Many home owners struggling to handle foreclosures of their properties are not aware that lenders prefer loan modification over the process of foreclosures. Loan modification may be a complicated procedure for lenders but compared to foreclosures, it is much better. This is due to the fact that loan modification saves much time compared to foreclosures as well as has other long term benefits.
The only stumbling block to loan modifications may be that lenders have to train staff to handle the procedures of loan modification. In spite of this, there are several pertinent reasons why the banks prefer loan modification over foreclosures.
- Fast and cheap process: Loan modification is a much faster and cheaper process for the banks. It provides the opportunity to the home owner to get current on the payments of their mortgage. Usually within 30 to 60 days, the lenders give approval to the application of your loan modification as they scrutinize your documents and negotiate with your attorney for loan modification.
- It involves less work: Loan modification implies less work for the lender. The documentation procedures are taken care of by the attorney for loan modification. Compared to this in a foreclosure process, the lender has to determine the late penalties, issue Default notice, hire the services of a lawyer and even prepare for auction of the home. Also if the home owner starts being current on mortgage payments, he retains the home and most of the expenses incurred by the lender goes to waste.
- Retaining Investors: The program for loan modification by the Obama administration aims to help struggling home owners combat foreclosures and retain their homes. The main reason why lenders offer loan modification is because investors do not like those banks which have big inventory of foreclosed properties as their responsibility. With the present economic down turn, where prices of homes have descended to new depths, instead of stamping your duties as bad debts, regular payments are ensured on their records.
Some of the big banks like GMAC mortgage, J.P. Morgan Chase and Wells Fargo are implementing the federal Home Affordable Modification Program but number of foreclosures are still on the rise. The number of permanent modifications given by these banks has seen a rise. But many home owners are angry with their lenders as they have either have been refused trial modifications or have had their trial modifications canceled because of which they have been denied permanent modifications. Many home owners have entered into foreclosures as they have not been given aid.
The banks argue that they have given home owners who do not qualify for loan modification options like assistance for short sales and deeds in lieu to combat foreclosures.
