Earlier this month, CNBC news reported that, nationally, consumers and business owners are at greater risk of losing their assets as the number of foreclosures and repossessions has spiked. The need for payment modifications and more flexible loan guidelines persists. Here are five tips debtors should review when contemplating a consumer or business loan modification:
Retail Bankers
In banking today, bankers at the retail level have very limited authority to make significant financial decisions without first obtaining approval from an underwriting committee or from a higher bank authority. Don’t rely or act on any bank communication that is not on paper containing a signature. Important decisions do not come quickly, so be patient.
Disclose All Personal Financial Information
If you are seeking a reduction in a monthly payment obligation, be prepared to disclose all personal financial information. No competent lender will provide relief based upon verbal statements of financial hardship alone. Provide thorough documentation supporting the reason for the hardship request, and be prepared to answer further questions concerning the same.
Use the Documents the Bank Provides—Creativity is Not Valued Here
Use the documents that the bank provides to complete any request. Supplying information in one’s own format just delays the process. Creditors have numerous requests for payment adjustments or debt forgiveness, so don’t expect the lender to take time to decipher your “customized” presentation. Standardization is key to efficiency and a lender’s timely response.
Be Consistent With Financial Disclosures
Nothing generates more questions than when financial information is provided to a creditor that fails to match up with earlier submissions of one’s financial representations. Red flags will go up when, for instance, a large account balance listed on a loan application is not reported on a later statement for financial hardship.
Submit All Requested Documents at One Time—Don’t Piecemeal Documentation
It’s common for lenders to request a list of documents needed to process a hardship request. These documents are valid for a certain time after submission. For example, bank statements are valid for 30 days, while other financial papers may be enforceable for 90 days. It’s best to submit all requested documents at the same time to avoid a document “leapfrog” effect—where the lender is ready to make a decision but can’t because some documents have expired while others are newly submitted.
Failure to address the above-listed items will certainly delay, if not kill, one’s opportunity to modify a loan agreement. Proceed cautiously and thoroughly, and maintain reasonable expectations.
About David Soble: David is a seasoned real estate and finance attorney with more than 35 years of experience, combining his background as a “big bank insider” with a commitment to demystifying complex legal issues for his clients. As the founding attorney of Soble Law (also known as Soble PLC / Proven Resource), he leads a specialized team in Michigan and Ohio that handles real estate transactions, contract disputes, probate, and financial litigation. Known for a practical, no-nonsense approach and peer-rated excellence (Martindale-Hubbell AV Preeminent), Soble and his team strive to protect clients’ property and financial interests with clarity, integrity, and experience.
Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own qualified attorney.
