People seeking to lower their monthly payments and resolve mortgage debt troubles through a loan modification often come in contact with many conflicting pieces of advice. Some advocate ideas such as strategic default, while others push a negotiation formula that is more suitable to the lender. In either case, knowing the difference between good and bad advice can be crucial to the success of a loan modification negotiation.
Sorting Through Ideas
The idea behind a mortgage modification is to negotiate changes to the existing loan that can lower payments and resolve past due balances. In order to obtain a modification with most lenders the debtor must be able to prove two things: (1) that they are experiencing a financial hardship and (2) that they have the ability to maintain the modified payment schedule. Proving that finances are tight enough to need help, but not so tight that future payments will be missed is a very fine line.
Although some will say that a lender will only negotiate once the account is delinquent for one or more months, this isn’t always the case. There are plenty of lenders who would prefer to negotiate terms before a payment is missed or the home is at risk of foreclosure. Therefore, it is never a good idea to miss a payment on purpose or to stop paying the mortgage. Further, purposely neglecting the homes condition or moving out early is not a good strategy. If a lender feels the home is in jeopardy or in poor condition, they may be less willing to negotiate a modification. The best strategy is to contact the lender early on and demonstrate good faith efforts towards maintaining the value of the home.