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Mortgage Companies Respond to Foreclosure Crisis

[Jun 10, 2007.]

 

With so many property owners facing foreclosure, some lenders are responding with a wealth of kindness. That's because it's actually in a bank's best interest to help borrowers avoid foreclosure, since brokerage fees, utility bills, and other costs can drive the cost of a foreclosure up to $40,000. To avoid that expense, lenders are more eager than ever to provide borrowers with modified payment plans that can help them weather the tough times.

For instance, Neighborhood Assistance Corporation of America, a community advocacy group, reports that Citigroup and Bank of America have pledged $1 billion for loan refinance funds for at-risk borrowers. Likewise, a subsidiary of Bear Sterns has created a loan modification team which attempts to provide support to homeowners who are having difficulty making their monthly mortgage payments.

One possible remedy for borrowers in trouble is the forbearance agreement in which a lender suspends payments for a set period of time. As an alternative, a borrower may agree to bring his or her payments up to speed within a year and a half. Borrowers may also be asked to change their loans from adjustable to fixed or to extend the length of their loans in order to reduce their monthly payments.

In a number of cases, borrowers in trouble are well-meaning working people who suddenly lose part of their income because of illness or some other unforeseen circumstance. As a result, they are anxious to work out arrangements that will allow them to stay in their homes even though their take-home pay might have decreased significantly.

Such deals represent a win/win situation for lenders and borrowers alike. With foreclosures on the rise nationwide, these creative financing arrangements could also become more and more common. It's an experiment that, at least at the present time, seems to be working.

Julie Ann Amos
June 10th 2007

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