Everyone who has every tried to negotiate a loan modification with their lender has been frustrated with the process. We hear the following comments from frustrated homeowners all the time. "Why won't they work with me? I want to keep my home and pay them a reasonable payment. My home has dropped so much in value that they are better off taking my payments. I don't understand."

Here's why: the banks don't have any skin in the game. You see, in most cases the bank any losses are not born by the bank. They are usually born by Uncle Sam or some other entity. Here is a shocking fact: Most banks don't own the loans they are handling. In fact, one of the "Big Four U.S. Banks" only owns around 20 percent of the loans they hold. They are handling the other 80 percent as a "servicer." The actual owner might be Fannie Mae, Freddie Mac, a Wall Street Trust, or a pension fund. A servicer acts as a trustee for the actual investor. They collect the payments and handle the "Lender" Functions. They then forward the money to the owner of the loan each month. The lenders get paid the same amount of money whether they do a good job or not. Are they motivated to do a good job with your loan modification application? Many people experience long waits trying to get their loan mods accepted. I think this is the reason why.

Here is the closest comparison to how the banks are handling things. Let's say you managed an apartment community. You only returned calls from prospective tenants one day during the week. The other days you went fishing. As a result, half of the apartments were empty. Would you really be representing the owner of this property properly? Would the owner miss out on tenants who could rent an apartment? Would that apartment manager be unhappy? You bet they would be. The same problem is happening with loan modifications and short sales. The lenders don't have enough staff in place to handle loan mod and short sale applications. As a result, they are foreclosing on properties when they really should be reducing the payment. But, the average American doesn't realize that this is happening. It's time we tell them about it

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