It takes the owner of a loan to modify that loan…the other shoe to fall is FDIC insurance.
A foreclosure often nets a bank less than half of the loan’s unpaid balance, so why do they not negotiate instead of letting the home go into foreclosure? Easy answer: money. As banks buy banks and take over loan servicing, they are insured for loss through the Federal Deposit Insurance Corporation.
In 1933 the Glass-Steagall Act created a temporary governmental corporation called the Federal Deposit Insurance Corporation (FDIC). The FDIC guarantees the safety of deposits up to $250,000 per depositor per insured bank. Thus bank customers are assured a certain amount backed by the federal government. However, that insurance may interfere with your mortgage negotiations.
The bank may let your house go on the courthouse steps for far less than what you could have gotten in a short sale. That is not necessarily the bank being lazy. That is the bank making more money through an FDIC claim (with the added benefit of not having to go through the hassle of negotiation with the homeowner).
Because of FDIC insurance, the lender, or servicer, is not highly motivated to modify the loan.
That being said, I have seen Joy Bryant at St. Johns Housing Partnership (SJHP) make some amazing deals, and make them stick. To learn more about mortgage modifications and what SJHP can do for you, visit http://sjhp.org.