More Modification Efforts On The Way

Frank Shump is a veteran from the financial services industry, and currently authors a blog called Thefinancecastle.com, which documents his thoughts on money matters and his adventures in self employment.

You probably noticed that in a previous article I pointed out the fact that loan modification efforts had by and large been a rather stunning failure. I also went on to suggest the possibility that the money could be better used elsewhere. Not surprisingly, I was met with a healthy amount of criticism for that assertion, and looking further into the issue I can see why some would be upset. After all, the loan modification efforts..especially at the earlier stages of the crisis were…inadequate. With that in mind, let’s take a look at some more recent developments and see if they’re more of a step in the right direction, shall we?

It appears increasingly that both legislators and financial institutions alike have realized the gravity of the situation, and so we’ve seen an increasing amount of flexibility from banks and others to work toward a solution that doesn’t involve bleeding billions of dollars whilst kicking consumers out of their homes. Citigroup, as an example, agreed to let certain troubled borrowers save their home through bankruptcy. As you might have guessed, such an effort was originally resisted by lending and housing groups like The National Association of Home Builders and the National Association of Realtors and the proposal failed it’s first time around. As the situation has continued to worsen, however, The Home Builders dropped its opposition to the plan, and the Realtors are still on the fence as to whether they’ll back off from the proposal, too. The plan aims to allow bankruptcy judges to erase a share of mortgage debts, although how much exactly and whether it’ll continue to help people stay in their homes is up for debate.

Fannie and Freddie, for it’s part, is also working to give borrowers more time to work things out. The hope is that homeowners will be able to put off the road to foreclosure until modification efforts take place. As to how many homeowners this will actually help, I’m not sure and neither is anyone else… the company doesn’t keep track of how many borrowers the moratorium will help.

Ultimately, I’m sure that loan modification efforts will continue to help some homeowners, and for that reason alone it may be worth continuing to pursue such efforts. If they expect to make an impact on the upcoming wave of foreclosures, however, both legislators and financial institutions alike will have to bring more to the table.

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