Tips and Traps When Negotiating Real Estate: What You Can Negotiate from a Lender

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

TIP

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.

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