The foreclosure crisis continues to ravage our economy with more lost jobs, reduced home equity from plummeting home sales and delinquent mortgage payments. Unfortunately, many people have the ability to make their home loan payment on time but they jumped on the loan modification train with their neighbors and stopped paying their mortgage in hopes of reducing their monthly payments through renegotiations with the loss and mitigation department of their mortgage servicing company.

Clearly, there is nothing wrong with renegotiating your mortgage for a lower payment. Essentially that is what mortgage refinancing is all about. Loan modifications are different, because the terms are not fair for the bank because they take a loss. Banks who hold the mortgage note loose income from pre-payment penalties, loss of interest and in some cases loss of principal. The argument could be made that each time a bank agrees to a loan modification jobs are lost, because revenue is lost and expenses must be cut. However the reality is that we are in a serious financial crisis and if the mortgage lenders did not restructure their customers mortgage loans, then the banks would crash quickly as the liquidity problems would worsen.

Millions of homeowners are seeking mortgage refinancing or loan modifications in an effort to save their house or make their monthly payments more affordable. Unfortunately for mortgage brokers and lenders, mortgage refinance closings have slowed to very uncomfortable rate.

According to CFB Branch loan officer, Jeff Moran, most refinance loans are taking seven to eight weeks. Imagine owning a mortgage company that had to fund four staff payrolls to fund a loan. Imagine paying underwriters, processors and loan officers to work on home loans that likely would not actually close. The mortgage business has seen brighter days. Credit restrictions have tightened lending guidelines to the level that very few borrowers qualify for a mortgage. Moran continued, “FHA mortgage loans have been the only lending product we can count on and fortunately the government loans will consider the borrower’s compensating factors for approvals.”

On the other hand loan modification companies have never has more business. With millions of have homeowners on the brink of foreclosure, people are lining up to help people modify their loan terms. With the recent $850 billion dollars from the Financial Bail-Out package, you can bet that loan modifications will only increase in 2009. Once we get past the foreclosure crisis most financial critics agree that home refinancing will resume back on its normal course.

Mortgage lenders have started to negotiate with borrowers who are not delinquent with their mortgage. In most cases, you don’t have to be 60 days late to get a loan modification any more. The Chinese define crisis as danger and opportunity. Hopefully Americans will utilize this foreclosure crisis and seize the opportunity to move forward as a stronger more pragmatic country.

By: Bryan Dornan