Bay Area Real Estate Finance

On Tuesday, Governor Schwarzenegger signed a hopeful law that would help handle the current California Housing crisis. The law states that lenders must properly contact borrowers by phone or person discussing possible loan modifications before proceeding with any foreclosure processes.

What does this mean for you?
This law will help make loan modifications and adjustments more readily available to those in trouble. To be honest, there are a good percentage of homeowners who have never even heard of loan modifications. Hopefully, this will help lenders make such modifications more popular and allow their borrowers from feeling trapped and without help.

While this is no quick-fix , this is definitely a step in the right direction. Personally, there should be no reason a lender isn’t willing to step in on its own to help modify a troubled homeowners loan. For those that did not know, a foreclosure costs a lender much more than it would to adjust their loan instead.

Foreclosures Costs Banks More
Reason being, they must file the necessary proceedings and then list the house for auction. Now if this process is not successful (which is guaranteed to take months by the way) , the bank is now stuck with another property and must file it in their loss of REO’s. Keep in mind, that during all of this time the lender has essentially lost out on any mortgage payments on the property.

A loan modification is not simple and still takes time, but in the meantime, the bank still has a chance to collect its payments and avoid another property being stuck in their bulk portfolio.

Other Key Benefits
in addition, the popularity of loan modifications should also help other lenders to follow suit during this mitigation process. Ask anyone who has been through a modification, and they will tell you it’s no easy feat. At best, it may feel like another refinance - on average, it could takes months before you reach an agreement. At worst, it could take months and still end up in the foreclosure process.

Either way, it is still a very viable option for troubled homeowners to explore. Keep in mind however, there are now companies offering to do loan modifications themselves. As a mortgage consultant, we advise clients to be aware of any fees to be paid. Reason being, a loan modification can be done by any homeowner themselves. Granted there are certain individuals who are experts at loan mods or may have special connections, there are still those few that will be trying to make the quick buck.

[Full Story @ Sacramento Bee]