“It’s the housing market, stupid.” That’s what an increasing number of policymakers and economists are saying as they push for widespread mortgage modifications as a way to address a root cause of the financial crisis. With more than 1.5 million houses in foreclosure (three times the normal rate), and about 3.5 million other homeowners behind on mortgage payments, the idea of rewriting loan terms has broad appeal. As advocates contend, homeowners will keep their houses, and lenders as well as investors in mortgage-related securities will recoup more money than is typically netted in a foreclosure. As a bonus, property prices across the country may stabilize more quickly as fewer foreclosures weigh on the market.
In fact, mortgage lenders are jumping on the bandwagon. There were 79,000 such modifications in August, up 200% from a year ago, according to the industry-backed Hope Now Alliance.
There is little evidence, however, that they will succeed in the long run. In fact, most studies of what happens after loans are modified show that a big percentage wind up in default anyway. In one such study, the ratings agency Moody’s looked at a group of subprime adjustable-rate mortgages modified in the first half of 2007. It found that by March 2008, only a third were either still current or had been fully paid off.
Consumer groups argue that part of the re-default problem is lenders’ reluctance to make the sorts of changes that will really improve a homeowner’s chances. While the popular notion of loan modification might have the lender lowering an interest rate or reducing the overall loan balance, many work quite differently. For example, one of the most widely implemented changes is to simply spread missed payments over the remaining life of the loan. That has the perverse effect of raising, not lowering, a homeowner’s monthly payment. The non-profit Center for Responsible Lending estimates that nearly half of the loan modifications reported by the Hope Now Alliance have left homeowners with the same or higher monthly payments.
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My compliments to Mr. Bedard. This blog is packed full of information for the American homeowner facing difficult decisions. Loan Modification can be a key ingredient to an overall plan. The worst thing American homeowners can do is put their head in the sand and wait for the inevitable foreclosure. There are options! Loan Modification, Short Sales, Bankruptcy, etc.
My suggestion to the American homeowner is to take action, consult professionals, and formulate a plan. Loan Modification can buy the American homeowner time to formulate a plan to survive tough times!
Awesome! Thanks for the kudos Attorney Broker and keep fighting the good fight for the American Homeowner and homeowners around the world! We need more people like you around here
can anyone out there give a review of the process/outcome if they used hope now loan modification in an effort to renegotiate their home loan–they have left us completely out of the loop, won’t return our phone calls, and, essentially took our money and we are getting nothing in return–we just would like to know if there are those out there experiencing the same thing
is there anyone out there who has dealt with hope now loan modifications in an effort to renegotiate their home loan? we have been trying to deal with this company who will not return our calls, answer any of our questions, or let us know what is going on at all–before we chose to work with them i did my due diligence on the net and felt they were a reputable(?) company but we are beginning to have doubts–can anyone let us know what experience they have had with this company?