Why Do Lenders Prefer A Loan Modification Over A Foreclosure?

The thought of foreclosure is enough to send any homeowner into a panic. But contrary to belief, starting the foreclosure process does mean your at a dead end. From the day you receive your Notice of Default, you always have options, and the earlier you act, the easier it is to get back on track.

The two most common ways to stop foreclosure are a short sale and a loan modification. Both have their own pros and cons, and its important to choose the right path based on your situation depending on if you plan to keep or sell your home. This guide shows you both options and how they can help.


Option 1: Loan modification

The main advantage of loan modification is that you get to keep your home and continue your mortgage on more comfortable terms. It works by changing your mortgage terms to lower your monthly payments, allowing you to afford making your monthly payments again. This option is best for homeowners who have good payment habits but fell behind because of unavoidable hardship.

How it works

In a loan modification, you work with a lawyer who will basically guide you through the application. Your loan modification attorney will start by evaluating your case and deciding whether or not a mortgage modification will work for you. Its important to talk to a good loan modification attorney who can completely understand your situation.

Once you are qualified, they ll ask for a few financial documents complete your negotiation package. These usually include proof of income (pay stubs, W2 forms, etc), bank statements, and a hardship letter explaining your request and how you fell behind. They .ll go over your documents to see if there are any legal violations (RESPA and TILA) that can be used as leverage.


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