Banks and financial institutions sell mortgage loans in the open market. Mortgage loans are available for individuals as well as for companies. Mortgage loan is considered to be highly secured form of loan and it is given for a longer period of time. Interest rates are also based upon several factors other than the total amount of loan and the time taken for repayment.
Sometimes, banks do not directly involve in marketing the loans. They hire the services of a marketing agency for selling the loans in the open market. This helps the banks in becoming more rigid in the process of sanctioning the loan. The marketing agency hired by the bank separately advertises the loan availability to individuals or groups or companies. The marketing agency works under the authorization of the bank and hence, it is responsible for its actions to the lending institution.
The marketing agency reaches out to the clients and explains different loaning and repayment options available for the individual or a group of customers. The agency also has the responsibility to get the application and the necessary documents from the loan applicants. It should educate the applicants about the application and the process involved through the bank and the duration it takes for sanctioning the loan. The agency has limited role in the sanctioning process and also in the fixing of the rate of interest. This is mostly done by the bank through an underwriter.
The underwriter has the final responsibility of reviewing the loan application and sanctioning the loans. If the underwriter finds that the loan applicant has defaulted earlier with another lending institution or his financial credibility is not sound, the application can be rejected. Also, if the underwriter feels that he is not satisfied with the submitted documents, he may request for more documents thus increasing the amount of time for sanctioning the loan.
Although the marketing advertisements assure that the loan sanctioning period is quite minimal, yet the actual time to process the loan is quite lengthy especially in difficult cases where the financial credibility of the loan applicant is not sound. In addition to the loan applicant’s income details and other certificates, the sales deed of the property that has to be mortgaged. Under the mortgage loan, the bank can seize the mortgaged property of the borrower if he fails to pay back the loan.
This is referred to foreclosure, where the loan is closed and the property is sold off by the bank to recover the full amount of the loan. To avoid this, loan modification can be introduced by the borrower or the bank through the mediation of a third party. The stop foreclosure is part of the loan modification process. Loan modification not only ensures stop foreclosure, but also revises the original terms and conditions of the loan agreement.
Under the stop foreclosure, bank agrees not to seize the property and the borrower promises to continue make repayments of the loan. There could be some fees attached or a higher rate of interest involved so that both the parties are able to manage the situation adequately.
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