Proactive approach solves problem loans

Half of the home owners who wind up in foreclosure fail to talk to their lender or seek help early on, perhaps missing an opportunity to rework their loans and keep their home.

With that in mind, recent reports indicate that some lenders are writing letters, making calls, knocking on doors when they see that a borrower is behind on loan payments.

In many instances, it's wiser and cheaper for a lender to modify a loan rather than foreclose.

That kind of proactive approach to problem solving is one reason why many analysts believe the housing industry will remain on solid ground.

The hope is that current efforts to workout issues - especially regarding loans made to uncredit worthy borrowers or loans with terms that from the beginning were impossible to meet - will avoid, rather than merely postpone, foreclosure.

If a property has lost value and the borrower is in dire financial straights - recently lost a job or unable to work - the greater the likelihood a lender will be inclined to rework the terms of the loan. One lender said the greater the loss in value of a property, the more likely they were to be flexible.

Once a property is in foreclosure and stands empty it may continue to depreciate. Plus, lenders will have to pay to maintain it and continue to absorb other costs like property taxes.

Some lenders have created special departments that focus on outreach to borrowers with problem loans. They will spend as much time as needed to find a solution and keep a borrower in their home.