Do Banks Prefer Foreclosures Over Loan Modifications?
If often seems like banks and lender prefer to foreclosure on people’s property, rather than moving forwards with a Loan Modification. Is this actually true? Why will a bank foreclose, and not perform a loan modification?
An increasing number of American homeowners are in desperate need of a home loan modification, to prevent foreclosure. Phoenix, and Tucson Arizona have been especially hit hard by the housing crisis, and many people are in default on their payments. Perhaps this is due to hardships such as losing your job, or simply because they were victims of predatory loans, and now their ARM loan has adjusted to a payment that they can no longer afford.
Perhaps you have discovered for yourself that mortgage lenders are being difficult when it comes to modifying your mortgage. The truth is that foreclosures do not necessarily benefit banks, and it is generally preferable for them to modify someone’s mortgage. Consider though that the lender does not want to go through the process of loan modification, with it’s associated time and costs for them, only to discover that the homeowner still cannot make their payments. They therefore, have to ensure that upon a modification the homeowner will truly be able to make their payments consistently.
Right now loan servicers are overwhelmed with the thousands of loan mod requests that they have been receiving from all over the country. This is one of the main reasons why your lender may appear to be moving slowly on your case. Processing these requests, along with the current backlog is quite time consuming. While some loan modifications process quite quickly, others have taken up a whole year to complete.
We have negotiated loan modifications successfully for our clients, that have been approved in well under 30 days, with signifiant payment reductions for the homeowner. The entire process can take 30-90 days to complete, but realize that during this time you can negotiate affordable payment arrangements even prior to being approved for a modification, through Forbearance Programs for example. The economy is still getting worse, and more people continue to lose their jobs, which could impact processing times moving forward.
In order to be approved for a loan modification, your lender will review your entire financial situation, and may demand to see documentation such as; pay stubs, bank statements, tax returns, and will also examine your credit history. For most people the negotiation part is the most difficult piece of the process. Lenders may ask you to answer simple financial questions, but beware they may use the data to disqualify you, if they think that you are a poor risk for a modification. It is very important that you fully understand the process prior to starting your negotiation, to avoid such things as false accusations, and miss calculations made in judgement against your case by your lender.
Once a lender initiates foreclosure proceedings on a property they will incur quite a number of expenses, including legal fees for the filing of the Notice Of Default. In addition to these attorney fees, they have to arrange for the house to be sold at auction. If you have received a Notice Of Default, or Notice of Foreclosure, then realize you can still save your home, but you must act quickly!
It is in both yours, and the lender’s best interest to find a way for you to stay in your home. This is especially true in todays housing market, where it is less likely that they will be able to sell the home for a suitable amount, and do so in a timely manner. I hope that you have gained some knowledge in this often confusing area. It is too easy to find yourself paralyzed with worry after receiving a Notice of Default. Act quickly, gather your financial information. Speak to someone who can advise you on the process, and follow up with your lender as much as possible to ensure that your case gets processed as fast as possible.
Related Articles:
Tucson Business Connection
Tucson Chamber of Commerce
Leave your response!