Trying To Modify Your Loan?

The GOOD NEWS is that you can do it yourself. Do not pay anyone upfront fees to handle the loan modification process for you. Your lender will walk you through what they need in order to see if you are a candidate for a loan mod. In some cases, particularly when the borrower has a high interest rate (7% or more) or when the home is not underwater by more than 20%, then a loan mod might be the ideal way to avoid foreclosure.

The BAD NEWS is that few loan mods get through the banks and the ones that do often have little to no benefit for the borrower.

June 22, 2009 - Fitch Ratings put out a report examining the effectiveness of loan modifications in terms of keeping homeowners out of foreclosure. Their findings make the initial reports of massive failure rates seem like the good old days. Reports that had come out earlier in the year found that fifty percent of modifications done in the first half of 2008 had gone back into default by year-end. The new study by Fitch estimates that between 65% and 75% of modified subprime loans will become 60-days or more delinquent again within a year of the loan modification.

Here are five reasons why loan modifications fail:

1.     Modified loans often carry higher balances than the original loan…

Because many lenders add unpaid interest and fees to the loan balance, homeowners often walk away with more mortgage debt that they originally incurred. The average amount added to a $200k mortgage is $10,800.

2.     Higher monthly payments???

It should come as little surprise that with virtually NO lenders reducing principal – and most tacking on fees to the loan balance- nearly half of all loan modifications (45%) actually resulted in increasing a borrower’s monthly payment.

3.      Despite modifications, most homeowners are still underwater.

Without question, this is the biggest cause for failure especially in areas where home values have dropped over 50% (such as Phoenix/Anthem). Borrowers who owe more on their homes than they are worth have little incentive to stay there, even if the payments are lower.

4.     Homeowners accept unaffordable terms.

Desperate to keep their homes, many homeowners accept modification offers they can’t afford.

5.     Navigating the system is difficult.

Ask anyone who has dealt with the banks and they will tell you it is a nightmare to get them to do anything. After months of effort, hour-long hold times, lost files, and massive incompetency from the bank(s), many homeowners simply give up.

Worse, many homeowners seek help from so-called loan-modification brokers who charge upfront fees. Many of these firms are outright scams, taking the homeowner’s money and doing nothing.

GET THE FACTS – TAKE CONTROL – PROTECT YOURSELF, YOUR FAMILY, YOUR FUTURE!

Call today to see if a Short Sale might be the best option for your situation.

the [HOLT] group 623.748.9583