Banks Profiting from Loan Modifications

first_american_is_greedyThere are a multitude of reasons why we are in this foreclosure pandemic. One reason is due to the banks having predatory lending practices. Banks were being dishonest in many ways, but the most common scenario was the lender granting a loan for house to a borrower who would not normally be approved for a loan. In addition to the borrower not being able to afford their house, the house they were purchasing was overvalued.  As the country has fallen into a recession/depression these homeowners are unable to sell their homes for the original purchase price and/or they are unable to meet the monthly mortgage fees. As a result borrowers have approached the banks to try and negotiate a loan modification. A loan modification does generally not reduce your principal. The loan modification reduces your monthly mortgage payment and annual interest rate. The bank reduces your monthly payment and interest rate by extending the life of the loan (i.e. a 30 year mortgage rate is extended to a 40 year).

Due to the greed of the banks and the public our county has been placed in a financial bind.  Obtaining a loan modification, foreclosure, or filing bankruptcy are the only options for many Americans. However, it is unfortunate that during this crisis banks are still trying to profit from the situation instead of trying to rectify their mistakes and aiding their clients.

Loan Modifications would help the homeowners and the banks would still profit for several reasons.

1. The borrower continues to pay interest on an inflated principle for a longer period of time (i.e. changing the life of the loan from 30 to 40 years). When the borrower purchased their home it was most likely 25% to 45% overvalued.

2. By allowing you to stay in your home they do not have another foreclosure that will sell for a quarter of its value.

3. Obtaining incentives from the government to help a distressed homeowner obtain a loan modification.

Lenders have created a win/win situation for themselves. Therefore, if you are going to obtain a loan modification you should try to obtain the best deal possible. The banks are dealing with this on a daily business and are going to try and profit as much as they can from the situation. As such you should seek help from a lawyer (professional negotiator). A lawyer who “specializes” in loan modifications deals with this situation on a day-to-day basis. The law professional should understand all the current loan modification regulations and should know how to negotiate your interest rate, monthly payments, and any fees associated with the restructuring.

The banks who are supposed to be helping the mortgagee are/were wealthy corporations that have unlimited resources and a team of lawyers that write each document. Therefore, whenever a person asks you to sign a document (loan modification application) you have to be careful and skeptical. Moreover, have a full understanding of what you are signing. This is why we believe it is the utmost importance for all persons desiring a loan modification to consult an attorney during each step of the process. The initial outlay of money a person may have to spend for a lawyer may seem expensive at first (especially during these hard times), however, the money you may potentially save in the long run or the restful sleep you will get from knowing you have secured a roof over your family’s head in the appropriate legal manner is priceless in comparison.

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