While some homeowners manage to pay their mortgages, a growing number of mortgage account holders are struggling in this economy. Homeowners suffers when it becomes difficult to keep up with the monthly mortgage payment. If you're in the same boat, it's not the end of the world. You can negotiate for lower mortgage payments with your lender so that you get a financial "breather" when you’re trying to pay the bills.
Make payments on time. Lenders look into your payment history and are more likely to work with you on a payment plan if they see that you are keeping your commitment to pay on time -- even when your financial situation is difficult. Give your lender a heads up if you’re already in a deep financial hole and making payments on time is impossible.
Review your monthly mortgage statement and contract. Check for the correct balance on your statement.
Be ready with your figures. Calculate how much you can afford to pay before you speak to your lender. Give some "elbow room" for negotiating in case your lender cannot go down to the amount you have in mind.
Talk to the right people. When you call your lender, chances are, you'll speak first to a customer representative. However, you'll have more traction if you speak to someone from the "loss mitigation" department," which most, if not all, lenders have.
Let your lender know that you want to negotiate for a lower monthly mortgage. Lowering your monthly mortgage is what lenders often refer to as "loan modification."
Understand the logic behind mortgage modification. Mortgage modification aims to reduce the principal loan’s interest rate by modifying the loan's current terms and conditions. A loan or mortgage modification reduces interest rates while extending the repayment period. A loan modification does not reduce the amount you owe.
Submit all documentations that your lender requires. Your income tax return, recent pay stubs, W2, property tax statement, recent mortgage statement, bank records and legal forms of identification (driver's license or Social Security card and passport) are items that your lender may request. Your lender also requires a handwritten hardship statement explaining why you cannot afford to make your current mortgage payments.
Complete an application form and submit it on time. Account for all your debts, as well as all your sources of income. Your lender will scrutinize your application and documents to find out if you can afford to pay the new amount. The lender also will run your credit report; therefore, list all your debts, amounts owed and monthly payments.
Keep calling your lender to follow up on the status of your application. Negotiating for a lower mortgage payment is sometimes a lengthy process and therefore can be stressful and frustrating. You may need to call daily and spend time on hold. Although loan modifications have no set time limits, completion time can vary depending on your lender and your ability to work through the process. Typically, you can expect a 30- to 90-day wait, sometimes longer.
Keep a record of all phone calls and correspondence between you and your lender. Write down all the numbers you called, the people you spoke to, the date and time of each call and the key points in conversations. Keep track of important dates. If your lender does not call you back on the date promised, call the next day to follow up on the status of your application.
- Consult with a loan modification specialist if you do not have the time to negotiate on your own. If you use a loan modification specialist, don't speak directly to the lender to avoid confusion.
- Continue paying your mortgage while waiting for the result of your loan modification application.
- If you suspect your lender is using unfair or inappropriate lending practices, lodge a complaint through the Office of the Comptroller and Currency (OCC).
- Bank of America: Is a Home Loan Modification Right for Me?
- MoneyWatch: Loan Modification Success Story - Filing a Complaint With the OCC Can Help
- US Department of the Treasury: Office of the Comptroller and Currency
- Asian Journal: Loan Modification Denied, How can Filing Bankcruptcy Help?
- Pine Tree Legal Assistance: Sample Hardship Letter
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