Dealing With Your Lender When You Can’t Make Your Payments

By Joel Persinger
YourRealEstateDude.com

Over the weekend, I received an email from a fellow asking me how to deal with a lender that was threatening foreclosure. In his case, he was not yet behind on payments and the lender had threatened to foreclose when the borrower called to ask for help. The borrower wanted to keep the house and expressed a desire to work with the lender by making partial payments. The question he asked me was, “Does a borrower have a right to keep the house, if he makes a partial payment.” With so many folks facing the same or similar issues, I thought you might like to know my answers to his question.

Not being an attorney, I can’t give you specifics regarding a borrower’s rights to keep the house by making a partial payment. However, it has been my experience that agreements allowing a borrower to remain in a home while making a partial payment are generally made outside the structure of the original lending agreement and are for short periods only. Your loan documents may contain a provision addressing the issue of partial payments. They may also address any rights you might have under such circumstances. Therefore, if you are wondering about your rights under the terms of your loan agreement, a good place to start would be examining those documents.

As for lender responses to telephone calls, you must first understand that banks employ different persons in different departments to do different things. As a result, the Customer Service Department may have a completely different response to a question than the Collections Department, which may have a different response than the Workout Department, and so on. That having been said, there are seven generally accepted “truths” you might wish to consider.

1) Letters generally work better than telephone calls. If you need to work out a payment strategy with your lender, you might try writing a letter. Draft your letter to the bank explaining your financial hardship, how long you feel the hardship will last and any proposed solutions you may have. Prior to sending the letter, you should contact your lender and ask for the “Workout Department” or for a supervisor. One or the other may be able to provide you with the appropriate address to which you should send the letter. You should also try to get an email address. That way you can send the letter by email, as well as by certified postal mail return receive requested. The email will provide you with a record of what you sent, to whom you sent it and when it was sent. Certified postal mail, by comparison, will only prove that you sent something, but will not prove what you sent.

2) Working these things out with banks is like trying to solve a problem with the DMV. It can try even the calmest person’s patience. Therefore, it is import to remember that perseverance and patience are the watchwords of the day.

3) Banks do not generally like partial payments. If you call your lender and say, “I’m having some financial troubles. Can I make a partial payment for a few months?” don’t be surprised if the first answer you receive is, “NO.” The bank is not going to just take your word for it. You will have to provide financial records and documents to prove that you cannot make the payment.

4) Banks don’t want to foreclose on your property. They just want their money back in the form of a payment. However, they will threaten to foreclose in order to motivate the borrower to pay. It should also be noted that they do have the power to foreclose, at some point, if the borrower does not pay. So, it is best to work on the problem sooner rather than later.

5) Collections people at banks tend to use threats as their first response to just about everything. So, don’t be terribly insulted if they threaten you the first, second or even the third time you talk to them.

6) Quite often, banks don’t see the situation as a problem when the borrower is making the payment. After all, the borrower is making the payment! So, what’s the problem? It’s when you completely run out of money and the bank doesn’t receive your payment that the light bulb will go on and the bank will realize that a problem exists. It’s sad, I agree. But, it’s the truth nonetheless. I should clearly point out that I am NOT advising you to stop making your loan payments. You should contact a quailed attorney for advice prior to making any such decision.

7) Dealing with problems like these is not easy. But, the sooner you start working on them the better. The worst thing you can do is to pretend that they will go away on their own.