Approach Matters: How To Start the Conversation with a Non-paying Borrower

Business people in a meeting

At some point, every lender is faced with a borrower who has missed a payment deadline. At Total Lender Solutions, we specialize in helping lenders manage the foreclosure process – but honestly, we’re staunch advocates of avoiding that process when possible. Foreclosures can be difficult, and can often be avoided through constructive dialogue with non-paying borrowers. Such conversations aren’t necessarily easy for either party, and for lenders the desired outcome may depend on the initial steps.  Here’s how to begin the conversation with non-paying borrowers – and why these first steps can lead to a successful outcome.

Make Sure Your Documentation Is In Order

Prior to reaching out to the non-paying borrower, it’s important to make sure that your communications with the borrower have been accurate and consistent. Have you been providing the borrower with regular statements that include all pertinent information, especially payment due dates? Have you sent written notifications to the borrower alerting them that they have fallen behind, and offering them the opportunity to chat with you regarding potential ways to resolve the issue? Doing so not only provides the borrower with the information they need to make an informed decision – it also protects lenders from running afoul of laws and regulations intended to uphold the integrity of the foreclosure process.

Be Transparent

Your initial outreach, whether written or verbal, should be transparent regarding your intent: to work with the borrower to come up with a solution that avoids foreclosure. The goal is to engage the borrower, and if the borrower feels like the intent is to frighten or threaten them, the borrower is likely to continue to avoid you. As the old saying goes, you catch more flies with honey than you do with vinegar. And again, offering a lifeline of sorts is beneficial to lenders; in some cases, lenders are legally bound to provide notifications of process timelines and alternate paths to resolving the debt prior to initiating a foreclosure.

Be Prepared to Offer Alternatives

In your initial communications, you should inform the non-paying borrower of some of the potential avenues they can take to avoid foreclosure. While it’s important to note that lenders are not required to offer loan modifications to borrowers – for example, if the borrower is unresponsive to attempts at communication, or if the borrower ultimately won’t accept fair terms – it’s still worth presenting that as a possible option during your initial communications. It’s also important for lenders to know that loan modifications are just one possible alternative to foreclosure.

Initiating conversations with non-paying borrowers can be the starting point to avoiding foreclosure if done prudently. Of course, even the most open and empathetic approach won’t always be successful, and some borrowers may refuse to work with you. If that happens, we’re here to help.

Advising lenders on how to help borrowers understand commercial loan down payments comes naturally to us. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.

Leave a Reply