The article below will tell you a sobering and depressing tale of borrower’s getting their loans modified only to redefault all over again. The short conclusion would be that mortgage modifications are not working. Of course, the definition of modification is never established in the article.
Allow me to propose the following arguement: The reason these so-called modifications arent’ working is because up until recently the banks have had no intention of wanting them to work. It has only been with increasing political pressure that major servicers have actually “come to the table” and started to make meaningful modifications for struggling borrowers.
For example, I have been working with a client from the Traverse City area in Michigan. His mortgage rate was in the 7′s and was scheduled to adjust above 10 percent. When we took him on as a client we quickly discovered that for him to be able to stay in the home long term, that his mortgage would need to be modified to approximately 5%. We developed the budget and made the modification request.
Almost immediately we received a letter stating that the interest rate on the loan would not adjust as scheduled, but be locked in at the current 7.375% rate. Great, right? Another successful modification! Not so fast.
The “new” payment was nothing more than and extension of his existing, unaffordable payment. We pointed this out to his servicer. Yet, we were told that was the modification and their was nothing more we could do.
As of the writing of this article, that client is in default. Another statistic of a “failed modification”. The silly part is, his servicer knows that the payment is unaffordable, and thus, unsustainable. Yet they quantify his case as a “modification” that has redefaulted.
Take a moment to read the whole article here
Of course, we continue to work on this client’s behalf and believe, eventually, his servicer is going to “come to the table” and truly negotiate a workable plan. I guess at that point we will be able to create a new category for the government statisticians, the default-modifiy-default-REALLYmodify, homeowner.
What a mess!
Jason Nolan
Advertisement
