Lenders Beginning to Make Deals

With so many houses in the United States facing foreclosure, mortgage lenders are starting to offer favorable deals for distressed borrowers they would not have agreed to just six months ago.  This is not altruism, but a case of lenders trying to avoid being stuck owning hundreds of thousands, or even millions, of homes, according to economists, academics and other experts.

According to research by the non-profit organization the Center for Responsible Lending, there are 7.2 million outstanding subprime mortgages in the United States.  Subprime mortgages are those offered to people with weak credit histories at higher interest rates than those offered to prime borrowers — those with good credit.

The center estimates that more than 14 percent of all subprime mortgages are already in default and that 2.2 million families or individuals with a subprime mortgage made between 1998 and 2006 will lose their homes through foreclosure.  The center further estimates homeowners will lose $164 billion in equity as a result of the crisis.

In the third quarter of 2007, mortgage companies had modified the terms on 54,000 loans and had worked out new repayment plans for another 183,000, according to the Mortgage Bankers Association.

The association did not give comparative figures for the third quarter of 2006.  An official said the loan modification programs had likely expanded further during the fourth quarter of 2007.

For lenders, there are financial incentives to keep people in their homes, even if it means cutting interest rates and making less money.

When a home ends up in foreclosure, the lender becomes the owner of a property that quickly loses value, with no revenue coming in.  They are also liable to pay property taxes.

So before you lose your home to foreclosure, talk to your lender.  They may just be willing to work with you today in ways they wouldn’t even think about a year ago.