According to this CNBC article, Bank of America Ups Its Foreclosure Prevention Efforts, Bank of America "increased the number of customers with a trial mortgage modification by 62% in September to 95,000" and "increased the total number of modification offers under the Home Affordable Modification Program to 156,000 last month, versus 125,338 in August" which is an increase of nearly 25%.
According to the article, "Data on success rates at this point is limited and in a way lagging. The program is barely six months old and its terms require that a modified loan stay current for three months to be considered a success." Personally, I do not think being current for 3 months is successful at all.
The article quotes a Bank of America document as saying "With sustained high unemployment, even the most aggressive loan modification program will not help where there is no income." In my opinion, this is the real issue: unemployment.
The article states "The government program also includes a refinancing component, which is meant to decrease the number of potential defaults. BofA says that as of September it has taken more than 144,000 applications in that category and funded some 60 percent of them. According to August Treasury data, the bank has the largest number of loans that are 60 days or more past due (836,000)—a key benchmark of delinquency and foreclosure barometer. Foreclosures continue to run at a record rate, despite a multitude of government and private programs. The problem has spread well beyond its original flash point, the subprime sector. The program is designed to help homeowners already in trouble (the loans have become delinquent) and those who may be heeded for it. Loan services receive a fee of $1,000 per loan modification. In addition, they receive a $1000 a year for three years if the modified loan stays current. The program also covers underwater borrowers. The loan-to-value ratio, which started out at 105 percent, is now 125 percent, meaning a homeowner with a $250,000 loan on a property valued at $200,000 is eligible for refinancing aid."
There are a few reasons why these increased loan modifications will still fail:
- Job Losses - You cannot pay your mortgage if you do not have a job.
- Number of Foreclosures - The number of foreclosures far exceeds any loan modification efforts.
- Underwater Homeowners - Even if the bank lowers their payments by a few hundred dollars per month many homeowners will still default due to owing far more than their home is worth.
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