interest rate modification or other mortgage modification that did not involve principal reduction. This is also significantly less than the 30 percent of homeowners who re-defaulted after their payments were temporarily suspended when their loan was put into forbearance.
These numbers show what we already know — principal reduction is the single best way to help people to keep their homes. Only by reducing the principal does a bank bear some of the losses that you, as a homeowner, suffered due to the collapse of the real estate market.
At the Law Offices of Evan M. Rosen, we have successfully helped Florida homeowners obtain principal reductions. While principal reduction isn’t always possible, we always place the needs of our clients first and provide the best possible legal advice and service we can. Our goal is to treat you the way we want to be treated and to treat your case as if it was our own. If principal reduction is best for you, then we will gladly explore it. Sometimes, we need to zealously and aggressively litigate the case to find ways to create some leverage. There have been many cases in which we find a sensitive issues, which causes the bank to want to quickly cut a deal.
You are welcome to read more about principal reduction below or you can contact us now for a consultation by calling 855-55-ROSEN or by filling out our online form.
There are a number of programs in place which claim to help homeowners to reduce their monthly mortgage payments. But, here is no program that requires a bank to reduce principal.
Unlike reducing an interest rate or extending the repayment period, reducing principal actually reduces the balance due so that the borrower has less to pay back. For example, if a bank lent $300,000 on a house that is worth $250,000 now, the lender might reduce the actual balance on the mortgage to $250,000 — the current market value of the home.
When this principal reduction occurs, the borrower doesn’t have to pay back that extra $50,000 — it is permanently forgiven. Lenders, understandably, may be more reluctant to reduce principal rather than just lower interest rates or extend a repayment period, since the lender is actually going receive less money than it loaned. There are also possible tax consequences in principal reductions for borrowers which must be addressed.
Although lenders may be more willing to modify a mortgage in other ways, it is possible to have the principal balance reduced on your loan in certain circumstances. The best way to achieve this goal varies in every case.
An important step in determining if you are eligible for principal reduction is finding out if your debt is backed by Fannie Mae or Freddie Mac, two government agencies that guarantee mortgages. Loan servicers whose loans are “owned” by Fannie or Freddie are currently limited in their ability to forgive loans that are owned by investors. The limitations will make it difficult for principal reduction to be an option for you if your loan is backed by one of these government-sponsored entities (GSEs). That said, we have cut all kinds of deals with Fannie and Freddie, so a principal reduction is still possible.
If your loan is not backed by Fannie Mae or Freddie Mac, each bank has their own programs. Some of those address when principal may be reduced. Regardless of those programs though, if during the course of litigation we expose a significant problem for a bank, they can get a higher up on the case, who can cut a special deal to make the case "go away." This has happened more than once. We have even obtained a "free home" for clients.
Ultimately, the best way to work towards a principal reduction is by creating leverage. Through aggressive and thorough litigation, our lawyers and staff often uncover evidence of fraud, false documents, “robo-signing,” servicing errors, misapplication of payments, evidentiary violations, discovery violations, illegal collection practices and more. This evidence is then use to shift the bargaining strength. If the fraud is egregious enough, then goal number one is to seek to have the mortgage and debt cancelled, a rare but obtainable goal. Otherwise, goal number two is often to seek a principal reduction, also rare but a goal that we have accomplished for clients.
Principal reduction is one of the more difficult types of loan modifications to obtain. Working with an experienced Florida foreclosure defense attorney, gives you the best possible chance of obtaining one.
At the Law Offices of Evan M. Rosen, we are skilled negotiators, knowledgeable about Florida foreclosure laws, and zealous advocates for our clients. We greatly enjoy taking cases to trial and appeal. And we have been successful in helping clients in the overwhelming majority of our cases. (Please keep in mind every case is different. Success rates in prior cases may not be indicative of the odds of success in yours.) Banks and their lawyers know who we are and know the fight we bring to the table. They understand with us a foreclosure is not guaranteed.
We use this reputation and tireless effort to best serve you to help increase the odds of success for you. We will take the time to review your situation, discuss your goals, and come up with a plan of action. If you want a principal reduction, then we will do all we can to increase the odds of making that happen. Contact us today at 855-55-ROSEN or through our online form to schedule a consultation to learn more.
Let the Law Offices of Evan M. Rosen serve you!