Why Loan Modification Is A Lifesaver
Posted by | Posted in What Is A Loan Modification | Posted on 01-07-2009
The present financial crisis and collapse of the mortgage industry may lead you to ask the obvious question, “Why are financial institutions even concerned with Loan Modification?” Why don’t we check out the present financial environment.
How Home Foreclosures Impact the Financial Industry
A total of 861,664 families lost their homes to foreclosure last year, according to RealtyTrac’s year-end report . What may be more surprising it the foreclosure filings during 2008 skyrocketed to a 30-year record high with 3.1 million foreclosure filings Depressed, scared, angry? Home prices have fallen over 21% from their peak according to the S&P/Case-Shiller Home Price index. In many areas the decline is much worse with home prices falling more than 40%.However there are many areas across the country that have seen house prices fallen. And adding a flood of foreclosed homes to already slow markets further lowers demand and prices, creating a whirlwind of lower prices and higher foreclosures. As a result, more homeowners who fall behind on their mortgage payments end up losing their homes, according to Jay Brinkman, the chief economist for the Mortgage Bankers Association
What would it be like if you were the lender and that you allowed someone to borrow money from you so they would be able to purchase a home? You and the borrower agreed to some terms for payback of the borrowed money, with one of those terms being that interest would be charged and the borrower would pay some interest with every payment they make.
Doesn’t this seem like the perfect way for you, the lender, to make easy money without working hard for it? However, let’s say the borrower stops making payments and the housing market crashes, so they can’t sell the house to get out of the loan.
Do you want the house, rather than ending up having to take the mortgage property back and then sell it at a very discounted price.
This is the reason WHY loan modifications are of interest to banks and other financial institutions. If they can change the terms of the loan sufficiently that you can afford to keep paying them for many years into the future, they will be happy. They make much better money off a mortgage that is being paid back than they do off a home that they have to go through the trouble of having to repossess.
At this point, it should be clear why a lender would be interested in negotiating your loan and changing some of the terms. The next article will discuss HOW TO GET A LOAN MODIFICATION. Click the links for more information loan modification or Debt Relief
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I agree with you that the lender in his best interest would do a loan modification for a homeowner it is just unfortunate that there is so much red tape involved. You would think the government would come up with a more streamlined process for the lenders to get homeowners approved. Thanks for the great info in the article.