What is a Reasonable Loan Modification Request

By: Timothy McFarlin | Published: May 20th, 2010 | Category: Loan Modification

Negotiating a loan modification with a lender is much like a game of tug of war. Put simple, both sides are trying to save as much money as possible. The borrower wants the lowest monthly payment while the lender wants the borrower to make the highest monthly payment possible. Borrowers thinking of applying for home loan modifications often wonder what a good amount of savings to ask for is. The answer is…there is no definitive answer. Financial hardship hits some people harder than others, and debt is relative to a person’s ability to pay off their debt. Less of an ability to pay off debts means more of a financial hardship. To say that all borrowers facing foreclosure and requesting home loan modifications should request their interest rate to be lowered by a certain percentage would be unwise because some borrowers need more help than others. Negotiating a 2% lower interest rate may not be enough for some borrowers, but plenty enough for others.

Borrowers shouldn’t request home loan modifications based on how much they think a fair number would be or how much of a chance they think an offer has of being approved, they should request home loan modifications based on the amount of help that they need to meet their financial obligations. If a 2% decrease in an interest rate isn’t enough, then request a 3% or 4% decrease. It is pointless for a borrower to request a lower monthly payment that they still can’t afford. Be sure to gather documentation to serve as evidence to justify the request in the form of pay stubs, income statements, and bills for all current debts. This will show the lender that the amount requested is due to an inability to make current payments, not simply out of a desire to lower monthly payments just for the heck of it.

One must understand that each lender is as different as each borrower. This means that some lenders will be more able to accommodate more loan modification requests than others. A company that is struggling and facing financial hardship of their own may be less willing to lower a monthly payment than another company. This is when a good trained negotiator will come in handy. The business world can be a cruel battlefield, but that doesn’t mean that a homeowner should lose their home just because a lender is facing a financial setback. The federal government is bailing out lenders left and right, leaving borrowers to fend for themselves. Hire a local attorney with experience negotiating with mortgage lenders. A good attorney will be able to read through lender attempts to save a buck and, in many cases, will be more successful at negotiating with the lender than unrepresented borrowers.

Home loan modifications are a great way to avoid foreclosure so long as they are approached and applied for properly. Keep in mind that a negotiation is a negotiation and business is business. Lender agents can be very good at building rapport with their borrowers so that borrowers feel bad about asking for more savings. Don’t fall for these tactics, lender agents don’t want to be your friend, they want to increase their commission or status within their company. Let a pro handle the negotiation to ensure the lowest monthly payment possible is pursued with the most effort on behalf of the borrower.

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