Sunday, June 28, 2009

The Issues In The World Of Loan Modifications Include Needless Foreclosures!!!

Needless foreclosures are happening all around us. It happens every day; mortgage companies are foreclosing on properties even though it costs more to foreclose then to provide a loan workout. In this case, common sense tells any sane person that it is a needless foreclosure. So, be aware that the mortgage servicers these days just don’t have common sense!

For example, it can cost the Investors who held the mortgage about $50,000 to foreclose on a home. It may have cost only $25,000 to make the mortgage affordable to the homeowner by reducing the interest rate. Modifying the loan note would keep the homeowner in their home and save the investor money.

stop needless foreclosure

Mortgage contracts are often modified, at some cost to the banks, to prevent the larger cost of a foreclosure. Loan modifications can include adding the unpaid interest to the loan balance, calculating a new payment to make the payment more affordable, lengthening the term of the loan, or reducing the interest rate. In cases where the property is worth less than the loan balance, the balance may be reduced.

There can be some major impediments to loan modification. Borrower denial is a big one. Developing a new loan contract that a distressed homeowner can live with requires full participation of the homeowner. But many homeowners in trouble don't contact their mortgage companies and may not respond when contacted. It is recommended to take the burden off your shoulder and contact an Attorney based firm to handle your loan modification attorney as all the work is then handled by them and not you.

Some loans are owned by Investors, not the banks. Third-party lenders in which the firm servicing the loan does not own it is quite common. Investors restrict servicers from modifying loan contracts because their interests are different. Investors want modifications only if the alternative is a more costly liquidation or foreclosure. lenders, in contrast, want to protect their servicing fees, which they receive only from loans in good standing. Homeowners just want to be able to afford the monthly payment of their dwellings.

Most lenders unfortunately suffer from, and cause homeowners to suffer through, a lack of proper staffing. Many interactions between homeowners and lenders are handled by relatively unskilled employees. Homeowners in serious trouble are referred to a smaller number of more skilled and specialized staff that are armed with stronger abilities in the attorney loan modification area. With the onset of the mortgage crisis, lenders were caught short of a critical resource. While they now claim to have expanded their staffs to handle the workflow, a financial disincentive to staff adequately remains.

Many of the homeowners in trouble have two mortgages with different lenders, which complicate matters. The lenders looking to modify the first mortgage has to make sure the borrower can afford both mortgages and that the second mortgage lender does not upset the apple cart by foreclosing. As it currently stands it seems some lenders are prepared to work with second-mortgage lenders, and some are not.

Situations like these make it harder on both parties to cut a swath through the path to attorney mortgage modification.