Why do lenders prefer refinancing than loan modification?
Aside from the money issue, a new loan can greatly impact a lender risk. If you buy a home with new loan or retain your property through loan modification, your financing is considered a purchase money mortgage. If in the future you go bankrupt or the property is foreclosed, the lender can reacquire the house but cannot sue you for any shortfall. On the other hand, if you refinance, you no longer have a purchase money mortgage and your lender can seek a deficiency judgment in case of foreclosure.