The problem? Even as lenders have become more willing to modify borrowers’ loans in the past year, many aren’t offering deals that borrowers can afford over the long term, explains Austin King, national director of ACORN Financial Justice Center, a St. Paul, Minn.-based consumer group.
Here are some reasons why loan modifications fail.
3. Despite modifications, many homeowners are still underwater.
Borrowers who owe more on their homes than they are worth have little incentive to stay there, even if their payments are lower. “I’m a big advocate for principal reduction because when people are underwater by hundreds of thousands of dollars, they walk away,” says Moe Bedard, the founder of LoanSafe Solutions, a Corona, Calif.-based company that works with attorneys specializing in loan modifications.
4. Homeowners accept unaffordable terms.
Desperate to keep their homes, many homeowners accept modification offers they can’t afford, according to Bedard. That shouldn’t be the case. “If you get a modification that you feel is not fair, counter that offer,” he says.
Read more from Moe and Loan Safe from Smart Money
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