Successfull Negotiations with Your Lender to Pay Back Your Arrears or Get a Loan Modification

When facing foreclosure, many people wonder how long they have to pay off their arrears and save their home. The foreclosure process is different with every state, court, and lender, so this is a very hard question to answer without knowing a lot more details. But I'll try to use a few different scenarios and some generalities to help those of you who need to stop foreclosure.

First of all, to pay back the arrears on a loan, the home owner must have a fairly large chunk of change, depending on how far behind they are. When someone falls behind, they not only owe the missed payments, but legal fees and late fees can add up very quickly. All these fees and missed payments combined are referred to as the "arrears". In order to bring the loan current, these must be paid in full. Alternatively, the home could be saved during a redemption period, provided it is allowed by the state.

Some homeowners are under the impression that they have to come up with all this money at once. Still others think they can send partial payments to the lender to slowly repay the arrears. Of course, paying the arrears at once will stop the foreclosure, but paying money up front, opposed to establishing a modification, may effect the long term affordability of the home. Simply sending reduced payments to your lender will not help at all. The payments will just be returned, because you have not had an official repayment plan or modification approved.

These days, lenders will be happy to do just about anything to stop foreclosure before the sheriff's sale or trustee sale. Once the home has sold, to get it back during a redemption period (if your state has one) you will need to come up with a lot more money. In most cases, you will need the entire amount to repay the loan. Because of this, it's very important to get an agreement before the sheriff's sale.

Prior to the sale, you could realistically get the home back with $0 out of pocket! Using a loan modification, you can get a new lower payment and you can negotiate the arrears and/or payoff amount. A loan modification is a permanent reduction in your monthly payment that should make your home affordable for the life of the loan. In many cases, the monthly payment can be cut in half! But these reductions do not happen automatically, it will require a lot of work, patience, and a good negotiator.

If you can ultimately afford the home with the existing payment and you just want to buy time to come up with money to pay off the loan or arrears, then a call to your lender may be enough. Just explain your situation and tell them you need more time. Assuming your request is reasonable and you can prove the home will be affordable in the future, they should accommodate your request. In the event the sale is already scheduled, they may require a payment to stop the sale, but this can be waived, when negotiated correctly. The only circumstances when I've seen issues with the lender stopping the sale, is when they are asked to stop the sale less than 36 hours prior to the sale. It's important to act quickly when facing foreclosure, because time will go by much more rapidly than you can imagine.

If you plan on paying the mortgage in full, such as when getting the home back in redemption, it's very important to negotiate the lowest possible payoff amount. The lender should be willing to accept a reduced amount, since the cost to foreclose (or resell the home) will be avoided. Also consider the current value of the home when making your offer. If the home has dropped in value, you should only pay what the home is worth, minus the cost of foreclosure.

When negotiating a reduced payoff, you need to get your entire agreement in writing and eliminate your lenders right to file a deficiency judgment. (again, if allowed in your state)

There are many options when negotiating with your lender, so it's always best to do as much research as possible and to hire a professional to make sure you get the best possible deal. A professional negotiator will have direct experience with your lender and ultimately save you $1000s over the life of the loan.