American Homeowners Archives – Refinance – Mortgage Refinancing Rates And Information

Loan Modifications, What Is The Situation 3 Years After The Housing Bubble Burst

February 24th, 2010 No comments

It is hard to believe that three years have gone by since the housing market took a dive drowning with it millions of American homeowners. So what is the situation now? Have we hit rock bottom? Are the Administration’s measures starting to work?

Let us start with the good news. There are now over one million homeowners benefiting from temporary or final loan modifications. Admittedly, most of them are still in the trial period, but nevertheless, the Administration has made an effort to ‘encourage’ lenders and servicers to make an effort, sometimes by using a carrot and other times by brandishing a big stick. Another good newsbyte is that the rate of troubled homeowners, people behind on their payments, is dropping.

Also, new measures are being carried out as we speak. Just a few days ago Obama announced another program to avoid foreclosures. The program included offering $1.5 billion to housing agencies in California and four other states. These states have been especially hit by a fall in house prices making loan modifications harder to qualify for. This new program aims to provide these hard hit states with extra flexibility that will allow them to provide the help troubled homeowners need.

Unfortunately the good news is over. The bad news is that nearly 3 million homes are going through foreclosure and 4.5 million will do so this year according to conservative estimates. Another problem is that the figures we have may not even be telling the full story. Experts say that lenders have an estimate of 1.7 to 7 million homes in a shadow list of foreclosed home they are yet to put for sale. This fudges our foreclosure figures.

High foreclosure rates do not only affect the owners, it also lowers the price of homes in the neighborhood and cripples the economy as a whole. The question many are asking and we have discussed widely in this blog is how much should the government help. It is a fact that many borrowers overstretched their budgets to breaking point; these cannot and should not be bailed out. However, the fact remains that loan modification trial and completed number should be higher.

Another problem is the high re-default rates. These rates show some of the inadequacies of the current loan modification system. Studies show that re-defaulting rates are lower when the principal balance of the loan is trimmed or reduced. Unfortunately most loan modifications simply extend the term of the loan or reduce the interest rate.

What can the government do? Extra incentives for lenders and servicers might just make them weight for the next best deal, instead of focusing on providing fast loan modifications now. An idea that has been thrown around that seems promising is to give bankruptcy judges the power to write down mortgages like they can write down other kinds of debt. It is very likely that this would increase the interest rates of new loans to reflect the increased risk of loan balance reduction. However, it would provide a good incentive for lenders to negotiate reasonable loan modifications before a judge tells them to.

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Loan Modifications Short Guide To Success Part 2 – The Guide

December 11th, 2009 No comments

Loan Modifications are not providing the help American homeowners need. Of the millions of troubled borrowers only a small percentage qualify for a loan modification trial and most of the lucky ones get stranded in the way.

This article will provide you with a list of simple steps that will increase your chances of getting a permanent loan modification.

The number one reason why loan modifications don’t work.

Before we get into the practicalities of how to find your way through the maze of loan modifications it is worth spending a few words on the top reason why loan modifications are not working: They Don’t Address the Real Problem.

The real problem is unemployment and the Credit Crisis.

The fastest growing demographic for loan modification are prime mortgages. These are good mortgages, bought by borrowers with high credit scores that can’t pay their mortgage because of the increasing rate in unemployment. Unemployed borrowers struggle to get a loan modification because you can only qualify if you can prove you have nine months of unemployment benefits lined up. Most unemployed borrowers are unlikely to fulfill this requirement.

The other big reason loan modifications might not work for you is that your mortgage might be the least of your credit problems, you might be overstretched on your car loan, credit card loan, and other personal loans. Many commentators feel the government is trying to deal with a Mortgage Crisis when what they should be dealing with is the broader Credit Crisis.

First Step. Get the Information You Need.

Visit the government’s official website at www.makinghomeaffordable.gov . There you can find:

1) The current sponsored program the Government is touting.

2) Useful forms to help you compile the information you need to supply to lenders.

3) Find the closest government paid advisor that can provide you with personalized guidance.

Second Step. Decide what you can pay, and be realistic about it.

There is such a thing as a BAD LOAN MODIFICATION. After months of wasted time and resources some borrowers end up with a loan modification they still can’t pay.

You need to figure out what you can truly afford to pay on your mortgage every month. The government guideline is 31% of your monthly income but that might not work for you. Get some real figures together. How much do you spend on housing costs? What is your income, or average income if you’re self employed or work on commission. Put all this on paper, your lender will want a look at it.

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