Loan companies and banks have made a paradigm shift about offering loan modification to borrowers. The crashing economy has forced lenders to re-think financial schemes in order to keep their profits rolling in. In the face of bankruptcy, these capitalists are willing to bargain anything just to save their businesses from suffering the curse of so many companies shutting down as an effect of the recession.
Loan modification proves to present a win-win situation for both parties involved. While borrowers benefit from reduced principal rates, lower interest rates, more affordable monthly payments and extended loan terms, lenders get more assurance of getting paid. Instead of zeroing in on empty profits, they get a hold of financial resources that could be attributed to other business ventures.
Lenders would prefer to modify loans than go through tedious foreclosure proceedings. Foreclosure cases cause banks precious resources. Each of these proceedings cost them almost 20-25% of the loan balance. To be more exact, administering a foreclosure case costs an estimate amount of $60,000 and this amount is expected to go higher as the property depreciates.
The foreclosure rate in the US already reached nearly a million last year. Now that the US economic recession is batting its hardest, this number is still expected to increase by 50% if the predicament can't be smoothed out. Multiplying the number of completely foreclosed cases to the amount each proceeding yields a whopping $60 billion. All that money was collectively spent by loan companies in foreclosing a home last year.
Aside from the fiscal detriments of foreclosure, banks would dread the idea of processing another foreclosure because it just spells more liabilities mortgage refinancing than gains. As cases start to pile up, much of their time has been allocated on processing these papers alone. Once completely foreclosed, more problems arise. One of which is selling the foreclosed property. With the economic status dwindling, closing a mortgage deal becomes more difficult by the day. Banks find it hard to dispose foreclosed houses because no one has enough finances to support the mortgage deal. Moreover, they are not going to risk to settle a mortgage mortgage refinancing to just about anyone without any assurance of getting paid. These and more make loan companies and banks want to modify loans.
The solution for the economic crunch calls for the initiative of the borrower to request for loan modification. Mortgagors should not hesitate to act towards stopping foreclosure because of fear that lender might not agree to the request. Given the right documents, valid hardship and a little salesmanship, lenders will not think twice of granting you a loan modification deal.
Jennifer Franco is a creative writer, teacher and freelance language editor currently completing her master's degree in Language and Literature. She writes about a wide array of topics including art, culture, entertainment, cars and loan modification. For more information about loan modification, you may call 1.888.864.1663.
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