Current Mortgage Modifications Aren’t Working.
Recently, the government relaxed the standards for receiving a mortgage modification to include homeowners whose loans exceeded the value of their homes by up to 25%. As home values continue to decline, more people can now qualify. But is the system doing anyone any real good?
First of all, it’s not easy to get a modification because of the stringent requirements placed on the process by the lenders. But even after you navigate through the process the modification you might receive may not do you any real good. Take a look at the excellent article on the Mortgage Law Network by my friend, David Liebowitz.
And what we are seeing now is that even homeowners who received a modification are defaulting months later. The Motley Fool says the currently-available home mortgage loan modification programs are ineffective, citing “pathetic” statistics from federal loan regulators that half of the modified loans were in default again three months later. Typical modifications now consist of lowering interest or tacking missed payments onto the back end of the loan. A scant 1.8% of modifications involved principal reductions. Thus, as home values decline there is much less incentive to make house payments when you aren’t building equity in the property.
Without judicial oversight, the current modification programs just seem to be delaying the inevitable.
Recently, the government relaxed the standards for receiving a mortgage modification to include homeowners whose loans exceeded the value of their homes by up to 25%. As home values continue to decline, more people can now qualify. But is the system doing anyone any real good?
First of all, it’s not easy to get a modification because of the stringent requirements placed on the process by the lenders. But even after you navigate through the process the modification you might receive may not do you any real good. Take a look at the excellent article on the Mortgage Law Network by my friend, David Leibowitz.
And what we are seeing now is that even homeowners who received a modification are defaulting months later. The Motley Fool says the currently-available home mortgage loan modification programs are ineffective, citing “pathetic” statistics from federal loan regulators that half of the modified loans were in default again three months later. Typical modifications now consist of lowering interest or tacking missed payments onto the back end of the loan. A scant 1.8% of modifications involved principal reductions. Thus, as home values decline there is much less incentive to make house payments when you aren’t building equity in the property.
Without judicial oversight, the current modification programs just seem to be delaying the inevitable.
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