Working with delinquent borrowers is a particular challenge in our industry; it can be unpleasant for everyone involved, especially if the borrower is not being cooperative. As the end of the year approaches, the holiday season often prompts borrowers to come to the negotiating table–resolving their outstanding payments may make for a happier Thanksgiving, a merrier Christmas, and a fresh start in the New Year. We encourage lenders to work with borrowers who are willing to work with them. Here are three ways to help a borrower who has stopped making payments.
Offer a Temporary Stay on Collection
Sometimes the simplest solution is best. If you’ve determined that the borrower is facing temporary difficulties, pausing collections for a brief period while they get their finances in order may be a win-win for both parties. We know that pursuing actions against delinquent borrowers takes time, effort and even money. It’s important, however, to have a thorough and verified accounting of the borrower’s finances, and for the borrower to be completely transparent about why they’re in this situation. The borrower will still need to make those missing payments. If there’s reason to believe that the borrower won’t be able to eventually make those payments and come current with the loan even after a pause, other options need to be considered.
Make Modifications to The Loan
Modifying the terms of the loan may provide a lasting solution. On a temporary basis, you may offer reduced payments for a set period of time; with this, you can apply a catch-up provision. If the amount of the monthly payment is causing the borrower to fall behind, you may want to adjust that either directly (extending the term of the loan) or by reducing the interest rate. In any of these scenarios, you’ll want to ensure that any changes to the loan agreement are drafted by experienced legal counsel, and that the borrower fully understands the changes to the terms before agreeing.
Refinancing
You may also consider encouraging the borrower to refinance the loan through another lender. This might be wishful thinking on everyone’s part; the borrower must have enough equity in the property, and their credit history – especially if they’ve missed multiple payments – may be a barrier to an affordable loan. But if successful, the borrower stands to benefit, either through lower payments, a lower interest rate, or both. And there’s an added benefit to you – that troubled borrower will no longer be your problem.
It’s our belief that resolving borrower’s difficulties before they lead to foreclosures is the best course of action for everyone involved. 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.
