How Mortgage Lenders Can Help Borrowers Avoid Foreclosures
If the borrower is struggling to make payments towards their home loans, they can consider loss mitigation to avoid foreclosure. Lenders can benefit more from supporting their borrowers in mitigating the loan by reaching a mutual agreement that can resolve the issue of past-due mortgage payments. As the name suggests, loss mitigation is geared towards alleviating the burden of loss faced by lenders when borrowers fall behind on their payments. Choosing this method makes more profitable sense for the lenders as foreclosure can be a complex and expensive process.
Here are some of the options that loan servicer should consider over foreclosure:
This is one of the most common forms of loss mitigation where the lender alters the term of mortgage to make the monthly payments more affordable for the borrower. By doing so, the servicer can prevent the long and harrowing process of foreclosing the property and bring the loan back on track. In this process, the lenders will reduce the monthly payments significantly, making the loan more affordable for the homeowner by reducing interest rate or extending the length of the mortgage and ensuring complete repayment of the loan.
Lenders can help borrowers get their finances back on track by offering them repayment plans. According to this plan, the lender spreads the delinquent amount across a certain period of months, adding a small fraction of it to the regular installments. At the end of this period, the borrower will be current on their payments and the lender can earn all of its money back without taking the default to the next level.
According to mortgage forbearance agreement, the lender agrees to not take a legal action against the delinquent borrower by foreclosing their property. However, the borrower has to agree to a mortgage plan that will bring them up-to-date with their payments in certain amount of time. By exercising this option, the lenders can prevent themselves the hassle of going through a lengthy and expensive mortgage process, giving them another chance to recoup their past-due payments and borrowers an opportunity to save their homes.
Short Mortgage Payoff
When the property value has dropped significantly, choosing to foreclose will not be as profitable as a lender would like it to be. In this case, they can offer to set the property price at which they will sell the house in the market and accept that payment as full payment towards the debt, even though this amount may be less than the total value. In some cases, the deficient amount is paid by the borrower via acceptable payment plans or written off by the lender completely.
Deed-in-Lieu of Foreclosure
Lenders can benefit by accepting a deed in lieu of foreclosure by avoiding the delay and expense, and even potential uncertainty, involved in foreclosure process. At the same time, the lender becomes the homeowner that allows them to take control and quick actions in maximizing the complete economic potential of the property. The terms and conditions of the deed-in-lieu of foreclosure offered by the borrower and accepted by the lender are highly negotiable.
Loan defaults can be a harrowing process for lenders that require complex functions such as document collection, market analysis etc. However, you can delegate the non-core administrative tasks associated with loss mitigation process to a reliable partner and focus on scaling your business.
Expert Mortgage Assistance is a premium provider of loss mitigation services that helps you in optimizing your loan defaults and mitigating your loss significantly. Our advanced solutions are designed to mitigate damages to all stakeholders, and not just the lenders. Contact our specialists today and get more information on how we can help your company reduce risks and losses.