Home » Real Estate

Lenders Are Working To Keep People Out Of Foreclosure

Aug 17, 2007
With large numbers of homeowners falling behind on mortgage payments, lenders across the country are seeking creative ways to keep delinquent customers out of foreclosure.

Foreclosing doesn't benefit anyone, not the borrower, not the lender, not the bond holder. On the other hand, recasting certain terms of the mortgage, lowering monthly payments for a period, deferring unpaid principal and interest, or changing the rate may allow delinquent borrowers to get past whatever financial issues caused them to fall behind.

Loan modification represents just one approach that mortgage servicers can use to stem the tide of foreclosures. Other techniques include:

Repayment plans where unpaid balances are reduced over time through small, regular add-ons to borrower's monthly payments.

Forbearance agreements whereby principal and interest payments are reduced or even suspended for a period of time, enabling the borrowers to get their finances under control.

Then the regular payments resume, along with gradual reimbursements of balances in arrears. Remedies such as these are more commonly available than many credit-strapped homeowners may be aware.

In fact, major mortgage institutions such as Freddie Mac, Fannie Mae and the Federal Housing Administration require loan servicing companies to offer one or more plans to delinquent customers who have a reasonable chance of avoiding foreclosure.

The FHA even allows money to be advanced interest-free on behalf of delinquent homeowners to bring their loans current, up to a maximum of 12 months worth of principal, interest, taxes and insurance.

The mortgage company files a partial claim with the FHA to obtain the funds needed to pay off all arrears. The borrowers are expected to repay everything they owe at the end of the loan term or from the proceeds when they sell their home.

Variations on that approach may be the next big development on the horizon in foreclosure-prevention. Many buyers during the past several years made no down payments and bought costlier properties than they could afford.

Some now face huge monthly payment boosts and negative equity situations. They can't afford their mortgages, nor can they afford to refinance because they owe more on the loan than their house is worth.

The initial balances on the new mortgages would be what the borrowers could afford to pay using their current incomes at market rates.

Any shortfall between the amount of the new loan and the balances owed on the unaffordable previous loan would be recast into a soft second lien, a second mortgage or deed of trust carrying a minimal or no interest rate and no monthly payments.

The second lien would be due and payable in a lump sum at any subsequent sale of the property, or whenever the borrowers could afford to retire the debt.

The concept wouldn't keep everybody out of foreclosure, nor would it be extended to people who inflated their incomes or recklessly bought properties they could never afford.

But it could be one answer for payment-shocked subprime borrowers who simply got in over their heads and mistimed the end of the boom.
About the Author
Richard Reichmann is internationally known as a millionaire maker. He's a leading consultant in real estate and internet marketing strategies that are profit proven.

Subscribe to our FREE newsletter Value $147.00
http://www.InstantRealEstateWealth.com
Rating:
Please Rate:
(Average: Not rated)
Views: 175
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Accounting
    • Credit
    • Currency Trading
    • Debt Consolidation
    • Insurance
    • Investing
    • Leasing
    • Loans
    • Mortgage
    • Mutual Funds
    • Personal Finance
    • Stock Market
    • Structured Settlements
    • Taxes
    • Wealth Building
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources