Renegotiated Loan


DEFINITION of 'Renegotiated Loan'

The result of an agreement between a borrower and a lender to modify a loan by taking a loan that a customer was having difficulty paying and turning it into a loan that the customer can pay. The loan may be modified by lowering the interest rate, changing it from an adjustable-rate loan to a fixed-rate loan, lengthening the repayment period or forbearing principal.

A renegotiated loan can benefit both borrowers and lenders. The borrower is able to maintain his or her credit rating, avoid bankruptcy and retain use of the asset that is tied to the loan (e.g., a house). The lender, while it may see less benefit (i.e., less interest income) from a renegotiated loan, retains the customer's business and may have better profits than it would by allowing the borrower to default.

BREAKING DOWN 'Renegotiated Loan'

Renegotiated loans, also called loan modifications, were popular in the aftermath of the 2007 housing-bubble burst among homeowners who found themselves unable to pay their mortgages. A bank will not always agree to renegotiate a loan. Sometimes the bank will see a greater financial benefit from letting the loan default and getting the nonperforming loan off its books than from modifying the loan.

  1. Forbearance

    A temporary postponement of mortgage payments.
  2. Nonperforming Loan - NPL

    A sum of borrowed money upon which the debtor has not made his ...
  3. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  4. Loan Modification

    A modification to an existing loan made by a lender in response ...
  5. Loan

    The act of giving money, property or other material goods to ...
  6. Housing Bubble

    A run-up in housing prices fueled by demand, speculation and ...
Related Articles
  1. Options & Futures

    Things To Know About The Home Modification Plan

    This program allows FHA borrowers to reduce monthly mortgage payments through negotiation with lenders.
  2. Entrepreneurship

    The New Mortgage Business: More Than Just Loans

    Many mortgage brokers adapted to the post-subprime environment by becoming loan modification specialists.
  3. Options & Futures

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  4. Credit & Loans

    HARP Loan Program: Help for Underwater Mortgages

    If you are underwater on your mortgage, this program may be just what you need to help build up equity in your home.
  5. Insurance

    6 Reasons To Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
  6. Credit & Loans

    Pre-Qualified Vs. Pre-Approved - What's The Difference?

    These terms may sound the same, but they mean very different things for homebuyers.
  7. Home & Auto

    9 Things You Need To Know About Homeowners' Associations

    Restrictive rules and high fees are just some of the things to watch out for before joining an HOA.
  8. Credit & Loans

    Adjustable Rate Mortgage: What Happens When Interest Rates Go Up

    Adjustable rate mortgages can save borrowers money, but they can't go into it blind. In order to benefit from an ARM, you have to understand how it works.
  9. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  10. Economics

    What to Expect From Mortgage Rates in 2016

    Understand the factors that influence the direction of mortgage rates, and use this information to project what will happen with rates in 2016.
  1. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
  2. Are FHA loans assumable?

    Loans insured by the Federal Housing Administration (FHA) on or after Dec. 15, 1989, are assumable by qualifying borrowers. ... Read Full Answer >>
  3. How accurate are online mortgage calculators?

    Online mortgage calculators are accurate to the extent that the calculator itself is asking for the right pieces of information ... Read Full Answer >>
  4. Are mortgage rates negotiable?

    Mortgages are just as negotiable as any other product or service. Whether it's a new home purchase or refinancing of an existing ... Read Full Answer >>
  5. Are FHA loans fixed?

    An FHA loan is a mortgage loan backed by the government that offers more flexible lending requirements than those of conventional ... Read Full Answer >>
  6. Does an FHA loan require a down payment?

    Federal Housing Administration (FHA) loans require down payments, which can be as low as 3.5% of the total purchase price ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center