How to Negotiate a Mortgage Loan Modification With Your Lender


If you are falling behind on your mortgage payments, do not hide from your lender. Instead, reach out to them for assistance. Your mortgage company would rather work with you than commence foreclosure proceedings, which can be quite costly for them.


Negotiating a Loan Modification

Step One

Make sure to know the state of your finances before contacting your lender. Determine how much income you're bringing in each month, how much you're paying in bills and where you can cut costs. Ask a nonprofit counseling service to help you put together this financial analysis for free. The counselor will also help to negotiate with your lender. Consumer Credit Counseling is a good place to start.


Step Two

Next, contact your lender and have an idea what you need. Tell them what your situation is and what you can offer to help your situation.


Step Three

Come up with some kind of an answer to the lender's question of how you propose to pay off the loan eventually. You're better off submitting an initial proposal. At least you've opened the door in the negotiation


Step Four

If you think that your financial strain won't last long, ask the lender for forbearance, or postponement of payments, for a couple of months until your finances recover.


Step Five

If you have an adjustable rate mortgage that reset and you cannot meet the higher monthly payments, request a loan modification from the lender. They will request a complete financial history from you, detailing your income and monthly expenses. Ideally, you should have some cushion in your income to justify a loan modification, if they switched your mortgage to a fixed-rate mortgage. Show them that you can comfortably pay a fixed rate mortgage through extra income from a second job, and you are more likely to get a modification.


Tips & Warnings

n     If you are strapped for cash, find a part-time job;

n     Call your lender as soon as you discover you will experience some hardship in making your monthly payments.

n     Once you have received a modification, make your payments on time to improve your credit.

n     If your credit is shaky, do some rebuilding before you refinance your loan.

n     If your loan is modified, your interest rate may be a little higher due to your shaky credit.