Why Lenders Prefer a Loan Modification vs Foreclosure

Lenders are sometimes difficult when it comes to loan modifications. But did you know they benefit at least as much from it as you do? The main reason they balk at Loan Modification is they have to train agents to handle them and each case requires individual attention. However, it also saves them a good deal of time when compared to foreclosure. Some good reasons why your lender might prefer a loan modification over a foreclosure are below.

It’s faster and cheaper. In a foreclosure, there are specific wait times that allow a borrower to get current with their mortgage. It’s not uncommon for the process to drag on for a year. These delays can cost your lender a good deal of money. On the other hand, a loan modification takes an average of 30 to 60 days. All they have to do is go over your documents, talk to your attorney and see if you qualify. The negotiations are the hardest part, but they don’t cost as much as a foreclosure would be.

It’s less work. To start the foreclosure process, your lender will have to assess late charges, file a Notice of Default, pay lawyer fees and arrange an auction to sell your home. If you manage to get back on track and stop foreclosure, all the work simply gets filed away. Loan modifications involve less work. You and your Attorney will do most of the work and provide most of the documentation. Often, all they have to do is assess your case and decide what kind of assistance you will need.

Foreclosures are as damaging to your lender as they are to you. It may benefit them for now, but with the recent housing bubble, it will eventually weigh them down. Investors don’t want to deal with banks that have a lot of foreclosures on record. If they grant you a loan modification instead, your payments will keep showing up on their records instead of being written off as a bad debt.

Obviously this doesn’t make it any easier to get what you want from your lender. After all, you’re still a liability, so it’s important to prove that you can get back on your feet. To get the best loan modification deal, you need a lawyer who knows what lenders need and can convince them that it’s the wiser choice to settle a loan modification. At KEL Attorneys we can assist you in this process.