Loan Modification or Foreclosure; What is Cheaper for Mortgage Lenders?
Posted on | November 4, 2009 | 1 Comment
Thinking logically, should a home owner foreclose on their home the lender would be receiving NO money at all as the home owner would no longer be making monthly payments. However, should the home owner modify their loan as opposed to foreclosing, one would think the lender would make more money this way as the home owner would still be making a monthly payment and the lender would still be receiving money.
This all seems like it lines up, but in reality there are several other ways in which lenders make their most profit. First and foremost, forbearance’s yield a great deal of profit to lenders. During a period of forbearance a home owner may be given a set amount of time to make no payments on their home in order to gather their financial bearings and get back on their feet. Once this set time frame has passed the lender will re-instate their monthly payments.
In addition to forbearance’s lenders make a great deal of profit when a home owner chooses foreclosure over loan modification. Loan modification is much more beneficial to the economy as a whole, as well as the home owner as it allows them to remain in the home and does ruin their credit.
However, there is no third party over-seeing the way in which lenders go about encouraging home owners to either get a loan modification or opt for foreclosure. Therefore, more home owners are choosing foreclosure because this is what the lenders are encouraging as it brings profits to them. Unfortunately, for the good of the economy is it far better for the home owners to make use of loan modification.
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Author: Sylvia Wayne
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One Response to “Loan Modification or Foreclosure; What is Cheaper for Mortgage Lenders?”
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November 4th, 2009 @ 10:17 pm
Homeowners need to educate themselves about their foreclosure rights and understand that they don’t have to give up their homes to the bank.