Sadly, too many homeowners come into my office after numerous failed attempts to work with their bank to modify their mortgage. There can be many different reasons why your bank wouldn't modify your mortgage. Modifications are complicated. Now, new rules require your servicer to explain why you may not have qualified for a modification but perhaps you didn't have the benefit of these disclosure requirements when you were applying for your loan modification.
So, is it possible to take your mortgage into your own hands and modify it? The answer may be yes if like many New Yorkers, you own a property which has a mixed use. The most common example of what I mean is a two or three family home which serves as both a primary residence and a rental property. Many New Yorkers bought into homes with built in rental income in the housing boom of the mid 2000s. Many of these homes have lost an incredible amount of value and are now underwater - that is, they are worth less than what the mortgage balance is.
In Chapter 13, you may be able to cram down the value of your home, even if a first mortgage is involved, if your property is more than just your primary residence. So, let's say you own a two family home that went from being worth $550,000 to $350,000 and that provides you with rental income every month. Well, you may be able to cram down the value of your home to its current value of $350,000 and pay this off over 60 payments at a reasonable interest rate.
Suddenly, that money you were hoping to allocate to a monthly modification payment may take you even further than you ever thought possible and make you debt free in 5 years.
How is this possible? Well, I've done it before and Bankruptcy Courts around the United States have interpreted the "anti-modification" section of the Bankruptcy Code (11 USC 1322(b)(2)) to only prevent modification of a mortgage on a property which is solely a person's principal residence and was originally intended to be that person's primary residence. The most recent example of a court taking this position is a case coming out of the Southern District of Florida. See In re Ramirez (Bankr. S.D. Fla. Apr. 4, 2014). We have this case law in New York too.
Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White Plains, NY 10601.