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Requesting A Loan Modification

Frequent Contributor

Requesting A Loan Modification

I know it's a long shot, but I'm going to try to get in touch with my bank regarding a loan modification. I currently have an interest only loan at 6.5% with an ARM that doesn't reset until 2013. If it were to reset now, my rate would drop to 3%. An adjustment to just 4.5% with a payment of interest and principal would lower my monthly payment (slightly) while actually reducing the balance of the loan on my underwater home each month. I've never been late and can currently afford the payments, but I desperately want to start reducing the balance of the loan and try to catch up with the continually declining value. My mortgage is not Fannie or Freddie. The loan is with a local bank.


I'm wondering if some of the mortgage people here can critique the letter I've written and give me suggestions on where to send it...




Dear Bank,


I am writing to ask that you consider adjuting the rate early on my mortgage. I currently have an interest only mortgage at 6.5% that is scheduled to reset in May 2013. When I obtained the mortgage, my home appraised for $640,000. Since then, values in my neighborhood have drastically dropped. Earlier this year similar homes sold for $479,950 and $455,000 and the house directly across the street is currently listed with no offers at $435,000 with no offers and is schedule for foreclosure next month.

Although the economy has had some impact on our income, my husband and I have faithfully paid the mortgage on time every month, and also paid a little extra towards the principal for a time. However, what we could afford to add to the payment each month could not keep up with the rapidly falling value of our house. At the time that we took out the loan, my husband's credit was struggling. By putting it in just my name, our loan officer was able to get us approved. Over the past three years, my husband has worked hard to correct all issues on his credit and his scores are now much higher. However, because we are now underwater we are unable to refinance at today's lower rates with both of us on the loan.

If you would be willing to adjust the rate on our mortgage, we would be willing to add my husband to the loan as additional security to you. We would also like to change the loan from interest only to include principal and interest so that the balance on the mortgage can catch up with the fall in values and keep up if the market continues to decline. I believe that this would put both us and you in a much more secure position. We would also be willing to make a payment towards the loan to bring the debt more in line with the current value of the home and greater strengthen your position. 

Please contact me regarding my options.

Message 1 of 4
Frequent Contributor

Re: Requesting A Loan Modification

I don't want to walk away from this obligation, but the value of the house has plummeted so far in the past 3 years - without an adjustment to the rate, there's just no way that we can catch up. I know several couples in similar situations to us who have chosen just to walk away from the house and then used the other person's credit to purchase a new home at today's lower prices. My husband's credit scores are now sitting at around 700 and will be even higher in 2012 when his student loans drop off (just couldn't get these to budge!) so we would easily be in a position to purchase using just his income and scores. As I said, I don't want to do this but I wonder if I should include something along these lines in the letter?

Message 2 of 4
Frequent Contributor

Re: Requesting A Loan Modification


Message 3 of 4
Super Contributor

Re: Requesting A Loan Modification

Looks pretty good.  I'd recommend you reach out to some of the upper level executives at the bank, get their names, title and of course their business address.  I'd send one to the President, the Vice President and perhaps the CFO, CEO & COO if each of those positions exist at the bank.  Usually the bank president & VP's have the final authority on those types of decisions though, at least ours do.

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial Multifamily) since 2002
In Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage
Message 4 of 4