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Loan Modifications are the way forward in the opinion of the Obama Administration. A number of federal programs have been placed and are ready to welcome droves of homeowners that need to modify their loans.

However many question the wisdom of loan modifications and if they are the real solution to the increasing number of foreclosures and unemployment. Some have compared the goals and resources of the loan modification program with bailing out water from the Titanic with a cup. It is understood that the task is so great the administration and the measures in place to control the situation will be completely overwhelmed.

The truth is that the goals the loan modification program has set itself are titanic in themselves. The administration is aiming to save three to four million homeowners from losing their homes through foreclosure. If this occurs it will be an amazing feat for many reasons. Not least is the fact that banks and mortgage servicers are not geared to modify loans. Their business up to now has been to set up the loans and collect the payments. The millions of homeowners that now seek a loan modification is challenging the banks to reinvent their work system, sometimes to their own detriment.

In order to make this possible the government has provided generous incentives to homeowners and mortgage providers. The idea is to provide bonuses and incentives to servicers and homeowners when loan modifications are made and honoured by borrowers. The loan modifications must be sustainable and fair for the homeowners to qualify. Homeowners on their part must be regular on their payments in order to qualify for the bonuses and receive the loan modification.

The sad part is that even if the government is successful in delivering the three to four million loan modifications there will still be about 4.6 million people or families that will nevertheless lose their homes by next year. This would be bring the grand total of foreclosed homes to 9 million homes by 2011.

So what can the government and homeowners do to minimize the effect of this crisis and increase the number of saved homes.

Information seems to be, as always, a key player. Many homeowners seem to let loan modifications go because they don’t understand the documents they must sign. Clear language and skilled counsel are key if this program is to have even the most modest success.

Another issue is that homeowners do not make it throught the three month trial period into the final loan modification. Of those that do, many will become delinquent later on in the loan tenure, nullifying the benefits of the loan modification with all the expense it involved.

Mortgage servicers themselves can be an obstacle. Many servicers are continuing to take foreclosure steps with homeowners that are participating in the program, undergoing the three month trial. The government is trying to motivate servicers to help homeowners to achieve the loan modification wherever this is possible.

One factor that could make the whole matter moot is the rising level of unemployment. The loan modifications the government is proposing are not designed for people who can’t afford any substantial mortgage payment due to unemployment. It is designed for homeowners that are not able to take advantage of the current lower interest rates and whose homes have dropped in value and are struggling to pay their mortgage.
If unemployment rates continue to rise the number of homeowners that don’t qualify for loan modification aid will rise increasing the number of foreclosures.

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Loan Modifications are the way forward in the opinion of the Obama Administration. A number of federal programs have been placed and are ready to welcome droves of homeowners that need to modify their loans.

However many question the wisdom of loan modifications and if they are the real solution to the increasing number of foreclosures and unemployment. Some have compared the goals and resources of the loan modification program with bailing out water from the Titanic with a cup. It is understood that the task is so great the administration and the measures in place to control the situation will be completely overwhelmed.

The truth is that the goals the loan modification program has set itself are titanic in themselves. The administration is aiming to save three to four million homeowners from losing their homes through foreclosure. If this occurs it will be an amazing feat for many reasons. Not least is the fact that banks and mortgage servicers are not geared to modify loans. Their business up to now has been to set up the loans and collect the payments. The millions of homeowners that now seek a loan modification is challenging the banks to reinvent their work system, sometimes to their own detriment.

In order to make this possible the government has provided generous incentives to homeowners and mortgage providers. The idea is to provide bonuses and incentives to servicers and homeowners when loan modifications are made and honoured by borrowers. The loan modifications must be sustainable and fair for the homeowners to qualify. Homeowners on their part must be regular on their payments in order to qualify for the bonuses and receive the loan modification.

The sad part is that even if the government is successful in delivering the three to four million loan modifications there will still be about 4.6 million people or families that will nevertheless lose their homes by next year. This would be bring the grand total of foreclosed homes to 9 million homes by 2011.

So what can the government and homeowners do to minimize the effect of this crisis and increase the number of saved homes.

Information seems to be, as always, a key player. Many homeowners seem to let loan modifications go because they don’t understand the documents they must sign. Clear language and skilled counsel are key if this program is to have even the most modest success.

Another issue is that homeowners do not make it throught the three month trial period into the final loan modification. Of those that do, many will become delinquent later on in the loan tenure, nullifying the benefits of the loan modification with all the expense it involved.

Mortgage servicers themselves can be an obstacle. Many servicers are continuing to take foreclosure steps with homeowners that are participating in the program, undergoing the three month trial. The government is trying to motivate servicers to help homeowners to achieve the loan modification wherever this is possible.

One factor that could make the whole matter moot is the rising level of unemployment. The loan modifications the government is proposing are not designed for people who can’t afford any substantial mortgage payment due to unemployment. It is designed for homeowners that are not able to take advantage of the current lower interest rates and whose homes have dropped in value and are struggling to pay their mortgage.

If unemployment rates continue to rise the number of homeowners that don’t qualify for loan modification aid will rise increasing the number of foreclosures.

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1. Loan Modifications No Match For Rising US Foreclosures.
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Two reports out say if you’re thinking of buying, wait. The prices are going to continue to drop. The reason they offer are the same: Continuing increases in the number of homes worth less than their current mortgages.

Zillow reports that 23% of US mortgage holders owed more than their homes were worth in the second quarter of this year. This number is challenged, but not in a good way, by Deutsche Bank which says it’s actually 26%.

Both numbers are a stark contrast to recent upbeat spins on real estate news. National Association of Realtors report that pending home sales rose for a fifth straight month in June. (Remember, the NAR’s last chief economist admitted lying about his numbers.) And the most recent Case-Schiller numbers which were widely misreported as showing a price increase in May.

While the Zillow report makes the relatively sure prediction that underwater mortgages will increase to 30% by mid-2010, DB goes all in and says it will be 48% by 2011.

This will further decrease prices as it increase the amount of housing for sale. There were 3.8 million homes for sale in June which take 9.4 months to sell at the current pace of transactions, and those numbers are from the ever-optimistic NAR.

The number of homes for sale doesn’t (and perhaps can’t) include the huge number of shadow homes out there. These are homes being kept off the market by banks, investors and individual owners waiting for prices to improve before putting them on the market. “If” prices continue to descend look to these folks to hit the market in a big way as they try to get anything back on their investments. This, of course, will further depress the price of homes. That’s a helluva catch, that Catch-22.

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The story repeats itself across the nation. Desperate homeowners that need an urgent loan modification to save their home phone their loan providers with little or no result. One borrower in Dallas explains relates how he is on his second counselor and he hasn’t been able to talk to either of them.
A common theme among frustrated borrowers is that they cannot speak to a decision maker. The current financial crisis has thrown people used to being in control of their financial situation into situations they are not used to handle.

Whichever way you look at it and there are a few, loan modifications are moving slowly and there are not clear signs of things changing. Treasury Secretary Timothy Geithner and Shaun Donovan, secretary for Housing and Urban Development have already expressed their opinion that “much more progress is needed” in a letter to mortgage companies.

What makes things worse for loan providers like Bank of America and Wachovia that are doing poorly in their loan modification turnover is that the performance among banks is inconsistent with some banks showing much healthier figures. The government wants results and his paying a hefty fee to get them, from their perspective it does seem that banks are simply not pulling their weight.

The perspective of banks is of course completely different. They understand the financial pressures everybody is experiencing because most if not all of the large banks have required and accepted financial help from the government to boost their own coffers. However banks will explain that they are simply not geared or designed to be mass producers of loan modifications.

Historically banks have limited themselves to lending, collecting and processing mortgage payments now they are in the process of reinventing themselves as loan modifiers, sometimes rearranging their whole outfits to meet the increasing demand. As John Dalton, president of the Financial Services Roundtable’s Housing Policy Council says : “It’s a new ballgame”. The figures are quite scary, there are 3 million people at this moment who are 60 days past due on their loans. Banks are simply not designed to deal with this volume of delinquent debtors.

Although there is no arguing the inconsistency between banks performance it does not require heroic amounts of empathy to understand it is not going to be easy for businesses to rearrange the way they work and provide services.

Think of a lemonade stands that sells readymade lemonade and suddenly has to deal with hundreds of customers who simply want more sugar stirred into their “old” lemonades. You are going to have to hire lemonade sugar adders and stirrers while you are trying to continue your main line of business.

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Mortgage Scams have been on the headlines of the news as the nationwide raid on mortgage consultants arrested high profile loan modification consultants and firms. This has created a panic among homeowners that need a loan modification creating insecurity among those that need the most help.

In response to this situation the Federal Trade Commission has teamed with local and state authorities in a nationwide crackdown on conmen consultants and loan adjustment scams.

The biggest challenge authorities have is actually reaching the people at risk from these scams before the scammers knock on their door and dupe them to pay for services and loan adjustments they never provide.

One avenue the Federal Trade Commission (FTC) and local authorities have embraced is providing videos under the theme “Real People, Real Stories” in Spanish and English. See at www.ftc.gov/YourHome.

These videos illustrate the steps homeowners can take to either save their home from foreclosure or save on their monthly payments without being taken for a ride by unscrupulous “consultants”

The FTC and the California Attorney General’s office has also put together a list of tips of how to avoid scams here is an excerpt from the the release that is worth reading:
•    The first thing anyone seeking to modify an existing loan should do is call his lender.

•    Lenders want to hear from homeowners and will probably be more willing to work directly with them than with a foreclosure consultant. Do not ignore letters from your lender. Many lenders are willing to work with homeowners who are behind on their payments.

•    Contact housing counselors approved by the U.S. Department of Housing and Urban Development, who may be able to help you for free.

•    It is illegal for foreclosure consultants to demand money before they give you a written contract  and before they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan.

•    However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the California Department of Real Estate for review.

•    Do not transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later.

•    Fraudulent foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. Beware — this is a common scheme so-called rescuers use to evict homeowners and steal all or most of the home’s equity.

•    Do not pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

•    Do not sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer” who is actually a scammer.

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Mortgage modifications are the only hope for millions of Americans that cannot continue paying their monthly payments. One of the typical reactions when people are behind in their payments and cannot see a way out is to simply ignore the bank or mortgage lender. This is a terrible idea that only makes things worse.

HOPE NOW the government run free mortgage counseling program explains the reasons why you must contact your mortgage provider as soon as possible in a new Video narrated by Queen Latifah. The video explains the consequences of not contacting your bank when you are behind in your payments or fear you will be in the near future.
The video illustrates this point through various real life cases of people that initially were reticent to calling their bank but were able to face their fears and solve the situation.
Another issue that the video deals with is that many banks are completely overwhelmed with the volume of borrowers that are calling to ask for loan modifications. Hope provides a way out by advising borrowers to head to theHUD.gov website to find advice and help when lenders cannot (or will not) reply to their calls.

This video deals with two serious issues that are causing many to lose their homes unnecessarily:

1) Borrowers not contacting their banks and finding a negotiated solution to the debt and

2) The apparent inability of banks and lenders to deal with the great number of borrowers in need of help.

Borrowers don’t contact their banks for various reasons. As illustrated in the new HOPE NOW video many borrowers don’t contact their bank about their late payments because they don’t have a good payback plan to present to their lender and feel embarrassed to contact them. Other’s have little understanding of the options at their disposal and simply ignore the efforts of the bank to contact them. Still others are not even sure who their lender is or how to contact them. The video illustrated how to find out by checking one of the mortgages payment slips which carries the lender’s name and telephone on the back.

The speed at which banks are dealing with customers loan modifications has caused many to feel that banks are not committed to providing loan modifications and are dragging their feet going through the motions. Although loan modifications can in many cases be beneficial to both the bank and the borrower, allowing the homeowner to keep his home while the bank can make more money on the same loan, in some cases they are not cost efficient for lenders that would do better foreclosing the loan.

The government has recently committed extra funds to incentivize banks into accelerate their mortgage modification programs in order to help the millions of Americans that risk foreclosure on their mortgages this year.

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Bankruptcy, foreclosure, bad debt used to be all four letter words. Not any more, defaulting on loans, mortgages and promises is happening so often it has nearly become acceptable. Obviously there are situations where there is nothing we can do and bankruptcy and foreclosure are the only viable way. However in many if not most of the situations they don’t have to be the only way out. The issue is that many people choose to opt out just because their home is no longer the dream investment it once was. It is attitudes like that, that are behind the fragility of our credit system, a promise to pay is not always worth that much if it is no longer profitable.

It is not only the moral implications that make unnecessary foreclosures and bankruptcies wrong. Although they might often seem like the easy way out they are rarely the best way out. It is much better to use debt management to face mortgage and loan issues than just giving up at the first hiccup.

As mentioned above this comment is not meant for families and households that truly can’t pay their home mortgage or have fallen in a cycle of debt they cannot get out from.

So how can you avoid bankruptcy with debt management?

Debt management refers to the methods used to control, limit and reduce debt. This can be done in a variety of ways:
Debt reduction.
Talk to your bank and ask for a debt reduction. This is by no means a fail sure approach but banks will in some cases offer help and debt breaks to people who come out in the open and explain a bad financial situation before missing payments. The key is to talk sooner rather than later and to present your case in a way that shows that you really want to find a solution that will benefit both of you. This option will only be attractive to banks if their security on your loan is not high and they would lose more money if they simply foreclose your debt.
Loan Modification.
Loan modification or home mortgage refinancing can be a great way to reduce your monthly bills and even the overall cost of your mortgage. The key here is to make sure the cost of your refinancing is not higher than the savings or the benefits you receive from the loan modification. Understanding the real cost of your loan mod can be sometimes complicated so it pays to find good advice and information. This site has many articles on this issue.
The main loan modifications you can apply for are interest rate reduction and loan tenure increase.

You can find a home mortgage interest rate reduction by either approaching your current bank or finding a competing lender that is willing to reduce the interest rate. If you have found a better deal it is often a good idea to give your bank a chance to match or improve the offer. Banks are often willing to reduce their interest to keep good customers. As we have said before, please make sure you understand the full cost of a loan or mortgage modification before you go through with it. Clauses included in the original mortgage can make the loan modification uneconomic.

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Despite the governments efforts to provide loan modifications for individuals and families in financial difficulties that are at risk of foreclosing on their loans the mortgage aid seems to be moving too slow for all the families to benefit from it.

This has made many experts to question why banks are moving so slowly to take advantage of a program that is designed to help both the borrower and the lender. The idea is that mortgage modifications benefit both borrowers and lenders as they allow banks to receive payments they would not get if the mortgage foreclosed in a buyers market where the security (normally the house itself) is in negative equity.

However recent research quoted in today´s Washington Post indicates that this only holds true with a certain kind of borrower, the type of borrower that truly can´t pay the monthly mortgage payments at the current level but would be able to pay them if the monthly payments were reduced. This is only one of three types of borrowers though. It seems that with the other two types of borrowers, loan modifications are just not cost effective.

These two types comprise:

1) Borrowers that are in such financial strife that no loan modification or mortgage refinance is going to help in the long run, ultimately they are going to have foreclose their loan.

2) Borrowers that can meet the payments even though this might mean serious financial difficulties, even losing their life savings.

Banks and lenders have little incentive to help either of these demographics of borrowers.

To illustrate imagine if you were a lender, a bank or even a private company that provided loans for a profit. Obviously you demand some sort of security to protect your investment in case the borrower cannot or will not pay, this could be  jewelry, thee deeds of a property or a car. Then one day the borrower tells you he is going through financial hardship and needs a break in his payments, a reduction in his debt or his monthly payments. However you realize that this borrower is not going to be able to pay his loan whether you help him now or not. Negotiating with him now is just going to cost you money in time, work and whatever reduction or break you provide for his loan. On the other hand you could simply foreclose his loan and claim the security without losing nearly as much. What would you do?
Even the kindest philanthropic can see the negative incentive that such a lender would have to actually negotiate a solution with the borrower.

Could  this explain why loan modifications are moving so slowly despite the huge incentive programs the government is providing to encourage loan modifications on mortgages that risk foreclosure.

It seems that Obama´s administration has also seen this flaw in their system and is currently negotiating with banks for further incentives for the provision of loan modifications to the most vulnerable borrowers.

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Sometimes the things that scare us the most are the subjects we know less about, death, darkness, losing someone we love and foreclosure are just a few examples. There is a reason we know little about the things we fear, not knowing is often worse; we always imagine things are worse than they really are. Learning about our fears and finding ways to deal with them is the best policy. This article will aim to shed some light on the issue of foreclosures and what they really are, that way we will hopefully fear them less and learn how to avoid them.

Foreclosure is a legal term to describe the termination of a mortgage or loan. Foreclosure occurs when the mortgagee (the lender) gets a court order that terminates the mortgage and allows the mortgagee or lender to redeem the mortgage’s security, nearly always the home itself. This occurs when the borrower fails to pay the mortgage principal and interest payments; the lender has then the right to force the borrower to either pay the payments he is behind in plus costs or sell the house or some other asset to meet his responsibility of paying the mortgage. When the borrower sells the property and uses the proceeding to pay the lender it is said that he has foreclosed the mortgage.

This rather dry definition we worked through provides some interesting points.

1) A foreclosure is a legal process that must be approved by the courts of equity. 2) Losing the house is not the only way to deal with the situation. The government is trying its best to avoid foreclosures and is willing to help most people that are willing to work hard to find a way around a foreclosure through loan modification and other types of financial aid. Do your homework and make it your job to jump through the necessary hoops to save our home.

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There are few things scarier than losing your home and seeing your family on the street. Unfortunately many Americans and people worldwide are facing this problem due to the worldwide crisis. As we know most governments are doing their best to protect poor families that are at risk of losing their home because they are unable to meet the mortgage payments. One of the measures the American government has provided is the HOPE program.  This program began under the Bush administration and the current administration has just expanded the availability and extent of the mortgage protection program for families.
Sadly many families don’t understand or know about the program and how they can benefit, if you fit this profile what can you do make the most of the helping hand the government is trying to provide. Information is as usual the most powerful weapon whether you are trying to fight a war or pay your home loan. If you are having trouble paying your mortgage and need aid to avoid foreclosure you need to get working on solving your situation.
1)    Find out what your situation is exactly. This means working out how in debt you are, what your interest rate on each loan is, what your prepayment penalty is on your current mortgage and compare it with your current income. You would do well to get all the paperwork you are going to need together. Contact your mortgage provider and ask for an up-to-date review of your mortgage and the details of the contract.

2)    Once you know how bad things are you can start making productive steps towards solving the situation. For instance you should get a feel for the value of your home and compare the current value with the outstanding principal on your mortgage. Once you have this information you should contact your lender. You should contact your lender before you are behind in your payments; this will show you are acting in good faith and want to solve the situation. Lenders can often provide breaks and good re-financing deals to customers that make the “right” decision. If your lender will not work with you, you might need to look to other lenders before your credit rating starts to suffer.

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