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The New Loan Modification System For Foreclosures



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By : Karim El Sheikh    99 or more times read
Foreclosures bring a very difficult time for borrowers as there are not many options for them to choose from. Luckily, the state Senate is proposing a bill that will allow borrowers to see if they are eligible for a modification before they can be foreclosed on by lenders. Hopefully we will go forward with this bill.

Neither borrowers nor lenders want to resort to foreclosure because it results in money lost for both parties. One of the main reasons that mortgages fail is that people buy houses that they cannot afford. Another reason is that people are losing their jobs in the struggling economy and they can no longer afford the house and lifestyle that they once had. Most foreclosures lie in the hands of the lender rather than the borrower. Many loan providers are not prepared to deal with the amount of defaults that are taking place in this failing economy. The fact that lenders are not prepared to offer modifications on a large scale has led to huge losses for banks and borrowers across the nation.

One of the most absurd dysfunctional parts of the foreclosure process is that many borrowers are foreclosed on while they are in the process of negotiating a modification to their loan with the bank. The Center for Responsible Lending just completed a study that showed that 60% of people who were foreclosed on, were in the middle of trying to negotiate a modification with their lenders. The goal of the bill passed earlier this year by the state senate is to prevent such events from taking place. Based on this bill, lenders should not be foreclosed on until they are deemed ineligible for modifications. How this will be decided is unknown as of right now. This is such a simple step but it could make a huge difference in the lending process and the lives of the borrowers and future borrowers.

This bill could also affect the economy in a very positive way by preventing foreclosures since it will also produce revenue for the lenders. Therefore the lenders can allow more people to borrow money from them and take slightly bigger risks with their lending, which will result in an increase of buyers. The housing market tends to determine the state of our economy. With more and more people purchasing homes, the more profitable our economy is going to be.

The program under the bill would rely on the good faith of the lenders to let borrowers know about any modification programs that they qualify for. It would also require the lenders to do some research into each individual client that defaulted to see what specifically could have been done in each case. This amount of attention is usually not paid to each client in these situations and it should be. With this bill, if a lender decided that a borrower did not qualify for a modification, they would have to send a letter to the borrower explaining why they did not qualify.

There have been points raised that there is no need for this bill since there are already systems in place that alert the borrower that they are about to default. This bill would not prevent borrowers from defaulting all together but it would rather offer them a chance to achieve a modification that could prevent them from defaulting in the future.

This bill and system of providing loans and modifications would not only be beneficial to the borrower, it would also be beneficial to the lender. Although it would take more time and energy for the lender to work through the process, it would result in the borrower being able to continue to make payments, resulting in revenue for the lending company. This is one bill that is sure to help the foreclosure crisis in one way or another.
Foreclosure.com provides millions of real estate listings that include foreclosures, pre-foreclosures, for sale by owner homes, bankruptcy homes, and tons of other types of properties. We update our database daily with new listings on the market.

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