Should I Notify My Mortgage Lender for Payment Difficulties?

Should i notify my mortgage lender that I am strating get difficulties to pay payments?

3 Answers

**YES! YES, YES, YES!**The longer you wait to seek help and/or solutions to your difficulties, the less they will be able to do to help. There are many active modification and short term assistance plans set you by the lenders and servicers at this point, as many people are struggling to make payments.

Because there can be a backup or delays at the servicer while so many people call for help, it is best to make the most out of your first conversation.

Put together: A household budget, accounting for all your expenses. Dont forget to include items like car maintenance, health insurance, food and utilities . . . basically, a realistic picture of what comes in and what needs to go out in terms of cash every month.

Your most recent bank statements and paystubs (to back up the budget)

2 years of taxes (especially if there has been an income loss, or some other hardship)

A sense of what you think your house is worth right now

Any paperwork that helps to document any hardship you have had . . . a layoff, a reduction in income, some significant new expense (such as medical), etc.

Then, call the customer service number on your statement and ask to speak to someone that can help you assess your options if you cant pay the mortgage. Each lender will have a different process for this, but you most likely have to start with the main number. If you have two loans, you may have to call both.

If you want to read some independent information from real customers, there is a good forum here: If you would like to see an example of what a lender eventually uses to evaluate assistance plans, there is one here: Every loan is different, and every lender is different . . . but eventually, it is only our lender or servicer that can help to evaluate your payment and options - so they are a great place to start.

If you think that you may be a good candidate for a refinance (that is, your credit is ok, your rate is higher than market, and there is some equity in your property), I encourage you to speak to a knowledgeable local loan officer as well.

Notifying your lender of your hardship is the only way to find out if you have any workout options available to you. The most common workout options are loan modification and short sale but there are several others options that may be available to you. If you have enough equity (or more commonly not too much loss of equity) in your home and depending upon who bought your loan on the secondary market you may actually have the option of refinancing. This may or may not help you depending upon the cause of your difficulties making payments. 

You do not have to be behind on payments before you make contact with your lender. Waiting until you are late on your payments may reduce the number of programs that you can qualify for. When you call into you lender they will direct you to a department called home retention or something similar. They will verify your identity and then collect information on your financial situation so that they can get a full picture of the problem. Once they see how your income compares to you expenses they will tell you whether or not you qualify for any of their workout options.

To be eligible for a loan modification your income cannot have decreased too dramatically. Conversely, to qualify for a short sale you must demonstrate some sort of signification financial hardship. Common causes would be job loss, hospitalization, divorce, or even the need to relocate. When neither of these options work for you some lenders offer a deed in lieu of foreclosure.

If your financial difficulties lead you to bankruptcy that's a whole new can of worms! I advise speaking to a lawyer for the details on that one.

You should absolutely notify your mortgage lender as soon as you anticipate having difficulty meeting your payment. You need to call your bank and ask to speak with the loan modification department. It may take awhile, but keep calling and holding, or go on in to your bank. You should bring all your paperwork with you, including any documentation of hardship or other issues that are contributing to your difficulty meeting payments. You should ask if there is any way to lower your monthly payments and put the difference on the back end of your loan. The last thing banks want today is another foreclosure on their hands, so it is likely they will be willing to work with you. You could also inquire about putting the next two or three months worth of payments on the back end of the mortgage at a higher rate to help you "catch up" if that is what you need.  

In the event that your bank is not wiling to modify the terms of your mortgage or give you a 60-90 day reprieve, then you may want to shop around for a lender who can refinance your mortgage quickly. If you plan on staying in your home for a while, and you aren't be able to meet the current payments, the best thing may be to find a lender who can give you a better rate, extend the length of your loan and cater to your monthly financial needs and abilities. Rates today (Nov 2009) are lower than they have been in years, so chances are you'll get a better rate today than you did when you bought your home. That is, of course, assuming you have made your payments on time and kept your credit clean. In that case, refinancing could be the option for you. Also, when shopping for a lender to refinance look for direct lenders, as they can get you a lower rate in less time (which is of importance in your situation), and they are also more likely to be flexible. When I refinanced my home, I used ICG, a direct lender based out of New York City. They were able to get me a 5.1% rate, whereas a broker I met with in my hometown in New Jersey offered me a 5.4% plus I would have had to pay a hefty broker fee. And it would have taken twice the amount of time to process. When dealing with mortgages (and almost anything else), using a middleman is an expensive and unnecessary luxury. 


Felicia Joe Sherman