Of course, taking a combative stance with the lender in response to client frustrations is not helpful. In fact, it can push a client’s application to the bottom of the pile and result in greater delay. Just remember: Lenders have an interest in keeping homeowners in their houses and would prefer to reach an accommodation that allows cash flow to resume. After all, the lender does not want to be in the business of owning real estate. So the alternatives are pretty clear: Either get the cash flow back on track with minimal disruption and cost, or liquidate the asset and move on to more productive activities.
The challenge for all parties — debtors and lenders alike — is to come up with an agreement that makes financial sense. If the mortgagee and homeowner can fashion a solution that makes modification more attractive than the expensive process of foreclosure, that’s a deal worth doing. However, if the financial upside for the lender is limited due to poor payment history and weak income prospects, it will probably decide to move that loan off its books through foreclosure. In many recent cases, the debtor’s situation has changed so markedly that there is little chance the parties will be able to find common ground. Under these circumstances, it is important for debtor’s counsel to explain the lender’s perspective to his or her client, and why it is impossible in the debtor’s case to create a viable solution.
This area of practice is interesting right now because the situation for lenders is very fluid. It is difficult to say from month to month what terms will be acceptable and what will be rejected out of hand. But right now, homeowners have more leverage than ever to renegotiate their mortgages in light of changed circumstances.