Home-Buddies

Would Mortgage Lenders Rather Work Out a Modification or Foreclose on my Home?

This comes from another email question we got recently. That is one of the biggest questions and misconceptions from the majority of the homeowners that we talk to who are facing a foreclosure.

So here is some good news for you. Though it may seem like the mortgage company wants to foreclose on your home, the truth of the matter is that they simply do not. Why? If a mortgage company has to end up foreclosing on a property, then that home becomes their liability. One problem for the mortgage company is that they may be located hundreds or even thousands of miles away from the property. The longer a property sits vacant, the harder it is for the mortgage company to sell. They are responsible for the taxes, maintenance, keeping vandals away from the property, and so forth. They know that they will usually lose money, especially if they are the one who ends up “taking the property back”. The mortgage company can become “stuck” with it because no one else bought the property at the foreclosure auction sale. So the mortgage company would much rather be able to initiate a workout plan with the homeowner, in an effort to avoid the foreclosure sale date.

So, why does it seem like they’re beating down your door to kick you out? Remember, mortgage companies are still the biggest playing factor in real estate, due largely to the amount of properties they end up assuming after the foreclosure sale. They are not afraid to foreclose on your home. They really would prefer to avoid it. Any correspondence from the mortgage company to you is generally a form letter written by some heartless lawyer who is just doing their job. If you do actually get contacted by a real person, you should remember that they may often be a minimally trained employee reading from a pre-written script. Also, they may be limited from negotiating anything with you because they are not the actual “loss mitigator” who has been assigned to your file. Because you are one of a million “loan numbers” to your mortgage company, they can have a tendency to let themselves become insensitive. Then they let themselves think that they don’t need to or want to specifically help you.

The mortgage company’s real interest lies in maintaining “performing notes”. They need money coming in every month on good mortgages to make their reports look better. The more homes a mortgage company forecloses on, the worse they look to their investors and the more difficult it will be for them to get more money to loan out on more mortgages.

While foreclosure is certainly an option for the mortgage company, the best option for them is to re-negotiate the loan and have another “performing note” rather than another vacant home that is a liability and burden on them. The best option for a homeowner is to have a professional negotiator get you the best workout plan possible.

Barbara Partaka
Home-Buddies