Question

In the first quarter of 2008, the number of repayment plans and modifications alone equaled 482,996 as compared with 198,172 foreclosure sales in the same timeframe. These are the figures that workouts are clearly outpacing foreclosures and that the loan servicing industry is showing its willingness and commitment to help borrowers avoid foreclosure. Can you agree that these numbers are indeed encouraging and that they do speak well of the lenders? Or does your take lean in another direction? Explain.

Answer 1

THe provided detials are belongs to the lender for the two equal quarter for th comparison purpose, now if wee see the provided data then the we can get to know that the repayment plan and modifications alone numbered as 482,996 as compared to the same timeframed quarter which stood as 198,172, now the reason for such a huge difference in the repayment plan will definitely give robust boost to the lender as this will help in generating more income in terms of monthly instalments as compare to those have been used to receive in foreclosures. in actual foreclosures are not much benefial from the lenders point of view, but it is benefiting to customer as he avoids the interest charges on the future instalments but lender losses the future income of interest on monthly instalments. So the robust increased repayment plan will help lender in increasing more revenue as compared to the previous quarter and help in sustaining growth of the firm.

Now, suppose if we think for the reverse situation where we can have a lean view with the provided data, so in that scenario the lender will have the increased cost of maintaining all the necessary records keeping, will have the increased human resource costing as the customer base increase will lead to the increase in service and the overall costing so if we compare the foreclosure income then the lender would have get the all future loan protfolio income in his present, so the risk of market uncertainty will not be matter of concern for the lender which was there in managing the loan repayment plans.

So the lean view avoids the market risk in long run and creates profit to lender in present , where as the positive repayment plan will give an opportunities for future.