OK lender, let's talk.

It seems counter-intuitive, but your lender probably will not talk to you about a workout unless you are in arrears on your mortgage payments. The number of months that you must be behind on your payments varies by lender. In early 2007, lenders were typically requiring 4 months missed payments. Later in the year, lender were talking to struggling homeowners just one month in arrears.

Why does the lender require missed payments?

The lender is worried that the borrower asking for relief may not really need help. A homeowner who wants to get out of a bad property purchase could claim hardship to escape a bad investment. The best proof of hardship to a bank is a missed mortgage payment.

The money for mortgages is often supplied by outside investors. Those investors expect a return on their investment and a lender who modifies that return must be able to justify their workout decisions. It is easier to defend a loan modification made to a homeowner in default.

Before talking to your lender, you should consider reading or listening to a good book on negotiating. It will bolster your confidence and provide tips that you can use to your advantage. Negotiating is an art that can be learned. I recommend listening to Brian Tracy's CD Communicate With Power .