|
Loan Modifications are not going to stop foreclosures. THE big talk at Default Conferences and in the media is to keep people in their homes by changing the terms of their loans-lowering interest rates and sometimes even reducing loan amounts. There is a Company (Titanium Solutions),that is hired by servicers to have agents go out to homeowners in default and give them the great news that they qualify for a loan modification. Here is the problem-half the time the homeowner has rented it out and stopped payments. They don't even live there anymore. Another 25% of the time they are so far upside down, they don't care about modifying the loan, they have walked away mentally and don't really have an open mind to modifying and keeping the property. In my experience, only 25% of the time do they work. For people that are not in default, they work more often and that is great.
Keeping people in their homes is great. But to suggest that loan modifications will stem the tide of foreclosures, sadly is not going to happen. Rising property values will stem the tide of foreclosures. Foreclosures will continue despite an abvious attempt by the lenders to loose guidelines recently on short sales and a serious effort to work on loan modifications. The problem with loan modification is that often you cannot change the term because of the way the security was packaged and sold on wall street. It has time limit that cannot be exceeded by simply extending the life of the loan in a loan modification. Worse, is that for most, even with a lower interest rate the client still cannot afford the new payment and has little incentive to try when the value of his home is tens of thousands of dollars below it's value. Hopefully short sales will become easier so that these properties aren't abandoned and left to drive values down further. |
