Three Ways To Modify New York Mortgages

The lax mortgage qualifications and practices of the mid 2000’s left millions of Americans with mortgage payments they simply can't afford. Now, homeowners are seeking to modify those rates in order to keep their homes. Our New York legal expert explained the three ways in which New Yorkers can modify their mortgages.

NY Attorney Elliot Schlissel

Elliot Schlissel, a Lynbrook New York based attorney who has been assisting clients in Nassau County, Suffolk County, Westchester County and New York City's five boroughs of the Bronx, Brooklyn, Manhattan, Queens and Staten Island for over 30 years, says that a mortgage modification involves bringing an application to the bank that holds your mortgage which requests that your mortgage payments be reduced. He explained the ways in which a mortgage can be modified:

  • Increase the length of your mortgage. In a situation where you are, let’s say, six months behind on your mortgage, you can request that the six months that you are behind be added to the end of your mortgage, so then you’d be up to date. Your mortgage would change from a 30-year mortgage to a 30-year-and-6-month mortgage.
  • Lower the interest rate. The second type of downward modification is where you ask that the interest rate be reduced on your mortgage or that the payments be reduced during the early years of your mortgage so that you can make up for the shortfall at a later point. Let’s say your mortgage is $2,000 a month, but you can’t pay that much, so [the bank modifies] it in years one to three so that you're paying $1,000 a month. In years four, five and six, you are paying $1,500 a month. In years seven, eight and nine, you are paying $2,500 a month – until you make up for the lower payments.
  • Reduce the amount of principal you owe. The third type of mortgage modification is used when your house is worth less than your mortgage. This situation, where your house may only be worth $300,000 due to the economy, but you owe $400,000, is called being “under water”. [Here], you can request that the bank reduce the amount of principal owed on your mortgage to the value of your home, which will then cause your mortgage payments to be reduced.

The process of obtaining a mortgage modification

The process involves making an application to your bank or financial institution, according to Schlissel, who says that this usually involves filling out forms and submitting tax returns, W2s and statements showing your income and expenses – which is then submitted to a bank committee that will evaluate whether you qualify for a mortgage modification based on the criteria set up by the bank.

How long does it take?

Filing a mortgage modification application from start to finish, can take anywhere from two months to eight months, according to Schlissel, who told us the reason for that is that banks often haven't allocated sufficient resources to review the paperwork, so it will sit on bank employees’ desks for long periods of time without action. That's where an experienced New York real estate lawyer can help. He or she can stay on top of the bank to keep the ball rolling and make sure that your best interests are being represented.