In the wake of the global financial crisis, you may be finding it difficult to stay current on the payments on certain loans you may have taken out prior to the sub-prime mortgage crisis and the ensuing collapse of the global financial system. Rather than defaulting on your loan and, in the case of a mortgage, having your home foreclosed, you may want to consider discussing and negotiating with your lender about the possibility of a loan modification. A loan modification is a change to the original terms of the loan that will enable you, the borrower, to remain current on loan repayments. Unlike a forbearance agreement which is also commonly used to relieve borrowers with temporary financial problems, loan modifications are long-term solutions for those who are very unlikely to be able to meet the current repayments in the future.
Before you approach your lender to request a loan modification, be sure to think about what you are going to say and plan your strategy carefully. Remember, lenders have jobs to do and what they want most of all is to do it well by getting as much money out of you as possible. The more information you gather before going in to see your lender, the more potential ammunition you will have in the negotiation. Things that you should do before negotiating a loan modification include documenting your income and expenses to show that you are unable to meet current loan payments and keeping all the correspondence between you and your lender since the loan was made. Leaving these correspondences in their original envelopes will strengthen your case because sometimes the postmarks can help with your argument. And as expected, you should also bring all the paperwork related to the loan itself such as the original terms and expected payments.
