The New York Times featured a Connecticut program that requires lenders and borrowers to sit down and mediate prior to foreclosure. Interestingly, representatives for both borrowers and lenders emphasized that the specialized mediation process is beneficial because lenders have a hard time talking to borrowers and borrowers say that lenders are impossible to contact.
Look for more states to require this type of program. Even if modification of the loan terms isn't possible, resolution may still be possible--lenders and borrowers can reach an agreement on "short sales" that will save the lender future foreclosure costs and save the borrower the hassle and expense of fighting the lender.
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