Large Banks Shifting Focus Away From Foreclosures and Toward Alternatives

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After dealing with countless foreclosures banks are starting to smarten up and engage in easier, cheaper and better alternatives to foreclosure. It turns out that despite the millions of customers that have been forced into foreclosure during the past five years, the aftermath of our nation’s biggest mortgage crisis has not affected all people equally and will not do so in the days yet to come.

Those that have qualified for and chosen to pursue loan modifications or short sales have far better long-term results than people that end up with a foreclosed property. But what exactly is the difference between a short sale or loan modification as opposed to a foreclosure? Well, for starters, for banks doing a foreclosure ends up costing a lot of money – which in turn ends up getting passed on to the consumer in one way or the other. Add to that the very negative impact such an action has on the homeowners and you have people with considerably damaged credit.

But as banks have recently begun to announce, they are starting to channel more energy toward providing homeowners with loan modifications that allow monthly payments to be lowered and become manageable. Being able to stay in their home is the single most attractive aspect of a loan modification and banks are leaning toward them because loan modifications cost them so much less to process.

Short sales are the other alternative to foreclosures that are gaining in popularity and frequency. Aside from being able to walk away from an underwater mortgage with considerably less damage to their credit, one of the best outcomes for homeowners that have done a short sale is that they can seek to purchase another home just two or three years later, depending on the market. Add to that the up to $30,000 that banks are willing to pay in relocation assistance and short sales become an attractive option for many borrowers.

Though there is not too much time left, people that do short sales through the end of this year can apply for the Mortgage Forgiveness Debt Relief Act, designed to allow exemption from being taxed on the discharged debt.
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As you find yourself at the crossroads of deciding how to proceed – particularly if you are facing foreclosure – contact our office today so we can evaluate your situation and determine which options work best for you.