Your lender doesn’t want to own your home. In many cases they will lost money on the sale. To foreclose and market the home they will likely face these expenses that can eat up 20% of the eventual sale price easily:
- Trustee’s fees (foreclosure attorney)
- Eviction attorney and court costs
- Eviction lockout company, trash removal
- Safety and property preservation repairs
- Broker’s fees
- Closing costs
- Miscellaneous: liens, taxes, other legal fees
- Time on market / lost interest
Mortgage companies are in the business of making loans and they make their money from the interest on the loans. They usually do much better financially by getting a loan back in the ‘performing’ category than by foreclosing.
In other words, working with your lender to stop the foreclosure can be a win / win situation. It can save them money and save you your home.
Here are some of the ways you can work with your lender:
- Delay foreclosure to allow a sale
- Short sale
- Pay interest only for a time
- Extend term of loan
- Reduce interest rate
- Other
I specifically included the category of other because your lender may have a suggestion. For example, one lender started a job counseling center to help borrowers find work when they lost their job. In working with your lender, you need to be prepared to do just that - work with your lender!
One of the first things you’ll need to do is be prepared to put your request in writing. A first step may be a letter to your mortgage companies workout department explaining your financial hardship that has led to your inability to pay as agreed. Your lender may have an application package they ask you to fill out or they may simply ask for certain documents. You need to be prepared to give them what they need to justify the workout to their investors. Ask yourself, did you refuse to give your tax return for privacy concerns when you applied for the loan? No, or you wouldn’t have gotten the loan. So, now when you are asking to renegotiate the terms is not the time to suddenly be concerned about your privacy. The lender needs the information and they need honest information. The people in these workout departments deal with hundreds of cases a week, so uncooperative borrowers end up in the out pile - out on their way to foreclosure.
