Benefits For All When Loan Modifications Work

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Benefits For All When Loan Modifications Work

Loan modifications have a bad reputation for being expensive on the customer and a gold mine for the greedy banks that offer them. It is true that a bad loan modification can be expensive and even lethal for a family’s economy. We saw this during the housing boom when owners saw their house value increasing with no end in sight and decided to “free” some of their locked capital by modifying their mortgage to have some cash to spend on their home, buy a car or go on the holidays of their dreams. This was all fine and good until financial hardship hits and incomes wobble and home prices topple.

To illustrate, just in Queens, New York, 100 families lose their homes to foreclosures. The President of Queen’s Borough, Helen Marshal blames the “mortgage lenders and realtors” who prey on uninformed homeowners “trying to plug into the American dream”. According the Marshall homeowners panic when they receive the foreclosure notices and don’t seek help due to shame and confusion.

Sadly the 100 families a week in Queens, the 13,000 homes in the city of New York and the 4.5 million distress foreclosures nationwide may have had or even have a chance to never occur with smart and fair loan modifications. This way everybody is a winner, families don’t lose their homes, banks don’t lose money but make more instead. However as Queen’s President said lack of information is often the worst culprit for foreclosures, home owners don’t know what to do, feel embarrassed to find out and end up losing all they have.

A good example of a success story in foreclosure avoidance is that of Philadelphia which New York City is trying to imitate. In 2008 the Mayor of Philadelphia Michael Nutter and the Association of Community Organizations for Reform Now (ACORN) started up the Philadelphia Foreclosure Diversion Program. The main resource the program offers is information and advice for home owners in risk of losing their home. Nutter admits that one of the hardest tasks of the program was to attract the homeowners in order to give them the information and advice. The program took drastic measures and Jehovah’s Witness style went from door to door to talk to the people that needed the help.

The results?

In Philadelphia alone 3,380 homeowners at risk have entered a pre-foreclosure mediation process, PFDF, 1,200 have reached an agreement and 1,500 are still in the process of being settled.
If you live in New York you can now call 311 to get advice on your home and the risk of foreclosure but wherever you live you can get advice and counsel from financial advisers, websites like ours and your bank that is very interested in coming to an agreement with you before foreclosure is even a risk.