LOAN MODIFICATION AND HAGGLING: IS THAT THE BEST YOU CAN DO?

Haggling is such an intrinsic part of many cultures. Visitors to a Chinese marketplace or an outdoor bazaar in Morocco wouldn’t think twice about engaging in some back and forth about the price of an item. Its expected even. The practice isn’t as mainstream in the United States. Or is it. After reading an article about the increase in price haggling in the United States during the current recession (a bitter relief to finally use that word), where haggling was used to negotiate the price for goods such as electronics and furniture as well as services such as doctor visits and dry cleaning, perhaps our Western civilization is finally grasping the concept. And perhaps we should take the concept and apply it to loan modification.

Many people are struggling to convince their lender to modify their current loan, to negotiate a lower interest rate with their credit card company. The following haggling tips may be useful in a successful modification.

Be patient and be nice- You are dealing with an overworked loan officer whose phone is ringing constantly and who is receiving more letters than Santa Claus. Following up patiently yet persistently will help the situation, while demands will likely send your hardship letter to the bottom of the pile.

Set your standards- If you want to keep your house, you still have to pay your lender. If you want to lower your payment by reducing the amount of interest, your lender will probably want to extend the length of your mortgage. Be prepared to accept some sacrifices to achieve your overall goal of keeping your home.

Ask for freebies- When haggling for an item, you may offer to pay more and ask for another item to be thrown in for free. You’re not going to do that with your mortgage. But there are other ways to sweeten the deal. For example, prior to your asking for loan modification, you didn’t pay your mortgage at all or didn’t pay on time. Your non payment resulted in late fees being added to your mortgage and your late payment was reported to the credit bureau. Both of those items may be removed as part of your mortgage modification.

Accept the offer when the price is right- Your lender is not going to make life easy for you. If your lender believes that you are able to pay your mortgage with some sacrifice, your lender will want you to do so. Be prepared to cut items out of your budget in order to make a monthly payment. Make sure your payment reflects that.