Programs to help mortgage holders are failing
Filed under: Economy
It would seem to make sense that a homeowner having trouble making mortgage payments would welcome the chance to see monthly payment costs reduced.
In an attempt to cut down home loan defaults and stabilize housing prices, mortgage loan companies have begun modifying monthly payment terms. The Administration has also introduced a plan to help finance an acceleration of these projects.
Why don't the programs work? Fitch guesses that because home prices are still falling, homeowners see their houses as economic sink holes whether the monthly payments change or not. The modification programs do not change the principal owed on homes, which are often valued at much less than their mortgages. The prices of those houses may not recover to 2005/2006 levels for years, if they ever recover that much at all.
The more likely reason that the programs do not work is the rise in unemployment and the increase in the business practice of turning full-time workers into part-time workers, sharply cutting many people's incomes. Even with monthly home payments cut, mortgage holders can't pay with money that they don't have.
If the mortgage modification programs are going to work, two things have to happen, both of them unlikely. Unemployment would have to bottom soon and mortgage principals would have to be lowered as part of the loan modification process. Neither of those is likely to change soon.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
5-26-2009 @ 10:07AM
john said...
my loan modification answer from asc morgate was to save me 13 dollars a month,after adding 3,500 dollars to end of my term ,this is why its not working.
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5-26-2009 @ 10:44PM
Tim said...
Attempting to work directly with your lender can oftern be a daunting and all too frustrating task. Many homeowners find out quickly that the banks employees seem to little if any sympathy for the struggling homeowners. I'm not sure what kind of training the banks are giving their employees, but they certainly seem to be quite proficient at turning down applications. If you're annoyed by the way the banks are treating you and you'd like to work with a professional to modify your mortgage I'd suggest The Mortgage Modifcation Consultants, you can find them at www.MMCLoanMod.com
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5-28-2009 @ 8:22PM
Catrice said...
I've spent hours every week for the last five months on the phone with HUD credit counselors, and my "A" Loan Servicing company to get in the process for a mortgage Modification under the new Home Affordable plan for Fannie Mae et al.... The paper work required hours of preparation and revisions, foreclosure dates were set three times and required hours of listening to "we know your time is valuable... thank you for your patience..." voice menus etc. With every step it was requisite that I CALL to confirm the receipt and processing of paperwork. I'm exhausted by the stress. At what should have been a turning point, a 'trial modification period" I was required to mail in separate envelopes to DIFFERENT ADDRESSES 1. a cashier's check payment and 2. signed agreements and documentation. OF Course I sent these priority mail USPS with tracking and both were received on the date required..... oh oh, received.... but not PROCESSED!!!! So I was told to do it all over again only by FAX at $1/page 40 pages no... I had proof you have my correspondence and btw check too. It took 17 days for the loan servicers to 'find' my documentation or perhaps 'log in' BUT because the docs are scanned in they aren't officially received... PLEASE I am crying....
AND to affirm your brief article. IF I am offered a modification the payments will be based on 31% of our income but the principle will remain somewhere around 20% -30% higher than comparable property LISTINGS (not sales) in my town. From my view, a huge amount of time is wasted in the processing (which isn't all that bad if you are still in a home) BUT what if the modification is such an inflated value, as most are, that it makes no sense to stay? Again a huge amount of paperwork, waste of time and processing, aren't there ways to manage these properties loans without abandonment, foreclosures, rehab, huge loses for the towns and neighborhoods. We could stay with an affordable payment, but what sense is that if the mortgage principle is out of sight for decades? Isn't it time for lenders to cut the losses and get on to the next borrower on hold?
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