(New condos in Las Vegas sit empty as tumble weeds gather)
by Jack Lee
New gov. report on the home loan modification programs is in. The results show that of 9% of loans currently in default that were modified (about 250,000 loans) over half have re-defaulted. The pace of re-defaults does not appear to be slowing either. Banks have bought some time from those homeowners who have been able to keep up their modified payment plan, but their losses have been compounded by the other half who have not, says the report.
Reality check – In most cases people in trouble don’t want a loan modification to hang on to a house and this is what government has been slow to recognize. The owners want out of the contract because they simply owe too much! They bought a house they couldn’t afford thinking they were going to make some easy money on a quick resale, but got caught when reality finally set in and the market reversed itself. Now they are stuck with a home worth 30-40% less than market value. It could be a decade or more before they are in a break even status. This is an unacceptable amount time for most. Marriages in the USA don’t last that long!
Source material:
1. http://www.dbrs.com/research/229680
2. http://www.mortgagelawnetwork.com/mortgage-modification-failure-inevitable/
3. http://home-mortgages.suite101.com/article.cfm/does_mortgage_modification_simply_delay_default