Negotiating With Your Lender - An Uphill Battle

By Author: Groshan Fabiola
Total Articles: 2678
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As record numbers of homeowners attempt to avoid foreclosure, the responses of large lenders and loan servicers are drawing increased scrutiny. While these companies maintain that they are doing all they can to help the desperate borrowers, critics contend that homeowners routinely meet roadblocks; for example, many borrowers have trouble even reaching a contact person who has the authority to renegotiate the terms of their loan, while others negotiate modifications only to realize that they are as unaffordable as the mortgages they replaced .
Lenders and servicers are flooded with requests from homeowners who cannot afford their loans and the problem is complicated by the fact that these companies are not well equipped to deal with such work. Servicing units were originally intended to collect monthly checks from borrowers and then disperse the payments to mortgage holders. During the recent boom years, many people were looking to buy or refinance, but there was little need to advise borrowers or modify loans.

Agencies Not Meeting the Demand
While there are government agencies available to ...
... help homeowners stop foreclosure, these agencies are not able to deal with the sheer numbers; for example, in May, as Hope Now assisted 70,000 loan modifications, an estimated 85,000 families were unable to avoid foreclosure. That same month, 276,000 loans either entered or completed foreclosure. According to an April report by the State Foreclosure Prevention Working Group, a unit of the Conference of State Bank Supervisors, a regulatory alliance, about 70 percent of delinquent borrowers were not receiving the help they needed to renegotiate their mortgages to avoid foreclosure.

Borrowers Face Problems Going it Alone
While homeowners are free to renegotiate on their own, they face a multitude of problems. First, the typical homeowner does not have the knowledge nor the expertise to negotiate the best deal. Trying to modify an existing mortgage is no different from other areas, which do not require, but practically demand the assistance of an expert, such as taxes and legal services. Taxpayers are free to file their own taxes, however many choose to hire an experienced accountant to make sure complicated forms are filled out correctly and to save them the most money. Similarly, a criminal defendant may represent himself in court, but the assistance of a licensed attorney is so crucial to the justice system that a public attorney is appointed by the state if the defendant is unable to afford one. Homeowners need to realize that the lenders' personnel in the loss mitigation department are highly trained to negotiate and collect past due mortgage payments. Loss mitigation departments at these lenders do not want to engage in debt settlements. In many mortgage cases, those going it alone hurt themselves by telling or showing the lender certain things they should not, which weakens their leverage and bargaining power and ultimately their chances at avoiding foreclosure.

Frustration
The efforts of the majority of homeowners facing foreclosure are typically met with frustration, with many lenders remaining reluctant to renegotiate mortgages despite the recent government mandates. Some lenders are simply overwhelmed with requests, while other times loans have been resold, and borrowers struggle to find the right contact to initiate any negotiations. Even those lucky enough to speak with an actual bank representative, and not a recording, face a downhill battle as the borrowers are typically speaking with those occupying entry level positions who are not the decision makers. As a result, many, if not most have had to deal with constant hang ups, transferred calls, and being put on hold for long periods of time. Trying to modify a loan , or negotiate a short sale can practically become a full-time job, which requires precious time that many facing foreclosure do not have as they struggle to make ends meet with overtime and second jobs.

Uneven Bargaining Power
The homeowner going it alone also faces an extremely uneven bargaining table. Homeowners struggling to keep their homes are desperate and the lenders can prey on their vulnerability. As a result, few distressed borrowers are likely to question the terms of a loan modification because they want to keep their homes under any circumstances. In addition, the current system rewards those who have fallen behind and neglects those that are spending every penny to make their monthly payments. For example, some lenders have told customers that they cannot do anything to help unless the borrower is at least three months behind. Borrowers who are current are not as desperate, but are less likely to receive a modification; however, once the borrower is three months behind, and a notice of default and foreclosure are imminent, the bargaining power shifts and borrowers are forced to take what they can get, even if the modification is doomed to fail. Many borrowers feel helpless as they sense lenders are trying to get away with giving as little help as possible.

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