"The Obama administration has said it wants to wrestle the foreclosure issue to the ground by encouraging mortgage loan modifications, but its efforts have gotten little traction.
Loan modifications occur when a lender agrees to change terms of a troubled borrower’s mortgage; the most common approach is to reduce the loan’s interest rate.Cutting the amount of principal owed — an option that could be of more help to a borrower — is rare because it means homeowners pay less money back to the bank over time. "
According to a Treasury Department report, "In the first quarter, loan companies modified 185,156 mortgages, up 55 percent from the previous quarter. But the number of foreclosures in process increased to 844,389, up 22 percent.And nearly one in four borrows who received a mortgage payment reduction fell behind again within six months."
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"Modifications can combine lower interest rates, maturity date extensions, changing from adjustable to fixed interest rates, and the reduction of principle."
I think of the four, principle reductions are statistically the best way to ensure the long term success of a loan modification.
For people who currently owe much more than their house is now worth, it probably makes the most sense to attempt to work with your lender to get your loan modified - because unless you are in an FHA or VA loan, you cannot refinance and even if you are in an FHA or VA loan, you are possibly going to end up with a better overall financial situation through loan modification process than the FHA/VA streamline without appraisal programs.
My Advice: If you are currently in situation where owe more than your house is worth -
you have two choices:
1. keep paying on your mortgage or
2. don’t keep paying on your mortgage.
The Bush administration overlooked the foreclosure issues of the average homeowners which the Obama administration is struggling to tackle with various initiatives.
The loan modification efforts to prevent the increase of foreclosure rates have not got a huge welcome. The reason is because the lender needs to revise the ‘borrowing terms’ of the troubled borrower who is struggling to repay the loan on time. It also involves reducing the interest rate which is generally not received well by the lender who would lose some margin in the sale. In addition, the revised plan involves cutting the principal amount by reconsidering the financial state of the borrower and hence, it tackles the benefit of the borrower than guarding the interest of the lender.
I donot think loan modification is really working.
"Experts say this is a bad omen for residential real-estate prices and homeowners trying to sell or refinance, because the fire sales, many to cover soured subprime loans, put downward pressure on the value of nearby homes. All of this undermines federal efforts to stabilize the housing market and revive the broader economy.
"While the banks are trying frantically to get loans off their books, they face the problem of large shadow inventories of housing being dumped on the market, which would depress prices further," said Anthony Sanders, real-estate finance professor at George Mason University in Fairfax, Va."
I think this makes sense.
"A weak economy has added job losses and falling home values to the mix of toxic loans that prompted the crisis two years ago, making an already difficult situation even more severe. Government measures from foreclosure freezes to loan modifications have only served, so far, to stall the inevitable – and to create an ominous backlog of millions of pending foreclosures. Plus, more than one in five homeowners now owe more on their mortgages than their homes are worth, according to the real estate website Zillow.com. No one can predict with assurance whether those underwater homeowners will keep paying on their loans, or take a walk."
Loan modification is clearly not working. Obama administration is aware of this unfortunate fact and that is the reason probably they are coming up with this "own-to-rent" plan.
"Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters."
I hope this works out.
As Reuters reports, the idea is to let owners facing eviction stay in their homes as renters:
Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.
Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.
As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said.
Read more http://seekingalpha.com/article/148932-obama-s-foreclosure-plan-du-jour-own-to-rent
I want this plan to work.
Loan modificatin program has worked to some extent but not fuly
I think loan modification plan works
i agree with rohit
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