In many cases, it is possible to negotiate with your lender on your own. Even though we now believe that using an experienced professional can drastically increase your chances of approval and save you tens of thousands of dollars over the life of the loan, home owners are still encouraged to make an honest attempt on their own, before hiring a professional.
Here are the steps you will need to take before you begin:
1. Gather all your income and expense documents for the last two years. You should have paystubs, income tax returns, bank statements, property tax statements, and proof of any other income you receive.
2. Prepare a hardship letter that includes exact dates when your hardship started and ended, as well as documentation to collaborate your hardship claim. This should be as detailed as possible and should be typed, so the agent can clearly read and understand the letter.
3. Contact your lender once you are two months behind. Most lenders will not negotiate with you until you have missed a few payments, so even if you have contacted them previously, with no results, you will need to do it again.
4. Once you have contacted the lender, tell them that you would like to apply for a loan modification or workout plan. Both of these options may be available, depending on your financial situation.
5. Your lender should send you a financial worksheet to fill out and return to them with the financial documents you have already gathered. You should try to fax this back to them the same day. In some cases, you can complete the entire process in a single day.
6. Once you and your lender have verbally agreed to a workout plan, you will need to get everything in writing and send them a payment as soon as possible. In many cases, if you qualify for a loan modification, they will require you to begin a “stop gap” repayment plan, while you wait for the modification to go through, which can take up to 60 days.
You should be prepared for long hold times (sometimes up to an hour and a half) and don’t expect the agent to always be friendly, but they will help you if you are persistent. Your lender will be looking for several things to see if you qualify, but the main qualification will be to determine if you can afford to keep the home. You will need to show that you can afford the monthly payment, after all your other monthly expenses. If you are attempting to get a repayment plan, then you will need to be able to afford your normal monthly payment, plus the added amount to pay off the arrears. In general, the arrears must be paid off in 18 months or less and you will need a minimum of one and a half payments to begin a repayment plan.
If you are not successful working with your lender on your own, of if the payment plane they set up for you is unaffordable, then you may want to consider another option, or you could hire a professional loss mitigation company to negotiate a better plan for you. Regardless of what option you choose, if you can afford your home, and you have recovered from your hardship, then you should be successful at saving your home from foreclosure.