Recently, we received a very tough and perplexing query. The specifics revolve around the modification of interest rates. The situation is prevalent and the writer’s looking to settle it in their own ways. We cannot provide a definitive answer, but we can try and provide some insights to clarify the circumstances for those in a similar situation.
Here’s The Query We’ve Received:
“Hi, we filed for bankruptcy in February, and the case was closed in May. We only file bankruptcy on our credit cards due to the fact we either could pay them or our mortgage. So here we are with a home mortgage that is at 6%, and we have not been able to refinance, much less get any modification from the bank. We are current on all our payments. I was wondering if we should purposely be late for a few months to get their attention so they will work with us to get a better rate. I have tried for 3 years to get help, and they have turned me down each time; then the bankruptcy came. How can I get help to lower my interest rate with the bank?” – Rose
This Is Our Take On The Situation…
After filing for bankruptcy on credit cards, Rose has a mortgage at a steep interest rate of 6%. Despite being current on payments, efforts to refinance or modify the loan have been unsuccessful. She wonders if deliberately missing payments might prompt the bank to renegotiate.
Technically, Rose wants to know if ‘bluffing’ the lender makes for a viable strategy for mortgage modification.
The short answer to “I was wondering if we should purposely be late for a few months to get their attention so they will work with us to get a better rate” is Maybe, and we HOPE that it works out in your favor.
This is a complex situation with no one-size-fits-all solution. The idea of ‘bluffing’ your lender by missing payments to force a negotiation can be risky. While it may seem like a viable strategy, it’s crucial to understand the potential consequences and alternatives.
Understanding the Lender’s Stance
Before considering missed payments, determine if your lender even offers modifications, interest rate reductions, or principal reductions. This service might vary widely among lenders, and some, particularly smaller banks or private lenders, may not entertain such discussions regardless of your payment status.
The Reality of Loan Modifications
Some borrowers might have successfully renegotiated their loan terms after missing payments. But these cases are often small in number and not the norm. The COVIC pandemic did result in many more loan modifications. It was refreshing to see the US Congress put pressure on the mortgage lenders and servicers to modify hope loans in lieu of foreclosure. Hopefully, this post-COVID modification increase will continue post pandemic.
The harsh reality is that most attempts at this strategy can have dire consequences, including foreclosure. As a bankruptcy law firm, we see more of these adverse outcomes, although modifications are granted in some instances. So, you’d want to stay mindful.
What Happens If You Wish To Proceed?
If you choose to go down this path, prepare for all eventualities. Save your mortgage payment, including a potential late fee, in a separate account. This provides a safety net to revert to regular payments if the lender does not react as anticipated.
A Word of Advice
While we understand the frustration and desperation that can lead to considering such a strategy, it’s important to proceed with caution. In Rose’s case, two words are the crucial differentiators – BEING PREPARED. Her situation is unique; what worked for others might not work for her or anyone, for that matter. There is no GUARANTEE of success.
Before trying out any option, we encourage you to EXPLORE all avenues and seek professional legal advice. In Rose’s case, since she has already reached out to her lender and had no success, her current strategy is all that remains.
If you believe you’re facing something different, call out for help. Expert assistance might prove beneficial.
Connect with Westgate Law Today for Better Assistance
If you’re grappling with post-bankruptcy mortgage issues or any other financial legal challenges, you can always reach out to us. Our experienced team is committed to providing you with the guidance and support you need. Call us at 800-891-1995, and let’s work together to find the right resolution for you.