If you are a Nevada resident behind on your mortgage, you may be feeling the pressure of a possible foreclosure. The good news is that there are a variety of ways to halt a foreclosure including foreclosure mediation, bankruptcy, or short sales. But one of the underrated methods of halting a foreclosure is entering into a loan modification with your lender. A loan modification is an agreement between you and your lender to alter the terms of your loan. This typically includes an agreement to pay back your missed payments over time and often involves other modifications including lowering your interest rates. With a successful loan modification, you will no longer be in default and at risk of foreclosure.
Unfortunately, there are other factors that can affect your ability to obtain a loan modification. If there is a federal tax lien on your home, it could prevent you from getting the loan modification you need. Here is everything you need to know about how a federal tax lien can affect your loan modification agreement.
How do loan modifications work?
A loan modification is a voluntary agreement between you and your lender. While loan modifications can occur during the bankruptcy process, it is not a requirement. In fact, many homeowners enter into loan modification agreements in order to avoid bankruptcy entirely. The process is complicated, however, which makes having an experienced loan modification attorney by your side so valuable. So of the potential benefits of a loan modification include:
- Monthly payment may be decreased
- Interest rate may be decreased
- Interest rate may be changed from an adjustable to a fixed rate
- Time the borrower has to pay the loan back can be lengthened
- Loan principal may be decreased in some cases
- Late fees may be waived
- Second mortgage could be settled or possibly even eliminated.
Can I modify a loan if there is a federal tax lien on my home?
Unfortunately, if there is a federal tax lien on your home you cannot sell your home or modify your loan without satisfying the tax lien. While that is an option in some sales where there are enough sale proceeds to cover the lien, the same can't be said for loan modifications.
In the past, this rule was firm and you had no recourse other than paying the tax lien. However, recent IRS changes have provided welcome relief to Nevada homeowners. Upon request, the IRS will consider making their lien secondary to your home loan. If the IRS agrees to this change, you will be able to refinance your home loan even though your lien has not yet been satisfied. The IRS is also taking steps to avoid filing liens on smaller delinquent tax debts in order to keep more people in their homes.
While there are now some options available for a home loan modification when you have a federal tax lien, you will still need to get the IRS to sign off before the modification can go through. Your best bet is to hire an experienced Nevada home loan modification attorney. To discuss your options, contact the experienced attorneys at Vohwinkel Law today.