For Lenders Mortgage Modification Make Financial Sense

For lenders, mortgage modification make financial sense because the average home foreclosure results in the loss of 55 percent of the balance for the owner of the mortgage, according to a 2008 study by Alan White, an assistant professor at the Valparaiso University School of Law. But homeowners often have mixed results. Nearly half of the mortgage modifications result in higher mortgage payments, and some end up back in default. Although some housing experts say enough isn't being done to prevent the drastic action of foreclosing on houses, more lenders and servicers are endorsing the formerly little-used practice of modifying terms of loans, sometimes in aggressive fashion. Lenders lose money on foreclosures because of court fees and other associated costs, charges to fix up the house for resale and foregone mortgage payments. In the past, the mortgage holder often could bank on profiting from appreciation in the foreclosed home's value when resold. But during the recession of the past year, home values have sunk in most markets. Meade said that in a foreclosure, the average loss for the mortgage holder has gone up significantly compared to three, four years ago. As a result, what makes sense is keeping a loan performing using some sort of loan mortgage modification.