What You Can Negotiate from a Lender
Lenders may be willing to do one or more of the following:
- Restructure the mortgage by extending the term so that you have lower payments, so long as the lender does not ultimately lose any interest
- Temporarily allow you to miss payments until you get back on your feet by adding interest not paid onto the loan amount
- Completely forgive interest and payments for up to a year or more, so long as you can demonstrate that you have the potential to pick up payments once again after that time
- Take back the property “in lieu of foreclosure” so that your credit does not have a foreclosure showing up on it
A big question is whether or not the loan is conforming. Remember, a “conforming” loan originally conformed to the underwriter’s parameters, the underwriters usually being quasi-government secondary market lenders such as Fannie Mae or Freddie Mac. These lenders generally insist that the primary lender make every effort (such as reducing or forgiving some payments) to help the borrower get out of default.
When it comes to foreclosure, however, a lender is restricted in what it can offer a desperate borrower by other underwriter guide lines. However, those guidelines have been so liberalized in recent years that they are very close to the above description. A portfolio lender (for example, a bank or S&L that made the loan out of its own funds) might be even more liberal.