In a front-page article on Thursday, July 30th, the San Diego Union Tribune reported that often lenders do not grant loan modifications to strapped borrowers because they make more money collecting fees on delinquent loans.
If a home goes into foreclosure, lending companies collect fees out of the foreclosure proceeds. The longer a borrower is delinquent, the greater the time for the lender to collect fees. The Federal Reserve Bank of Boston recently said that mortgage companies are reimbursed for expenses while loans are delinquent, and they may have an incentive to foreclose rather than modify a loan.
In the meantime, many borrowers who are delinquent on their loan payments continue to negotiate with the bank holding their loan to try to negotiate a loan modification. Often they face a lengthy process as they wait up to 60 days or more to be assigned a negotiator, and even then, they don’t know if their loan modification will be approved. It’s a tricky situation at best.