Negotiating late payment with mortgage lenders is an option to consider if you are falling behind on your home loan. There are some strategies you can use to get the best deal possible from the bank or loan holder, so you can save money and keep your home out of foreclosure. Before you look at a short sale or defaulting, work with the bank and keep your property.
Negotiate Prior to Due Date
If you wait until you are behind, you may have waited too long. If you have already fallen behind on your mortgage payments, you will have much less leverage with the lender, but you still could have some options to consider. Working early shows good faith and a willingness to work with the financer, which hopefully will make them more willing to work with you on your payments.
This is one of the easier things to negotiate with a lender, in many situations. While they are not under any obligation to waive late fees and things of that nature, they might be willing to work with you if you are able to prove the need and the ability to get the loan current again. This is a good tactic that can save you a lot of money.
Short Term Forbearance
You might be able to get a short term forbearance of the payments due and have them added to the backend. Don’t expect this to happen over a long period of time. Your best bet is probably to shoot for a few months at most, to help you get back on your feet financially.
Perhaps you can extend the terms of the mortgage, making the payments a little lower. If you still have good credit, you might be able to get a lower rate of interest. If you have a lot of equity in the house, even in a poor housing market, you might be able to borrow your way current.
Tips for Negotiations
Root Causes: When deciding what to say during late payment negotiations for mortgages, you need to know what the root causes are. Did you lose your job? Did you take out a shorter loan than you should have? Did your ARM interest rate increase? Figure out what is making it so you cannot afford the mortgage payments.
Changes You’re Making: What are you doing that will ease the bank’s mind? Are you getting or did you get a second job? Do you have vehicles and other items up for sale to decrease your monthly expenses? Figure out what you can do to pull yourself through and the bank might surprise you. Be sure you are realistic and only make promises you can keep.
Bring Documentation: Did you lose your job? Bring proof of unemployment. Is there a lot of equity in the home, which minimizes the bank’s risk? If so, bring proof. Don’t just assume the mortgage company will take your word for it. Documentation will likely go a long way during the negotiation process.
Learn the Law: Learn about laws in the financing industry. Before foreclosure, the lender is obligated to attempt to work out a repayment plan, but the requirements are actually pretty minimal. Fair lending laws are in place, but offer limited protection for borrowers. If you are behind on your mortgage payments, the loan holder most likely knows the law, and has complied with it. That doesn’t mean you should assume all they are doing is on the up and up.
Have Suggestions: Ask for what you want. Don’t just throw yourself at your mercy. If you have some options you think both parties can live with, by all means, bring them up. Keep in mind the mortgage lender doesn’t have to accept any of your proposals. Additional collateral will carry some risk, but will increase the chance the bank approves of your suggestions.
Get it in Writing: Most likely, the financing company will insist that it is in writing, but if not, be sure to ask for a contract, signed by a bank representative. This will help you cover yourself if the lender changes their mind down the road.
Act Professionally: You can be rude and demanding, but with any loan comes a contract. You are not in the position to make demands. This means the lender is not under any obligation to deviate from the signed, written contract. A professional demeanor will get you a lot further, in most instances. Negotiating late payments with mortgage lenders can be tricky.