The process of seeking loans involves the borrower submitting documents to the lender. Here, the borrower is any individual or a company or a group requesting for a loan for any purpose. Depending upon the kind of the loan, the purpose has to be made clear to the lender. Sometimes, if there is an unsecured, personal loan, it is not necessary for the borrower to explain the purpose of lending to the lender.
However, in more secured and long-term loans, it becomes necessary for the borrower to mention the purpose of taking a loan, like for constructing a house, buying a home or even for a specific commercial activity. In secured loans, there is a requirement of mortgaging one’s existing property as a form of collateral to the lender. The lender, who arranges the loan, can be a bank or a financial institution. The lender provides the loan on the assurance that the borrower repays it back over a period of time along with the interest fixed to the principal amount.
To seek a loan, the borrower first submits an application along with the required documentation to the bank. Sometimes, the banks also get involved in selling loans and heavily markets loan provision through advertising to attract potential borrowers. Banks also sell loans that require minimum documentation.
This could be a kind of a less secured loan offered to people who are unable to provide all documentation to the banks for some personal reason. However, banks levy higher rate of interest on them against the minimum number of documents they submit against the loan they raise. The underwriter plays the critical role of sanctioning the loans. He goes through all the documents and conducts the enquiries about the borrower before giving the loan. If the borrower has fulfilled all the requirements the loan is sanctioned.
In secured types of loans, property of the borrower is mortgaged with the lending institution. There are cases where the borrower fails to pay the loan instalments from time to time. In such cases, the bank reserves the right to seize and sell the mortgage property of the borrower. This is clearly mentioned in the mortgage agreement itself prior to the sanctioning of the loan. However, selling of the mortgage property can make the two parties, the borrower as well as the lender, lose in the process.
So, a stop foreclosure is introduced where the foreclosure is preventing from taking place by holding back the property by the bank. Stop foreclosure is in interest of the borrower, since he will be able to save his property and it also helps the bank from any potential losses from this act. In the stop foreclosure, a loan modification is made available. A mediation of the third party is required for carrying out the loan modification process.
There are third party agencies that negotiate between the bank and the borrower on the loan modification terms and conditions so that there is a win-win situation. The bank gets back its loan amount and the borrower is able to save his property by repaying the amount.