This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How to Renegotiate a Mortgage

If you're struggling to stay current on your mortgage payments, you may be able to renegotiate the terms of your loan.

Default and delinquency rates are rising nationwide as the economy continues to decline. Foreclosure proceedings are expensive, however, so banks are trying to avoid them by offering to modify delinquent loans, according to the most recent Mortgage Metrics report from the federal Office of Thrift Supervision.

Mortgage modifications formerly were reserved for homeowners who were already behind on their payments. Now, however, lenders are willing to offer them to homeowners who are still current and who meet certain conditions. In particular, Citigroup (C), JPMorgan Chase (JPM), HSBC (HBC) and Bank of America (BAC) have been willing to undertake preemptive modifications.

Here's what you need to know to talk to your lender about renegotiating your mortgage.

Debt-to-income ratio: Your lender will base its decision on your request for a loan modification based largely on your debt-to-income ratio, or DTI. Your DTI is a measure of how much of your pretax income is taken up by your housing costs. Typically, the industry uses a DTI of 33% to qualify homeowners for a mortgage. If your DTI is significantly above that figure, your lender may be willing to make some changes on your loan. Ultimately, loan modifications are aimed at getting the DTI to roughly 38%.

Loss mitigation: If you think your DTI qualifies you for a loan modification, call your lender and ask for the loss-mitigation department. Explain why you are struggling to stay current -- there's no sense in understating or overstating your situation. Typically, the loss-mitigation department will ask you to reiterate this information in a letter of hardship, and they'll ask you to send the necessary financial documents to corroborate your story.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs