Loan Modifications


In our experience in representing clients facing New Jersey Foreclosure proceedings against their homes and property over the last 30 years, it has been necessary to adjust to the changing times and conditions.   Since the mortgage and housing crisis began in late 2007 and early 2008, one option for homeowners that has offered a solution to foreclosure has been Loan Modifications.

Loan Modifications are agreements with a mortgage company to restructure a mortgage which is either delinquent or facing a future delinquency due to changes in financial circumstances.   Gillman & Gillman LLC have represented clients in negotiations for Loan Modifications since 2008.  Many of our clients have been frustrated in attempting to negotiate with their mortgage companies or have had unfortunate experiences with “loan modification companies” who have offered many promises and few results or explanations.   In our experience, especially for those facing foreclosure, it is important for a homeowner to consult with a New Jersey Foreclosure Attorney who has experience in all foreclosure options, including loan modifications.


In February 2009, the government unveiled the Making Home Affordable Program, which is made up of two main programs: one for loan modifications and one for refinance loans. The loan modification portion is called the Home Affordable Modification Program (HAMP). It is designed to reduce mortgage payments struggling homeowners pay per month to sustainable levels. The refinance plan is called the Home Affordable Refinance Program (HARP).

According to the details of the HAMP plan:

  • The lender would first be responsible for bringing down interest rates so that the borrowers monthly mortgage payment is no more than 38 percent of his or her income.
  • Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent.
  • Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.
  • Borrowers will be put on a trial modification at the new interest rate and payment for three months. If they make all their payments on time, the modification will be implemented at the new rate and be fixed for five years.

Under the HAMP, loan modifications will be standardized, with uniform loan modification guidelines used by Fannie and Freddie Mac, and then they will be implemented throughout the entire mortgage industry.

To qualify, you must:

  • Have originated your mortgage before Jan. 1, 2009.
  • Be an owner-occupant.
  • Have an unpaid balance that is equal to or less than $729,750 (for a single-family home).
  • Have trouble paying your mortgage due to financial hardship. That could be because you have had an increase in your mortgage payments, or because your income was reduced or you suffered a hardship (like medical problems) that increased your bills, or, you can show that you soon will be unable to make your payments. You will be required to enter an affidavit of financial hardship.
  • Your monthly mortgage payment must also be more than 31% of your gross (pre-tax) monthly income.

According to the Department of Treasury: Anyone with high combined mortgage debt compared to income or who is underwater (i.e., has a combined mortgage balance higher than the current market value of his house) may be eligible for a loan modification. This initiative will also include borrowers who show other indications of being at risk of default. New borrowers will be accepted until Dec. 31, 2012.    The future of the HAMP program after December 31, 2012, is continuing to change and be reviewed in light of the large number of homeowners who are still facing foreclosure on their homes.