Steps For Lenders To Consider In Connection With Mortgage Modification Programs

Banks are increasingly implementing mortgage modification programs in order both to settle class-action lawsuits and as a way to improve returns on their investments. With housing prices continuing to decline, some lenders have found it increasingly cost-effective to allow borrowers to modify mortgages, rather than foreclosing and having to maintain properties or dispose of them at a loss in a weak housing market. These programs have typically been available only for borrowers who are significantly (usually 60 days or more) behind in payments on first mortgages on their primary residences.

Although the specific features of these programs vary, certain elements are likely to become standard, such as waiving prepayment and restructuring fees associated with mortgage modifications and providing a stay from foreclosure to any potentially eligible borrowers while the programs are implemented. Some lenders have capped borrowers' monthly payments (including