Borrowers who are behind on their mortgage payment, or soon expect to be, and who wish to obtain a loan modification from their lender, may choose to negotiate on their own behalf. There are several reasons borrowers would to do their own negotiation. They are:
- Problems with finding a reputable loan modification company. While there are companies and law firms that will make a good faith effort to represent a consumer at a fair price, there are many that simply charge high fees in return for very little in the way of services.
- Cost. With many modification companies charging upwards of $3,000 to even start the process of negotiating with a lender, this is often out of the question. Consumers should be wary of firms that charge hefty fees in advance of obtaining any kind of resolution; any upfront fees should be relatively modest.
- It’s doable. Many consumer advocates and public agencies discourage homeowners from contracting for loan modification services on the grounds its something most homeowners can handle themselves, once equipped with the right information. Many nonprofit agencies offer housing counselors who can get homeowners pointed in the right direction. An attorney can usually be hired on an as-needed basis to review documents and answer legal questions for less than the cost of hiring a negotiator.
What to have Ready for the Loan Modification Process
Nothing frustrates lenders, nor slows down the loan modification process, more than borrowers who are unprepared to provide lenders with what they need in terms of paperwork from the borrower.
Lenders quickly become impatient if they have to work through four or five phone calls with a borrower who has been asked repeatedly to provide specific information needed to proceed with their loan modification. Being unprepared may suggest to the lender that the borrower is either less serious about completing a loan modification than they originally let on, or that they are hiding something. Responding quickly to the requests of their lender both shows the lender that the borrower is motivated to make the loan work.
At the minimum, borrowers should have the following information available when they meet with the lender for the first time:
- A hardship letter, stating how they got into their current financial position, and an explanation as to why the borrower will be able to continue making payments if they receive the loan modification.
- The terms of some modifications last only months or years, and the lender wants to know the plan of the borrower for the foreseeable future, rather than for the short-term.
- Income and expense documentation. Borrowers who are unable to accurately show the lender how much income they take in, as well as spend, each month will appear as unmotivated and be taken less seriously than someone who has this information.
- What would the borrower like to see happen? Is the borrower looking for a short-term modification to get them through the upcoming months until they start working again? Will the borrower be receiving either child support or alimony in the near future, as the result of a divorce, to add to their income? Does the borrower expect any other changes in their financial situation that, combined with a lower mortgage, will make their finances manageable once again? The lender needs to know all of this.
Many lenders have loan modification kits, which have all of the information that a borrower needs in working with them in the course of a loan modification. If borrowers are able to get this kit, which may be available online, before they approach the lender in an attempt to modify their loan, they will know exactly what the lender is looking for.
Ask for Loan Modification Help
Borrowers who want to talk to their lender about a loan modification, but are unable, or hesitant in using a loan modification service should seek the help of someone who knows how the process works, or a qualified counselor, preferably someone who works specifically with mortgages.
Many general counseling services, mainly non-profits, work with borrowers on their unsecured debt, such as credit cards, and their purpose is to map out a plan for the long term. If the borrower is able to manage their other debt though, such as credit cards, but their mortgage payment is about to be outside of their means, they need someone specifically that knows mortgages.