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 have 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:
- Bankers today. 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. 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.
- Creativity is not valued here. Use the documents that the bank provides to complete any request. Supplying information on 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. 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.
- 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 valid 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, thoroughly, and maintain reasonable expectations.
About the Author: Since 1990, attorney David Soble has represented lenders, loan servicers, consumers and business owners in real estate, finance and compliance matters. For over 24 years, he has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his business and consumer clients.
Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.