How to Negotiate a Settlement With a Second Mortgage Lender

Be prepared to discuss a manageable payment plan per your circumstances.

Second mortgage lenders do not want to foreclose on mortgages because they may not recoup their investment after the first mortgage lender is paid. For that reason, lenders would prefer to work out terms to bring the loan current. Your purpose in negotiating a second mortgage settlement is for the second mortgage lender to release the lien.

Things You'll Need

• Second mortgage payment history
• First mortgage payment history
• Employment letter

Instructions

1. Stay in touch with the second mortgage lender and keep the company informed about your situation, as uncomfortable as it may be. Write a letter explaining your circumstances of payment and request a modification to the payments. Explain how this arrangement will benefit both you and the lender. See Resources for a sample letter.

2. State that you have made consistently timely payments and provide an attachment listing your second mortgage payments to support your statement. Also include your first mortgage payment history to show that you have been stable with both payments. Be specific about what you can do to get the loan up to date. Mention that your situation is temporary, if you have a defined date of starting a new job. Provide confirmation of your employment. Discuss the terms you require for a manageable repayment plan.

3. Negotiate with the second mortgage lender, a possible lump sum to be due on an agreed-upon date. Use the opportunity to request a lower interest rate to manage payments. Try to remove any late penalties and annual charges. Recognize the importance of negotiating to relieve the debt on your second mortgage in part or in full, at least temporarily, to help you through your financial situation while also preventing the lender from entering into an unprofitable foreclosure.

Tips & Warnings

• When settling, include in your estimate, costs of between 3 percent and 6 percent depending on the area.

References

• NnLoan.com: Second Mortgage Settlement with Chase
• SolvingDebts.com: When and How to Use Debt Settlement Offers
• Bills.com: What are the consequences if I do not pay the second mortgage but stay timely on the first?
• T-Rex Global: Mortgage Guide -- Tips on Negotiating Mortgage Settlement Costs

Resources

• American Loan Search: Negotiating a Settlement