Just read an article about loan modifications, and what has been happening. Big sigh from me here, as I read this article, because of the underlying greed that results in real pain for real people.
It may seem obvious: Increasing how much troubled borrowers pay on their mortgage leads to redefaults. But that didn’t stop America’s banks. Until the end of last year, the majority of loan modifications either increased homeowners’ monthly payments or left them unchanged. Not surprisingly, more than half of those borrowers fell behind again within six months.
The above is true. I have heard from people that had this happen to them. When a person went to the lender to ask for a loan modification, the lender was happy to comply, but instead of helping the person, the lender RAISED THE PAYMENTS so now the loan payment became even harder to pay. End result: foreclosure. Well… Duh! It made me think that foreclosure was what the lender wanted as the result, for it makes no sense to make a loan payment even more impossible to pay unless you want the person to fail.
Foreclosures are not working out so good for the lenders, however, and things are beginning to change. Even foreclosures are not selling these days, as perhaps the lenders expected, and are proving to be more trouble than they are worth. Therefore the percentage of loan modifications that are leading to decreased payments is growing.
As foreclosures soared, however, servicers and investors grew more open to lowering payments, as long as it was more cost effective than foreclosing on the home. This crisis is more severe,” Evers said. “The traditional approach of loss mitigation may not be the right approach in this environment.”
Banks/lenders need an attitude change. Instead of always putting money first, it would be nice if they could think of people first. I know this goes against the very reason for their existence — at least with their present attitudes. Once again I think back to the old Christmas movie we see every year — It’s A Wonderful Life — and to Potters banking philosophy. The Potters of the world have won, and money has become the only value the banking industry knows. Sad but true. No longer is a bank seen as on the side of people, as with the small town bank that kept the money circulating in the community.
Big sign again. At least if the lenders believe they lose less money by lowering rates for a home owner, and thereby lowering payments so the home owner can actually stay in the home, we can get results that benefit people. We real estate agents are really looking forward to the day when there are less foreclosures on the market, and no new foreclosures. Foreclosures are not good for the housing market — at all!
Tags: foreclosure, lenders, loan modification
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