Parties to a Foreclosure Workout

The parties to the workout negotiations are you, or your attorney, and a person or team within the lender’s organization.

If a single individual is handling the workout for the lender you may or may not have an advantage, depending on the personality and temperament of that person. Years ago, the loan officer who originated the mortgage was chosen to work out the loan. This is still the case with small banks.

Larger banks handed the job off to department or committees. The loan officer is not involved because a loan gone badly is a mark against the loan officer. Lending companies’ feel the original loan officers lacks objectivity because he or she might want to go harder on the borrower who spoiled his lending record.

Many lenders use independent companies to deal with defaulting borrowers because there are so many non-performing loans. When you speak with your lender about your loan you might talk with a third-party workout specialist instead. They are sometimes are referred to as "loss-mit" (loss-mitigation) specialists.

Larger banks break aspects of the process into teams for better management and efficiency. They can variously be described as: Mitigation Group; Special Loans Department; Assets Management; Workout Department; and the Real Estate Owned (REO) Department. The lenders also employ lawyers and accountants to work on defaulting loans.

Committees and teams that make workout decisions often have difficulty deciding. A decision usually takes longer than if working with an in-bank loan workout specialist.

Workout deals that make sense are lost because time runs out before the bank committee can return a decision.

Lenders are reluctant to acknowledge problems with their loans. Too many bad loans cause unwanted attention from regulators if the lender is part of a regulated industry, such as a federal bank.