Tuesday, August 4, 2009

Great Blog Post: The Ridiculous Loan Modification Solution

According to this BrokerAgentSocial article, The Ridiculous Loan Modification Solution, Banks and Mortgage Lenders have no real incentive to offer struggling home owners a loan modification since a Barclay's study showed that "current loans receiving rate modifications will experience a 62% redefault rate and delinquent loans receiving rate modifications will experience an 83% redefault rate." The reasons that these loans will still go bad are simple:

  1. The home owners were shaky from the beginning and so they are not the most financially responsible people to start with.
  2. Their homes are worth far less than the their mortgage balances. Eventually these people realize that they will never "get even" and just give up by letting the go into foreclosure.

The result of all of this is that short sales are rely best solution for the lenders and the homeowners since it is statistically proven that loan modifications will not work. Regardless of what the all knowing Obama says, keeping people in their homes is not the answer to our real estate crisis. Letting the market hit bottom as soon as possible is.

1 comment:

  1. Interesting!

    The loan modification process can be frustrating and confusing for many distressed homeowners. But you have to know what exactly is loan modification. A loan modification is a permanent change in one or more terms of a borrower's home loan.