Voluntary Loan Modifications Not Working
Categories: Current Events, Foreclosure
Via Yves Smith at Naked Capitalism, here’s another reason why passing cramdown now is important: the existing loan modifications aren’t working.
Mortgages modified in the third quarter failed at a faster pace than those revised in the first, and the delinquency rate on the least risky loans doubled, signs of deteriorating credit quality, U.S. regulators said.
Loans modified in the first quarter to help borrowers keep their homes fell delinquent 41 percent of the time after eight months, and second-quarter loans had a 46 percent default rate, the Office of the Comptroller of the Currency and Office of Thrift Supervision said in a report today. Third-quarter trends “are worsening,” the agencies said.
Yves notes that most of the mods that lenders are offering today involve interest rate reductions and lengthening maturities, which aren’t as successful as mods that reduce the principal owed. Unfortunately, principal reduction is rarely offered due to the way most mortgages today are securitized (i.e., cut up into pieces and sold to far-flung investors). The only thing that is likely to reverse this trend of increasing modification failures is if bankruptcy judges are given the power to rewrite loan terms.
They bailed out wall street but kicked homeowners to the curb with no place to live.
I am trapped in an interest only loan with America’s Servicing Company who obstinately won’t even send me the paperwork. If you are behind on payments they foreclose even IF they agree to a loan modification. They are unprofessional and unscrupulous. The government is doing NOTHING BUT….
They bailed out wall street and kicked homeowners to the curb with no place to live. They are taxing the middle class to death. We have been abandoned.
It is obvious this administration will do ANYTHING to help big business but will not help hard working Americans who want to stay in their homes and make their payments. For one thing the 31% of gross rule is absurd. For those in trouble, especially singles, payments may already be at 31%. This is the case for me. But the catch is I’m single so I get taxed to the max eroding my gross salary. MY PAYMENT IS 55% OF MY NET but they don’t take that into consideration.
The servicing companies get kickbacks for loan mods. The banks get bailed out. The TARP benefited everyone but the homeowner. President Obama has let us down and now he wants us to pay for healthcare.I would consider it as a good idea but with facing homelessnes how can I consider a new tax boondoggle?
Obama could have used TARP funds to bailout homeowners but stiff armed us away with complicated rules and regulations that no one can qualify for. And, now I read this article about the FICO score ding for a loan mod. I’m crying my eyes out. I’m too old to start over and the stress is killing me.
I started a blog to collect stories to print out and mail to Obama. I figure with a big pile, he would pay attention.
Go to:
obamaloanmod.blogspot.com
and post your story.
Thank you.
Comment by Megan McKenzie — August 8, 2009 @ 9:57 am