Renegotiating a Mortgage: One Man's Quest
A reader emailed us the letter he was planning to send to his lender in an effort to renegotiate the terms of his loan. We thought it would be interesting to get readers’ input, both in terms of changes/improvements to the letter as well as predictions about the likelihood of his success. Dear Madam or…
A reader emailed us the letter he was planning to send to his lender in an effort to renegotiate the terms of his loan. We thought it would be interesting to get readers’ input, both in terms of changes/improvements to the letter as well as predictions about the likelihood of his success.
Dear Madam or Sir:
I am writing to be considered for a loan modification. I am currently in year three of a 5yr fixed mortgage at a rate of 5.75%. As I weigh my options, I am asking that MORTGAGECO extend me a lower, fixed rate for a term of 30 or 20 years. I have every intention of exploring my mortgage options with other lenders but first I wanted to contact you. I would be happy to remain a customer of MORTGAGECO under the proper terms.
In no way should this be considered a plea…
…from a homeowner in financial distress (I will detail my current status below). I simply would like to offer you the opportunity to retain my business, and at the same time take a loan of yours out of the adjustable-rate category and move it to the fixed-rate (which I’m sure is in your interest as well given the current storied “mortgage crisis”).
The three-family home at which my wife and I reside was purchased in December of 2004 for $625,000. Having kept an eye on the area real estate market, and considering the amount of renovations we have done, I would estimate the current minimum price at $750,000. The rental income from the other two units is $2,550 per month (30,600/yr). My credit score is approximately 830. My income is over $70,000 per year. The second mortgage is approximately $50,000. I carry no other debt.
(Although she is not part of this contract since we were not married at the time, I wanted to mention that my wife’s salary is $45,000 per year and her credit score is also north of 800.)
I would sincerely hope that MORTGAGECO and INVESTMENTBANK look at my request as an opportunity to re-negotiate the terms to benefit both parties and not an opportunity to “make a buck” with fees. I thank you for your time and consideration on this.
Sincerely,
BORROWER
Thoughts or suggestions?
10:51,
Great story, but the point remains… You were able to refinance at a better rate because the prevailing rates were “BETTER”
the OP is trying to get the store to take back the shoes he bought, and resell them to him at a lower price than he bought them. Not to mention that the shoes are now being sold at a higher price that he originally bought them.
OP doesn’t have a shot in hell!
I work on behalf of banks and finance companies selling portfolios of loans into securitiaztion programs. we have sold $11 billion of comemrcial and residential loan portfolios over the last 5 years.
That said loan servicers are all too familiar with borrowers who look at the current environment and think they can take advantage. The first thing the loan servicer will do is look at their loan to value. You received this loan 3 years ago when rates were low and the real estate market had not reached its peak. If you live in one of the boroughs, i would guess that you have some equity in your place to protect (if you live in FL, then skip the rest of this.) The bank will see this and either call your bluff and not give you an extension based on the fact that you will do everything you can to protect your equity. If you decide to stop paying in order to force their hand, they will either (i) retain a firm such as ours to sell your now distressed loan to another firm which will aggressively go after the equity in your home via foreclosure or (ii) do exactly what a loan buyer would do which is accelerate your loan (calling it due today), impose a default rate of interest (i.e. your low 5.75% rate becomes 10.57% per the terms of the note), proceed with foreclosure, take back the property and sell it for a full payoff (i.e. loan balance+regular interest+default interest+attorney fees).
The thing is, a defaulted loan with good equity for the lender is worth more today than a below interest rate loan. Said differently, I can get a 10%+ ROR on a defaulted loan vs. a 5.57% ROR on your performing loan. The return on a defaulted loan is capped by the amount of equity currently in the property. Lack of equity or negative equity is where seling loans at a discount comes into play.
I would consider for a moment that you are not the smartest person in the room.
Yes, our business is booming right now.
The fact that this letter was submitted by a brownstoner reader confirms my earlier suspicion – many brownstone readers are flat out nuts
First, I work at a bank and agree with all the problems people have posted. However, my mortgage lender recently did a refi for me in order to retain the relationship. I had a 1 year ARM and they offered (I didn’t ask) to fix it for 3 years and a rate lower than the 1-yr reset was going to be. There were no closing costs. I was baffled at the time and read the documentation carefully and I’m still not sure why they did it.
Perhaps this writer should look into some compromise such as extending the fixed rate period by a few years rather than asking to fix for the life of the loan. The mortgage recording tax alone makes refinancings very expensive if you have to use a new lender.
If I was the recipient of this letter, I would completely p.o.-ed by the smug, entitled tone of the writer. Especially the second to last sentence. “I would sincerely hope that MORTGAGECO and INVESTMENTBANK look at my request as an opportunity to re-negotiate the terms to benefit both parties and not an opportunity to “make a buck” with fees.” Great touch — insult the people you’re asking a favor of! I completely agree with all the comments above. This guy has provided zero reasons for the bank to cut him a deal. As our beloved borough president would say, “fuggedaboudit.”
I am in a similar position as you, in that I have a 5/1 ARM, with the 5 year fixed rate at 4.75%. In the coming years I am looking at anywhere from 6.75 to 9.75%. While I do not look forward to this, and am tempted to plea for, at the very least, a lower lifetime cap, I know the bank will not even consider the request. As someone said, why would they re-do a performing loan? Think about the closing costs in refinancing. It will add up to at least $15-20k. Rather than just give that money to the bank, use that money to begin pre-paying on your current loan. You are effectively reducing your interest, without it costing you unnecessary and excessive fees. Here is an ARM calculator to help you figure this out. Just one man’s opinion. Thanks for listening.
http://www.vertex42.com/ExcelTemplates/arm-calculator.html
This world if filled with morons. This guy is one of them. Apparently, he doesn’t read the NY times, wall street journa or have a clue.
Is that a sign of the times…….Madam or Sir
I always thought it was Sir/Madam
This is probably not relevant to the current market, but about 15 years ago I managed to refinance my original mortgage with the bank that originated the loan, despite its having been securitized in the interim. I first tried to refinance and was told that was impossible as my mortgage had been sold to “a securitized mortgage pool.” The bank said I’d have to get an entirely new mortgage, with closing costs that would have made it impossible for me to do the new kitchen I was hoping for. I managed to track the mortgage’s sale through four different intermediaries, and located the securitized mortgage pool it had been sold into, which was run out of California. When I got the manager of that pool on the phone, he told me it was the first time in twenty years of managing such investments that he had ever heard from a consumer affected by the resale of a mortgage. He wasn’t very sympathetic to my plea about my kitchen, but then I told him I knew an attorney who had just finished working on the NYPIRG litigation that had won settlements from banks that were redlining minority neighborhoods in NYC (this is true; I’d already given him the paperwork and he was interested). I took a guess, and told the pool manager that I presumed these securitized mortgages were being resold based on both the borrower’s credit rating AND the zip code of the property in question, and that these resales were undoubtedly affecting minority neighborhoods on a disproportional basis, and were therefore illegal. So I told him cheerfully that if he didn’t jump into his pool, pull out my mortgage, and send it back to the bank for refinancing, and replace it with some other comparable mortgage, I was going to file a class action lawsuit based on my theory, with backup from NYPIRG. The manager suddenly got very sympathetic and cooperative, and my mortgage was returned to the originating bank within three days. I refinanced at a better rate with no closing costs, and got a new kitchen. But that was before the whole subprime mess, so I’m assuming that securitized mortgages are sold so broadly that this type of targeting would be very hard to demonstrate today.