Loan Modification - Negotiating Your Best Deal

Negotiating is a key part of the Loan Modification process. Once your lender has reviewed your package and determined that you are a good candidate for a modified loan, the real fun begins.

Let's talk about a hypothetical example:

It has been 69 days...you have waited and followed up. It has been 37 days since you were told it would be 60-120 days before you would get the loan modification documents with your lenders proposed modification.

You are beginning to wonder if you would EVER hear...but you faxed or called once a week to see if there was an update on your file, ever week until you got the letter..today.

You open the letter and start reading.

Now, it is time to determine if this is a good deal for you.

Then, you need to decide if this is the best you can do...

Ask yourself these questions:

• Did you get a payment you can live with?
• Do you think you could get a couple hundred dollars less per month approved?
• Did you get a reduced interest rate?
• Did you get a reduced principle amount? Unlikely by the way.
• Did you get a plan you can perform successfully on (for at least 12 months...with no missed or late payments? Generally, you have to successfully pay on your modified loan for 12 months before asking for another modification.)

Do you think you can ask for any other concessions or modifications.

One area that you can usually get some more "help" with is the area concerning fees and late charges. Have you asked for the forgiveness of these fees and charges?

Lower interest rates for a longer period of time?

Could you possibly get a longer payback period? 40 years instead of 30?

Next, you have to determine if you were offered a modification deal you can live with and if going for "more" means you might blow the modification all together.

This is normally not the case (although most negotiators will want you to think it is and that the deal they propose is a take it or leave it, one time offer thing).

You have to look at your personal situation and weigh the pros and cons of accepting the loan modification.

Sometimes you really cannot afford the loan modification your lender comes back with.

Sometimes you look at the "modification" and wonder if anyone even looked at the information you sent. (I am working on one for a woman right now that we just had the lender "throw out" and we are starting over...they came back with a payment that she cannot possibly afford even short term, much less over the life of the proposed modified mortgage).

In that situation, it is easy to ask for what you need because you have nothing to lose. You know you cannot afford what the lender offers, so you having nothing to lose and everything to gain, by countering their offer.

Other times, you know you can afford the modification, but you are not sure if you could get "more".

You can usually safely ask for a reduction of the fees and expenses charged to your account - especially if it has taken your lender a long time to get you a modified loan.

If you initiated the loan modification process 5 months ago and were only 1 month behind on payments...but are now 6 months behind (partially because it took so long to get the modification), you can often get a fee reduction. Do not count on them forgiving all the expenses, but you won't go wrong by asking.

Your lender would much rather forgive some charges and get you paying (and in the performing loan category) as soon as possible, than risking you not accepting the loan modification and them having to go through the foreclosure process...

Lenders appear to be willing to move on interest rates and length of loan terms to get people a payment they can make.

Principle reductions are still not being done (as of this writing)...so if you are in a market that has just gotten blasted, a loan modification might not be your best option. Folks keep hoping for principle reductions, but we are just not seeing them happening. (Florida, California, Arizona, Las Vegas...no real help in sight for those areas yet.)

It can't hurt to ask nicely for a little bit more. All they can say is no.

So, go for it. Put on your best poker face (they can not see you through the phone) and Ask for what you want.