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Report finds subprime loan servicers practicing forbearance

Long-term benefits of modifying loan terms a matter of debate

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A new report by Standard & Poor's Ratings Services details steps subprime loan servicers are taking to help borrowers avoid foreclosure, but doesn't attempt to gauge how successful those efforts will be. With estimates of more than $500 billion in adjustable-rate mortgages expected to reset to higher interest rates this year, the willingness of lenders to work with debtors to avoid foreclosure could mean the difference between a soft and hard landing for some U.S. housing markets in 2007. (See Inman News' four-part series on the Subprime Tsunami.) Loan servicers, who not only collect payments from borrowers but also handle defaults, foreclosures and the sale of real estate-owned properties, can "minimize losses to investors while providing assistance to thousands of homeowners in dire financial trouble," the Standard & Poor's report said. There's plenty of incentive for lenders, too, since the foreclosure process can cost $40,000 per home or more. But subprime loan...