Foreclosure? Loan Modification? Short Sale? What Are My Options?

Lenders can often be difficult when it comes to loan modifications and foreclosure alternatives, like short sales and deeds-in-lieu. What you should know is that lenders benefit at least as much from these workouts as you do. Lenders balk at mortgage mitigation due to the expense of adding staff to handle it. Each case requires individual attention, and once matters move to the foreclosure phase, the expenses get even higher.

Regardless, it can save your lender time and money compared to foreclosure, and may even have a few long term benefits. Here are some good reasons why your lender might prefer a loan modification or other foreclosure alternatives over a foreclosure.

It is faster and less expensive:

In a foreclosure, there are specific wait times that allow the borrower to become current with their mortgage. It is not uncommon for the process to drag on for a years. The process can cost your lender a great deal of money. Alternatively, a loan modification takes an average of 60 to 90 days. The negotiations are the most difficult part, but they don’t cost quite as much as foreclosure expenses. Loan modifications also involve much less work on the part of the lender, especially when you are represented by a foreclosure attorney that understands the qualification guidelines for loan modifications.

It is less work:

To start the foreclosure process, your lender will have to assess late charges, file a Notice of Default, pay heavy legal fees, and arrange an auction to sell your home. If you manage to get back on track and stop the foreclosure, all that work becomes unnecessary. Loan modifications involve much less work on the part of your lender. You and your loan modification attorney will do most of the work and provide the required documentation. All your lender has to do is assess your case and decide what kind of mortgage assistance is appropriate for you. This also explains why it is better to pursue a loan modification before your lender incurs costs of foreclosure.

It helps keep investors:

Foreclosures are as damaging to your lender as they are to you. It may benefit them now, but it will eventually weigh them down. Investors don’t want to deal with banks that have too many foreclosures on their books. If they grant you a loan modification instead, your payments will keep showing up on their records instead of being written off as bad debt. Also, if that modification happens to include a principal reduction, this will also add to the overall appeal of the lender’s books to an investor.

Of course, this doesn’t make it any easier to get what you want from your lender. After all, you are still a liability and it is important to prove that you can maintain your mortgage payments going forward. To get the best loan modification results, you need a good foreclosure attorney who knows what lenders need and is able to convince the lender that a loan modification is the wiser choice for everyone.

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