A debt workout program may be the best alternative if you’re behind on your loan payments. A workout is any agreement that you and the lender reach that alters your payment of the delinquent amount and prevents foreclosure of your home. Assuming you and the lender can agree on an amount and a payment schedule, a workout program may save you from a plummeting credit score, foreclosure, and potential bankruptcy. For the lender, a workout is preferable to bankruptcy, since it allows the lender to recoup some its losses. It is important to be prepared if you intend to pursue a mortgage workout with your lender.
Know your finances and demonstrate your ability to pay. The first step in negotiating a workout is to have an accurate picture of your financial situation. Knowing how much you can repay and establishing a realistic timeline will help you work out a compromise with the lender. Moreover, you should be able to provide documentation to demonstrate to your lender that you actually have the ability to make periodic payments in the workout.
Decide whether your problems are long-term or short-term. You should have a clear idea of what type of workout you might benefit from before approaching the lender. If you are having short-term financial difficulties, your lender might be able to postpone your monthly payments for a limited period of time. This is known as a forbearance agreement. When the forbearance period ends, you must start paying the loan installments. Forbearance agreements typically cover a three to six-month period.
If your financial strain is more of a long-term problem, you might ask the lender to modify the loan. A modification is different than a forbearance. A modification is implemented to reduce monthly payments over a longer period of time with the goal of bringing your debt current. If a borrower doubts that he will be able to make his loan payments in the near future, a modification is recommended. The lender might modify the loan by either reducing the interest rate to match current market rates, lowering the principal amount owed, converting to a fixed-rate mortgage, prolonging the total repayment period or excusing accrued penalties and fees.
Reducing the principal amount in a modification is generally difficult and lenders are reluctant to take this step. Lenders are more willing to offer a new interest rate, which can help homeowners get back on track with their loan obligations.
If you plan to negotiate a workout, start early. You should begin negotiations as early as possible after a default. It is easier to achieve a workout when you haven’t missed an excessive number of mortgage payments. Also, early action prevents the borrower from having to negotiate when foreclosure is imminent.
The experienced team of attorneys at the Law Offices of Mark Weinstein, P.C. can help you litigate your real estate claims. Contact Mark Weinstein and his colleagues at (770) 888-7707 or visit them at http://www.markweinsteinlaw.com to find out how they can advise you.