Re: Loan Modifications Falling Short of Goal
January 2, 2010 – 9:10 pmBack in July I wrote this: http://www.therealestateledger.com/2009/07/loan-modifications-falling-short-of-goal/
UPDATE: A New York Times article is pronouncing the Making Home Affordable program… a failure. Initiated by the Obama Administration earlier this year, the program intended to modify the mortgage payments of distressed homeowners so they would be able to afford and continue to live in their homes. Unfortunately it has been a dissappointment with some experts going as far as saying it has done more harm than good.
The main problem with this bill, as I’ve stated many times, is that the bill creates a false sense of hope. The reality for most homeowners being “rescued” is they temporarily continue to pay for their mortgages but they are still in over their heads. They are living in homes they cannot afford and should be looking to reduce their home payments much lower than the loan modification program could possibly offer. They need a way to be eased out.
The new “solution” from the Treasury is incentives to lenders to accept a lower mortgage payoff than what is actually owed, or simply – a short sale. The short sale has been increasing in popularity. It doesn’t necessarily leave the homeowner’s credit unharmed but it definetly is better than a foreclosure. (Which leads to another problem with the loan modification program – it was harming homeowner’s credit without them being fully aware.)
It remains to be seen where this latest venture will lead us. However, I’m sure if it’s worse off than today there will be a huge public outcry. Either way, prices will continue to drop as buyers are able to buy higher quality distressed homes at lower prices.
I’ll check back in on this topic in a few months or if something significant happens.
