Why would a modification be preferable to a lender than foreclosing on the subject property?
A lender will modify a loan because the cost of doing so is less than the cost of default, and foreclosure is a long, arduous and expensive process. If the lender goes through the entire foreclosure process, significant costs will accrue including posting the notice of foreclosure and advertising the foreclosure sale. If no sale occurs the lender will have to pay not only the advertising and notice fees but they will also be responsible for attorneys fees, trustee’s fees, and title insurance. The lender will then be forced to possess the property which will require them to pay for repairs, maintenance, hazard insurance, and property taxes. Furthermore, the lender will have to sell the property which will require them to pay not only real estate commissions but also closing costs.
