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Dollars and Sense – How to Negotiate a Pre-foreclosure Workout Agreement

November 14, 2007

Prior to the recent downturn in the real estate market and turmoil in the sub-prime lending industry, a pre-foreclosure workout was extremely rare. Historically, because the housing market usually increased a homeowners’ equity, banks were generally better off foreclosing to obtain most, if not all, of the money it was owed.

As the housing market began to decline, so did the equity in many debtors’ homes. Simultaneously, as the equity decline excelled, so did the mortgage lenders’ confidence that they were going to be adequately paid from a foreclosure sale. Accordingly, mortgage lenders are now in a position in which they must look at alternative options to avoid the substantial financial loss caused by foreclosure. In turn, homeowners can now negotiate pre-foreclosure workouts with more confidence.

Basic Observations Regarding Pre-Foreclosure Work-Out Negotiations

As lenders vary in their willingness to negotiate pre-foreclosure work-outs, there are no guarantees that a work-out will be successful. Surprisingly, the first step in a work-out is making sure the homeowner knows who their lender is. In today’s market, many lenders sell their mortgage loans. In addition, …

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by: Justin H. Dion, Esq.

Business to Business
October 29, 2007

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