Posted on: 09th Apr, 2004 12:24 am
if you are behind on your payments and facing foreclosure, you may need loss mitigation help. loss mitigation options (forbearance, loan modification, etc) help a borrower avoid foreclosure by providing them with alternatives to pay down their mortgage. it also minimizes the lender's credit loss resulting from the borrower's inability to repay the loan.
how do i negotiate for loss mitigation?
here's an overview of what you should do when you cannot keep up with your usual payments, how to negotiate with the lender, and what actually happens when you are considered for a loss mitigation/loan workout plan.
contact the lender: unless you've missed a few payments, some lenders will not negotiate with you for a workout plan. however, if the lender refuses to negotiate unless you're behind, you should keep trying. contact the lender's loss mitigation department and request a loan workout option to help you pay down the mortgage.
hardship letter: prepare a hardship letter including the specific date when the hardship started. take a look at this sample hardship letter. you should attach documents supporting your hardship claim. learn more on how to write a hardship letter.
lender's analysis of your loan: after the lender has agreed to discuss a loan modification, they will send you a packet of forms. they will want you to provide as much information as you can about your finances so they can evaluate your situation using their own calculations. the types of information they are looking for include:
contact the lender: unless you've missed a few payments, some lenders will not negotiate with you for a workout plan. however, if the lender refuses to negotiate unless you're behind, you should keep trying. contact the lender's loss mitigation department and request a loan workout option to help you pay down the mortgage.
hardship letter: prepare a hardship letter including the specific date when the hardship started. take a look at this sample hardship letter. you should attach documents supporting your hardship claim. learn more on how to write a hardship letter.
lender's analysis of your loan: after the lender has agreed to discuss a loan modification, they will send you a packet of forms. they will want you to provide as much information as you can about your finances so they can evaluate your situation using their own calculations. the types of information they are looking for include:
- 2 months of bank statements
- tax filings for past 2 years
- receipts of 4 months of regular monthly payments
- personal statement about your finances
- situation that made you delinquent
- paystubs for past 2 months (to check for current ability to pay off loan)
- name and contact details of borrower's current employer
- for self-employed persons, last 2 years of tax information and year-to-date and profit and loss business statement for past 2 years
- recent utility bill
- monthly net income for past 2 years (adjusted to changes in income)
- monthly living expenses (under normal conditions) with debt payments (adjustments are made to reflect rise or fall in expenses for each of the first 3 months of the loss mitigation option)
- surplus income available each month by deducting expenses from income
- surplus income percentage by diving surplus income by total monthly expense
what are the loss mitigation options?
here's a rundown of the workout options available to you in order to avoid a foreclosure.
| options | how to benefit | who qualifies | when to qualify | property condition |
special forbearance | repayment plan for the borrower to cover the debt and get current on loan until you can make the usual payments through a structured payment plan or loan modification. |
| delinquent for 3 months but not more than 12 months. | property should not need repairs which may affect payment under forbearance. |
loan modification | permanent change in terms of the loan - the debt is included in the loan balance and reamortized at a reduced interest rate. |
| behind on payments for 3 months or more and 1 year has passed since the loan was signed. | property should be in good physical condition; otherwise costs to complete repair work will drain out enough cash and borrower won't be able to make payments under the modification. |
short sale/ pre-foreclosure sale | sell off property to pay off the debt, though property value has declined to less than the money owed. know more… |
| one who is already behind on payments or likely to be behind soon. | no serious damage to property. even if damaged, cost of repair should not exceed 10% of the repaired appraised value. property should be able to be sold free and clear of liens. |
deed-in-lieu of foreclosure | borrower offers property to lender who sells it off to retrieve the unpaid balance. learn more… |
| the loan is in default (that is, the borrower is more than 30 days late on their payments and the cause of the default cannot be eliminated). | property should be free of any liens. property shouldn't have been used as rental property for more than 1 year. |
partial claim | placing your past debts into a subordinate 2nd mortgage (not exceeding 12 months of piti) payable to hud (2nd loan payment to begin only after first mortgage is paid down; there's no interest on the 2nd loan). |
| delinquent for 4 months but not more than 12 months. | property should be in good physical condition. |
*n.b: the criteria and conditions stated in the table above may vary from one lender/mortgage company to another.
of all the loss mitigation options, special forbearance is the best. it may be combined with loan modification when there's doubt about the borrower's income stability. especially in these tough economic times, if you're unable to get a loan modification, your lender may be open to a short sale or a deed-in-lieu to avoid foreclosure. if you convince your lender to accept a deed-in-lieu you can even talk to the lender about rental options. whichever option you decide is best to help you avoid foreclosure, you'll need to submit the same documents to prove your hardship.
of all the loss mitigation options, special forbearance is the best. it may be combined with loan modification when there's doubt about the borrower's income stability. especially in these tough economic times, if you're unable to get a loan modification, your lender may be open to a short sale or a deed-in-lieu to avoid foreclosure. if you convince your lender to accept a deed-in-lieu you can even talk to the lender about rental options. whichever option you decide is best to help you avoid foreclosure, you'll need to submit the same documents to prove your hardship.
related readings
Hi Denise,
It is not mandatory for a person to be late on the mortgage payments to get approved for a loan modification. Depending upon your financial situation, the lender would approve your modification even though you are not late. It is true that the taxes are not due until April 15th. You should talk to the lender about this and ask them to consider their decision.
Take care.
It is not mandatory for a person to be late on the mortgage payments to get approved for a loan modification. Depending upon your financial situation, the lender would approve your modification even though you are not late. It is true that the taxes are not due until April 15th. You should talk to the lender about this and ask them to consider their decision.
Take care.
Hello, i have a mobile home that i got through conseco first and was later sold to green tree, but, the individual that had the mobile home was behind like 6 months and to be honest, my credit score should not have let me gotten this mobile home. I was working a good job back when i got it and i am unemployed right now. Green tree servicing is crooked. As of right now um behind may payment and i have gotten a temporary job, i called the main lady over accounts i think whose name is Susan and i asked her about payment defferal and yup you can guess she stated i can't get one this month because they are only allowed to give 5 or 6 a month and she'll put me on the list for next month which i'll be 3rd in line. They told me that exact same crap in 07 and it went on and on, excuse after excuse. These people have me borrowed out from family and friends and i hate i had to do that. In my area jobs are getting scarcer. She said if i wasn't able to make the may payment on the 25th of this month then i'll be in a little trouble with legal fees and the foreclosure process. I am not dumb, but are they suppose to toss that at you like that. They've called my neighbor and i don't know how they got her number and they've also told my cousin my account problems because they went on to tell him he was me and this was no time to be playing games. Um stuck and i refuse to let these folks stress me out. The mobile home was built by redman homes and it sucks as far as quality goes and not worth the $11,000 i owe on it. Its a 1995 built mobile home, they stuck me with their crappy insurance and you can't get things fixed because they are crooked. To be honest I need to figure out something, they also said i could not get a loss mitigation loan mod either. Any help would be greatly appreciated
Hi marlon,
If you want to get rid of the property, then it will be better to go for a deed in lieu of foreclosure. This will not only help you in getting rid of the property but you won't be liable for the deficient balance even.
If you get qualified for a loan modification, your interest rates will be reduced and the loan term would be increased. If you don't want to keep the property, then going for a mortgage modification is not a good option.
Thanks,
Jerry
If you want to get rid of the property, then it will be better to go for a deed in lieu of foreclosure. This will not only help you in getting rid of the property but you won't be liable for the deficient balance even.
If you get qualified for a loan modification, your interest rates will be reduced and the loan term would be increased. If you don't want to keep the property, then going for a mortgage modification is not a good option.
Thanks,
Jerry
Marlon, if your servicer is contacting others and discussing your financial situation, that is illegal and you have to find someone to assist you in taking action. A good place to start is with the Federal Trade Commission (www.ftc.gov). Check that site out and you'll learn what you need to do to take care of that situation.
As for your payments being due, and your inability to obtain a modification, that is often the case. I don't know about limitations on how many modifications are allowable on a monthly basis (sounds fishy), but if you're marginally employed, and have had a history of delinquency with them, they are certainly within their rights to demand payment in full at once without offering you any sort of break.
As for your payments being due, and your inability to obtain a modification, that is often the case. I don't know about limitations on how many modifications are allowable on a monthly basis (sounds fishy), but if you're marginally employed, and have had a history of delinquency with them, they are certainly within their rights to demand payment in full at once without offering you any sort of break.
my home i live in was justmodified with g.m.a.c under only my husbands name.this loan was not owned by freddie mac or fannie mae, can i modify my rental home under my name which is owned by freddie mac.
Hi simon,
If you're facing a financial hardship and cannot pay off the mortgage for your rental home, you can apply for a modification. The lender will judge your financial situation. If he is convinced about your hardship, your request for modification will get accepted.
Take care.
If you're facing a financial hardship and cannot pay off the mortgage for your rental home, you can apply for a modification. The lender will judge your financial situation. If he is convinced about your hardship, your request for modification will get accepted.
Take care.
how does a loan modifycation program address secong homes?
Hi waverly!
Welcome to forums!
A lender will address the loan modification on your second home in a similar way as your first home. You need to contact your lender and apply for it. The lender will judge your financial situation and let you know whether or not you would get a modification.
Sussane
Welcome to forums!
A lender will address the loan modification on your second home in a similar way as your first home. You need to contact your lender and apply for it. The lender will judge your financial situation and let you know whether or not you would get a modification.
Sussane
Indeed, modifications are possible on every time of ownership. The considerations will be different if it's not owner-occupied, of course, but your lender will be able to pick and choose from a variety of options, to ensure that your situation will (we all hope) fit one of them and provide the relief you seek.
It is quite surprising to me that the lender went ahead and testing of the property when your friend was to negotiate a loan modification. She should contact the lender and discuss the matter with him. In my opinion, it would be better if she could hire a lawyer and let him negotiate with his lender.
ME AND MY WIFE HAVE TWO BUSSINESSES WITH ONE BING SUSSIFUL AND THE OTHER NOT. WE ARE UNABLE TO MAKE THE PAYMENTS. WE BEEN IN BUSSINESS TEN YEARS PLUS. BANK DOES NOT WANT TO WORK WITH US ON MODIFING THE PAYMENTS. HAVE NOT MISSED PAYMENTS IN THE LAST TEN YEARS EXCEPT JUST LAST TWO MOUTHS. WHAT SHOULD WE DO?
HAVE YOU RESPONED TO MY PROBLEM YET?
Hi Jack!
Welcome to forums!
You should contact your lender who has given you the business loan and inform him about your financial hardship. He will go through your situation and might offer you a payment plan so that it becomes affordable for you to pay off the dues.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You should contact your lender who has given you the business loan and inform him about your financial hardship. He will go through your situation and might offer you a payment plan so that it becomes affordable for you to pay off the dues.
Feel free to ask if you've further queries.
Sussane
WE HAVE ALLREADY DISCUSSED THIS WITH THE LENDER AND HE SEID THEIRS NOTHING HE CAN , DO TO VALUES OF HAVE ALL WENT DOWN THE LAST YEAR OR SO.
I owe 172,000 on my mortgage and I am thinking of doing a short sale. The property is worth 32,000. What are the positives and negatives of this? Can the lender come after me to come up with balance of the loan after short sale? What should I expect good and bad out of a short sale. My lender is Bank of America