"As of August 2008, we have been continuously emphasizing to our customers, many lenders are getting overwhelmed by the number of requests for Short Sales and the processing of Notices of Defaults (NOD’s). Some lenders have reported that they are just now getting around to processing these notices on borrowers who are as much as two years delinquent on their loans.
It is worth mentioning that lenders are now attempting to work out many of the loans by offering loan modifications or approving the Short Sales of these properties before they resort to foreclosure." states Tom Diller of Guaranty Title Agency of Arizona.
Top Reasons Why Lenders Consider Mortgage Workout Plans
- The amounts recovered on either a Short Sale or loan modification will often be greater than a Foreclosure.
- The amount of money that is tied up during Foreclosure can be significant.
- The amount of other resources tied up during Foreclosure that can impede the lender from being able to make more loans, which is how a lender makes money.
- The percentage of non-performing loans in the lender’s portfolio can be a major issue as reserve requirements for federally-regulated or insured lenders would dramatically increase, further constricting the lender from being able to make loans.
- A recent federal court ruling has determined that, if a lender does not possess the actual original promissory note on the loan, they cannot Foreclose on the borrower.
- Foreclosure creates negative perceptions all around and many lenders are attempting to create more positive perceptions with the public.
In as much as these considerations make the other options of loan modifications, refinancing, or a Short Sale more attractive in most instances, sometimes Foreclosure is inevitable. Some borrowers just allowed themselves to get immersed in debt, are too far gone to be able to recover, and unfortunately for both the lender and the borrowers, Foreclosure may be the only option.
Top Reason Why Mortgage Lenders Declare A Mortgage In Default
- Failure to make the required payments on the loans.
- Failure to pay taxes or insurance on the property.
- Not maintaining the property in reasonable condition.
- Failing to make payments on prior liens.
- Selling or transferring the property in violation of a “Due on Sale” clause on any of the existing loans.
When a borrower is in default with little or no chance of curing the default, the lender may evaluate three alternatives to foreclose: Deed in Lieu vs. Foreclosure, Trust Deed Foreclosure (Non-Judicial/Trustee's Sale), and Judicial Foreclosure. To understand these in detail see Part 2 of this article series: Foreclosure On Your Home - Three Alternatives For A Lender.
Article written by Guaranty Title Agency of Arizona. Guaranty Title Agency has been serving the needs of the Arizona real estate community for over 30 years. During those years, we’ve developed a strong culture of valuing each client who asks us to serve them. We work for you. We don’t ever forget that. We’ll listen to your suggestions, and do everything we can to exceed your expectations. We’re your Partner for Success.
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