Loan Modifications - Are they Working?

Interesting article in the LA Times today http://tinyurl.com/yh7qan8 regarding loan modifications. Some high, or rather low, points:

• Making Home Affordable has only achieved about 350,000 trial modifications as of 9-1-2009.
• Of those, only 1700 have been made permanent. Yes, that's one thousand and seven hundred, not a misprint, not 17,000.
• The government has recently allowed servicers 5 months, not the original 3 months to handle each case.

This program is supposed to reduce mortgage payments to 31% of the borrowers income. My issue with ths concept is that it doesn't address the huge underlying problems:

• Nearly one in four homeowners are underwater - they owe more than their house is worth today and to be fair, anytime soon.
• According to the Mortgage Banker's Association, more than 4 million homes are either in foreclosure or more than 90 days past due.

As for that last statistic, what I've heard is that there are more homes in some stage of foreclosure than there are homes currently listed for sale. That's a big, big problem.

As I have stated throughout the current housing crisis, unless the issue of the underlying valuation is addressed in a comprehensive systemic manner, we can't begin to see daylight. Specifically, homeowners who can no longer either afford their payments or who simply want out and a fresh start have to be given a viable alternative to foreclosure. Foreclosure is lose - lose. It's a platitude, but we need win - win.

One possible solution would be a streamlined short sale process with the government picking up some of the shortfall (from repaid or unused TARP funds) thus allowing sales of underwater homes and possibly some money in the pockets of the borrowers to move and get on with their lives.

In any case, collective denial as to the eventual outcome of 25% of homes having negative equity does not move the ball forward and neither does programs such as Making Home Affordable if they are poorly thought out and implemented.

Curious about the foreclosure activity in your area. Check out http://tinyurl.com/search4closures.

Comments

[studio city real estate]

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