Patty Manzi's Tri-Valley Real Estate Blog

I’ve had many discussions with people lately about why banks take so long to do a loan modification or a short sale on a property.  What I learned today from a major lending institution answers that very question. 

With this institutions loans there are three parties.  There is the Customer (borrower), the bank, and the actual investor who “owns” the loan.  80% of these investors are Freddie Mac, Fannie Mae, FHA and over $2,000 private investors. 

When a borrower contacts the bank for a loan modification, the bank may not own the loan so they have to go back to the original investor.  The investor doesnt have the same urgency to modify the loan as the borrower.  They are trying to protect their assets in an attempt to lose the least amount of money and want to know that the borrower has exhausted every effort to pay the loan. 

So while it may seem the bank isnt trying to help, or is taking a very long time, it can actually be the investor that is holding up the decision making process.