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Some Lenders Refusing to Renegotiate on Potential Foreclosures
A new study says loan services rarely renegotiate terms with Illinois homeowners facing foreclosure.

The group Housing Action Illinois examined 38 loan servicers in Illinois and found that 27 of them were willing to renegotiate a loan with a homeowner facing foreclosure less than 25 percent of the time. Bob Palmer, policy director of Housing Action Illinois, speculates as to why mortgage servicers aren't willing to renegotiate loans to prevent foreclosure. "Part of the problem is that if servicers don't have any long-term interest in the property, they get paid the same regardless of whether they foreclose or keep the mortgage current," Palmer said.

The study shows refinancing into a new affordable loan was only offered 3 percent of the time. Palmer says a workout may be complex because the loan may be divided, packaged, and sold to a group of lenders, but the money saved by the lenders is huge compared to the value lost when a property goes into foreclosure.

Palmer says that if a borrower sustains a hardship such as job loss, it is hard for them to keep their home with no income; but if the problem is the terms of the loan itself, renegotiating the terms can be a benefit of the lender, the servicer and the homeowner.
01 04 09 by Newsroom
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