Arizona Loan Modification Law

What is an Arizona Loan Modification?

As opposed to a loan refinance, an Arizona loan modification is an adjustment to your existing Arizona mortgage loan, typically based on your demonstrated inability to continue paying your mortgage due to circumstances that have changed since you originally obtained the loan.

Your lender may agree to a loan modification that reduces your interest rate, locks in a fixed rate of interest for the life of the loan or an extended period, extends the term of the loan, and/or forgives a portion of the loan's principal balance.  These modified terms are usually designed to reduce your monthly mortgage loan payment, thus allowing you to keep your home.

Lenders who have provided mortgages for Arizona real estate may be motivated to approve a loan modification in order to avoid even larger losses that they may incur if forced to foreclose.

Composing the Hardship Letter for an Arizona Loan Modification Request

In addition to the financial information lenders require when processing an Arizona loan modification request, they will also require a hardship letter.  Your lender wants this letter in order to understand what the problem was that caused your mortgage delinquency, in addition to how you have solved or intend to resolve the problem so it doesn't happen again.

If you can't tell your lender what caused the problem and why it won't happen again, your lender may not approve the loan modification request. 

State Bar Ethics Alert Should Be A Warning to Loan Modification Consumers

The California State Bar has issued an "Ethics Alert" to its member attorneys, warning them of possible ethical violations stemming from lending their name to so-called "foreclosure consultants" or "loan modification consultants" who advertise their services as being backed by an attorney.  It seems that the attorneys involved with these companies frequently do little to no work in connection with the company's efforts and are otherwise not truly involved in the services being performed.

We suspect the Arizona State Bar will address this issue as well, and Arizona loan modification consumers should avoid working with companies who suggest the involvement of a lawyer without being able to actually produce a live lawyer to speak with.

Fortunately, many law firms are providing loan modification services to Arizona homeowners facing financial difficulties and foreclosure.  You should make sure you actually meet with the lawyer who will manage your case.