I had previously mentioned in a blog that loan modifications were an option for homeowners that are behind on mortgage payments or are in a financial situation that will lead to missed mortgage payments. If it was not apparent I was not heavily recommending this option because I do not have a lot of faith that it works for the typical homeowner, especially when they are experiencing a long term financial hardship. Recently I read a couple of articles that substantiated my lack of faith.
Loan modifications have decreased for many reasons. Probably the most important reason to highlight is that a lot of people in financially distressed situations have already been given a loan modification or do not qualify at all. According to The Washington Post, these failures are happening at “an alarming rate”, forty-six percent and thirty-nine percent just in the last two quarter of 2009. The article goes on to explain that HAMP, or the Home Affordable Modification Program, a program for employed homeowners struggling to make mortgage payments; has failed to help lower the mortgage payments to a sustainable amount. By the end of last March this accounted for 312,000 homeowners who had defaulted on their modified loans under HAMP and are now losing their homes again. The reasoning provided for this is unclear and under investigation by the special inspector general for the Troubled Asset Relief Program. The TARP was signed into law by George W. Bush in 2008 to aide in the subprime mortgage crisis. The special inspector general’s department has suggested that HAMP work with servicers of mortgages to develop an “early-warning system” for homeowners about to default on their newly modified loans. In HAMP’s defense their loan modifications do have a lower re-default rate than private servicers. That means if you need a loan modification, it is probably recommended that you go through HAMP anyways.
According to an article by Esther Cho in DSnews.com, when loan modifications are not an option servicers are relying on short sales to save them from the costly fees of foreclosure. This is not a new occurrence. There are a lot of agents out there that try short sales and fail mostly because doing a short sale requires months of work that can be hard for one person to manage especially while balancing other traditional sales, or worse more short sales. There are a few of us, however, that are successful and willing to handle the large volume of homeowners who are considering short sales. In fact, let us help you. We are happy to take your calls if you are a homeowner and want to know if a short sale is right for you or if you are an agent and need some help with your short sale. Don’t forget we do take referrals and teach free classes.