950,000 Mortgages Modified

Posted on December 27, 2008. Filed under: Foreclosure Defense, Loan Modification | Tags: , , , , , |

Hope Now, an alliance of mortgage servicers, counselors and investors, said this week that the mortgage industry completed nearly 950,000 mortgage modifications in 2008.
But there are questions lingering about just how effective those modifications have been: A separate report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision found that more than half of the mortgages modified in the first quarter were at least 30 days delinquent after six months.
“The underlying cause of both the worsening economy and the growing number of re-defaults is that loan servicers have thus far failed to modify loans often enough or, when they do, to use the type of sustainable loan modifications most likely to succeed,” said Michael Calhoun, president of the Center for Responsible Lending, in a news release.
“Sustainable” modifications can be made by lowering the interest rate, lowering the principal balance, extending the term of the loan or some combination of the three, he said.
“Of no help in this situation is a modification that increases monthly payments to bring a family in arrears up to date; such a solution is appropriate only for families who can afford their loan but have fallen behind because of a one-time setback such as a divorce or temporary job loss or sickness,” he said.
Recent research by Valparaiso University School of Law professor Alan White suggested that “half the modifications on the types of loans at the root of this crisis don’t lower monthly payments,” Calhoun said.
Considering the ailing economy, there’s no doubt the foreclosure problem will continue into 2009. Hopefully, foreclosure prevention efforts ahead will be even more effective in helping people stay in their homes.

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