January 17, 2020

What Type of Mortgages are Most Likely to be Modified?

prepare for mortgage modificationYour success at modifying your mortgage depends primarily on how much leverage you have in your negotiations with your lender.  If you can convince your lender that it has no realistic chance at recovering full payment from you, or that pursuing you for payment will be expensive and time consuming, you greatly improve your odds.

Banks and mortgage lending institutions are in business to make money.  If you miss payments or pay late, your banker will not be personally offended.  This does not mean that your lender will not employ psychology in its collection efforts.  Representatives from the bank or mortgage company will call you and attempt to make you feel guilty about not paying.  They will suggest that you have a moral and a financial obligation to pay your mortgage obligation.

No doubt you would like to pay your mortgage in full and on time.  However, if your financial circumstances do not allow for this, there is no shame in seeking a modification with your mortgage lender.   Always treat mortgage modification negotiations as business transactions – money, not morality is the only relevant issue.

How, then, do you gain leverage in your negotiations?   Here are some suggestions for a negotiation strategy:

Strategy 1:  Know your numbers.  Before beginning any negotiation, you need to know exactly how much you owe on your mortgage, your interest rate and other details about your mortgage.  You also need to know as much as you can about the value of your house, and the trend in your neighborhood.

Assuming there is little or no equity in your home, your lender (not an investor) will “buy” your house at foreclosure.  The lender then has to hire a real estate agent and sell your home as an “REO” (real estate owned property).   REO brokers such as this Atlanta REO company specialize in disposing of lender owned property.  Often these properties are sold at a substantial discount because (1) an empty home is more difficult to sell than one that is occupied; (2) empty homes are more likely to be vandalized; (3) if there is one bank owned property in a neighborhood, it is likely that there will be several more, thus driving prices down.

Part of your job will be to convince the lender that it will generate more money by working out a deal with you rather than with some unknown buyer at some hazy point in the future.

In my next post, I’ll discuss additional strategies and some of the specific tactics you can use.

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