How to Negotiate a Lower Second Mortgage Payoff

Current economic conditions have forced difficult changes in the lives of many consumers. Homeowners with more than one lien on their home can find themselves in a particularly challenging situation should their income decline or other financial obligations increase. One way to alleviate some of the financial burden of making two mortgage payments is attempt to negotiate a lower second mortgage payoff.



Negotiating a lower second mortgage payoff will be a challenge; the lender is not likely to agree to simply reduce the payoff to a lower dollar amount. However, government loan modification programs can provide relief to struggling homeowners and provide viable options to reduce the financial burden of a second mortgage in other ways. The government has suggested two options for participating second mortgage lenders to provide relief to homeowners: reduced payments or lien extinguishment. You can contact your second mortgage servicer to take advantage of these programs.

Instructions

1

Contact your lender to ask for a second lien loan modification. Explain that you are experiencing financial hardship and are unable to make payments as agreed.

2

Be honest when explaining your financial situation. Do not lie or try to hide information. Be prepared to explain any large savings you have or any large new purchases such as a car or recreational vehicle. If you have lost a job or experienced a life-changing illness, reveal the details. If you have taken on too much debt and have now found that you cannot handle the obligation, fess up. Being upfront about your circumstances will likely give you a better chance at receiving the assistance you need.

3

Ask the lender if they are participating in the second lien modification programs backed by the government. If so, ask for the lien extinguishment program. If the lender does not participate, do not refuse their in-house loan modification proposal. The lender's modification program could reduce the principal balance on your second mortgage in the long run by lowering the interest rate that will amortize over the life of the loan.

4

Send all requested documents. Be prepared to send copies of your last two pay check stubs and your last years' tax returns. Some lenders will also ask you to compose a financial hardship letter explaining your circumstances in writing. Provide all information requested in a timely manner using their preferred method of delivery.

5

Follow up. The entire process of applying for and receiving a loan modification will take several business days to a couple of weeks. Once you have submitted all the requested information, allow for processing time (ask your representative how long the typical wait is). If you have not heard from the lender in a reasonable amount of time--say two days longer than is typical--call to check the status of your modification.