Two Reasons Your Lender Would Prefer To Modify Your Mortgage Instead Of Foreclose

With the high number of foreclosures taking place across the country it would seem to most that the banks prefer to foreclose on your home than to work with you to find another solution. But the truth is lenders would much prefer a workable solution exist, and that you get to stay in your home than have it go back to the bank. There are a lot of reasons foreclosure is not as desirable for the banks as it looks, and perhaps the biggest of those reasons is that it costs the bank to foreclose. That said, there are other reasons lenders prefer to look for alternatives, and an attractive alternative for both parties is a mortgage modification.

Two reasons your lender would prefer to modify your mortgage are:

•         Foreclosures can take time, and during the process your home may lose some of its value. That means if the bank ends up getting the house back and has to remarket it, they can only do so for what it is worth. This could mean a financial loss to the bank.

•         When you modify your mortgage you still make payments to the bank. And even at a lower interest rate, your bank is still turning a profit on your mortgage loan. Banks are not in the real estate sales business, they are in the money business. It is much better for a bank to process payments and service loans than it is for them to try and resell houses.

In these two ways, along with saving the money it costs to foreclose a mortgage, banks also benefit when you modify your mortgage. This is an important piece of information to keep in mind when negotiating a modification of your mortgage loan. You can use this knowledge to your advantage and get terms that are more in line with what your budget can handle. All too often people have to threaten bankruptcy in order to get a good result from their lenders, and that is because creditors would rather have some money than none and if bankruptcy is the answer the lenders may loosen their standards to help out their customers. This is usually something seen with credit cards, and does not typically arise in a modification situation, but knowing the bank has incentives to work with you in these instances gives you a leg up.

For more information about mortgage loan modifications, call us today or reach us online at www.law-ri.com. We will help by coming up with solutions that work for you and have multiple locations for more convenient one on one office visits.