A common question we are asked is:
“Why would the lender want to force a homeowner into foreclosure or short sale?”
If the lender allows a modification, they will collect a small monthly payment from a borrower who usually has a hardship.
If they sell the property (foreclosure or short sale) they will receive a lump sum, often hundreds of thousands of dollars, when the sale closes.
They will also remove an “upside-down” loan from their portfolio by selling the property instead of keeping it on their books indefinitely.
Occasionally lenders do approve a loan modification, which usually temporarily lowers the intesrest rate on the loan, often for 3 months or up to several years, but does not address the principal balance, which is the real problem for most homeowners. It usually only delays the homeowner from short sale or foreclosure for a period of time.
It is strongly recommended that any homeowner considering a loan modification consult with a real etsate attorney before beginning the process.
If you would like a recommendation for an experienced real estate attorney, please contact us.