Feldman Law Center - What Do Banks and Lenders Think of Loan Modifications?

Feldman Law Center - News by Feldman Law Center
The whole reason a loan modification becomes necessary is because the borrower needs the loan to be more manageable, so that he or she can continue to pay for it. The purpose of a loan modification is for the borrower, or someone on the borrower’s behalf, to negotiate a more feasible mortgage with the lender. At first glance, this deal seems like a good one for the borrower. And oftentimes it is. But what about the lender?

Because of the current financial crisis, many people are seeing loan modifications as a good deal. The negotiations are usually initiated by the borrowers, and allow them to keep their property, postpone payments, reduce or stabilize interest rates, and sometimes even get a better deal on the house they already live in. Their credit scores are not harmed like they would be by a foreclosure or bankruptcy. Most of all, they do not have to move from their houses, forcing upheaval on their families, during a time of financial hardship and stress.

Society seems to take the side of families and the personal stories broadcast on the nightly news shows. Stories about 50-year old, recently-laid off, single moms who can’t afford their mortgages tend to pull on people’s heartstrings, winning the allegiance of many members of the public. And since so many people are being affected by the mortgage crisis, public outcry seems to be against banks and lenders, who are being blamed for offering such ludicrous loans in the first place.

The government, and specifically groups such as the FDIC, are also increasingly supportive of loan modification programs. The FDIC has even built a “Mod in a Box” loan modification program guide, in order to encourage more and more lenders to offer loan modifications. Obama has plans that involve modifying home loans to keep families in their homes, and countless nonprofits and support groups seem to be cropping up to help people with distressed finances.

So, borrowers, the government, and society at large are supporting the numerous loan modification programs available. One still has to wonder what banks think about home loan modifications.

Although much less loudly proclaimed, many lenders are in support of home loan modifications too. Lenders’ motivations for modifying a loan can vary. If a home is sold in a short sale, the bank agrees to write off the amount the borrower still owes, sells the property, and takes a loss. Foreclosures are much the same. When a bank forecloses on a home, they often make less profit on the property than they would have made through a mortgage, even a mortgage modified through a loan modification. Simply put, banks have a business motivation to modify your loan: they stand to make more profit if you stay in your house. Not to mention the fact that loan modifications make them look better in the eyes of the community and the government, and could potentially help the world’s economy in the long run.

If you need a home loan modification, contact the attorneys of the Feldman Law Center. Consultations are free, and they can help you benefit from staying in your home.