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?
9:53 nailed it…can’t disagree with any of the points made, and 10:15 makes a good point too; that any borrower would balk at the lender trying to renogotiate after a contract had been signed.
any bank would laugh at this…sorry, but this won’t fly…just get the 30 year fixed, pay the refi fees, and get on with your life. be happy your place is worth more than you paid.
Its a bit pointless to cover this guys attempt to renegotiate when he appears to be fine even at market rates.
His rental income is 30k (taxable) and a market rate mortgage on a lump of 650k (he doesn’t say what his equity is) is over 45k (deductible) and he has two incomes total over 100k.
So whats his problem, exactly?
This guy has 0 chance. If he came to the table and said Bank X has offered me terms of X % to Refi, maybe he has a shot. But he basically saying the bank should give him a sweet deal (In which they lose money) for no reason at all.
He references the “Mortgage Crisis” but goes on to detail how he has great credit, plenty of equity, and more than enough income to cover the payments.
Am I missing something? Why is he writing this letter? What is he hoping to achieve?
If he wants to do a refi, why not just price it out and let his current bank compete?
A new fixed rate loan with a mortgage rate less than 5.75% is worth less than par to a mortgage company given today’s rates. (assuming it is in their portfolio which is unlikely). The mortgage company would rather be paid back par with a refinance.
Most likely the loan is securitized though, and typically the agreements underlying securitizations only allow mods in default situations.
A contract is a contract. What would happen if the mortgage wrote you a similar contract wanting to raise the fees?
Rates on a 30 year mortgage (bankrate) are well above 5.75%, so I don’t see that op’s bargaining position is very good.
Question, though: who is in a better bargaining position given that the existing mortgage is a 5-year fixed? OP is going to have to refinance in a year or so anyway. The bank is going to potentially lose this customer in a year or so anyway. No one (except the What) knows were rates are going to be in a year or so.
The writer’s reference to “INVESTMENT BANK” in the letter implies that the loan has in fact been securitized. Once securitized, it’s hard for servicers to even do modifications for those loans that are delinquent. This guy is dreaming if he thinks they will even consider modifying a performing loan!
A little knowledge is dangerous…I agree with 9:53. This person thinks he’s a know-it-all, but he clearly hasn’t thought through his negotiating power. The first rule of war (debate and negotiation too): Know your opponent’s position.
This is a very weak plea. As earlier stated, there is no compelling reason for the bank to do anything. You have to show what competing offers are and why it is to the mutual benfit of both parites — show that you have done your homework (looks like you haven’t). I woudl trash this letter if I got it.