DON'T TAKE YOUR LENDERS 1st OFFER
If you are behind on your mortgage your bank might call and try to discuss your situation with you. If after an analysis of your finances, they feel that you will be able to make your payments in the future they are going to offer you a short term payment plan disguised as a loan modification solution.
DO NOT TAKE IT!!!
Your lender is not going to offer you something that is designed with your best interest in mind. They are going to offer you a solution that will get every dime out of you both short and long term.
A plan designed with their best interest in mind. If you are lucky you will barely be able to survive, if you aren't you'll be back in trouble again in the future. The fact that loan modifications are re-defaulting at a rate of 58 percent is no coincidence.
PRINCIPLE BALANCE REDUCTIONS
Principal balance reductions are not the norm and no bank is going to volunteer to reduce the amount you owe them. Loss mitigation managers have a responsibility to upper management and their performance is monitored for loss percentages.
Remember any losses have to be reported to stock holders. A principal reduction is a loss. If you owe more than your home is worth you have negative equity. If you have negative equity there is a good chance that you may be able to convince them to lower your principal balance in addition to lowering your interest rate.
Most banks and lenders will initially offer to defer your past due balance, temporarily reduce your interest rate and give you a few months off of making payments. This might be a good loan modification for you.
Be firm when you negotiate. Simply tell them that this is not enough. Explaining that this is a short term fix that will only delay the inevitable will help to convince them to do more.
Tell them that you need your interest rate lowered and fixed permanently, your loan re-amortized (stretched back out over a longer term) 30, 40 or 50 years.
Tell them you want your PRINCIPAL BALANCE REDUCED.
Many lenders have predatory loans on their books. Over 80 percent of loans closed from 2000 -- 2007 contain predatory terms. These predatory provisions can help you to negotiate a principal balance reduction.
Having a good attorney who has experience with RESPA & TIL violations analyze your loan documents might cost a few dollars but it could help you with your negotiations. If the attorney finds a violation you could wind up saving hundreds of thousands of dollars over the life of your loan.
You must avoid the urge to jump at the first offer your lender makes. Ask professionals what they think of what you are being offered.
Perhaps the attorney who reviewed your documents could look at the offer. Remember you can pay a professional to fight for you against your lender. If you do most of the leg work you should be able to negotiate a small fee for reviewing your file and rendering an opinion or some coaching.
A good loan modification company might also be willing to do these things for you.
Dan Harris - All Rights Reserved © 2008
Comments(2)