First, you should get in touch with your lender and see if they will let you renegotiate your loan. Do not wait until you have missed payments or are in a pre-foreclosure state. Ahead of the problem. Each Lender is different so it is impossible to predict if they will allow a renegotiation.
Second, if you are already in the foreclosure process and you wish to try for a short sale (which is where the Lender agrees to take less than is owed for the property) please know that Lenders will not discuss a short sale unless there is a formal, written Sale & Purchase Contract for the property.
With an offer on the table, your Realtor should be prepared to negotiate with the Lender’s Loss Mitigation Department. For your Realtor to represent you, you must send a FAX authorizing the lender to speak with your Realtor on your behalf. In your Fax of authorization you will need to have all parties to the mortgage sign the FAX, you will need to have the Loan Number and the last four digits of all social security numbers and you should identify your realtor by name, by Brokerage as well as your realtor’s contact information.
With this authorization (and the Sales & Purchase Contract) your Realtor will be able to begin negotiations. You should send to the Lenders Loss Mitigation Department the following information:
A hardship letter explaining why you are not able to make your mortgage payments.
Copies of your last two months pay stubs
Copies of your last two years Income Tax.
With this information sent in, your Realtor can begin serious negotiations with the Lender on your behalf. Other information to keep in mind:
The Lender will not allow you, the seller, to realize any money from the sale whatsoever.
Ask the Lender to give you confirmation that you have satisfied the mortgage.
Be aware, many Lenders will ask you to sign a note for repayment of the difference between the sale price and the mortgage. They will, in some cases, allow you to pay this off over ten years, interest free.
It is better for you if you can receive a satisfaction of the debt without having to agree to a payment plan.
Critical to you successfully concluding a short sale is to have an experienced Realtor who has the expertise and knowledge to work with your Lender’s Loss Mitigation Department. Your Realtor will do a Brokers Price Opinion (BPO) as the basis for negotiating with the short sale price.