Preparing mortgage aid programs and loan modification schemes is not easy. Not as hard as struggling with a mortgage you can’t afford and trying to get a loan modification from heartless corporations that simply want to milk the proverbial consumer cow, so I am not expecting any sympathy, but nevertheless it is hard.
The Government has provided a whole variety of programs in order to deal with the different type of struggling borrowers, or have they? I actually believe the government has a vested interest in making loan modifications work, they want to get reelected and people having a roof under which to live is a big part of what makes us feel a government is looking after our interests.
However there is an alternative way of looking at things. Loan modifications are designed so that only after an initial loan modification trial where the borrower proves he can pay the modified monthly payments faithfully does the full loan modification come into action.
This could seem fair and logical. Only after a show of good faith should borrowers get a second chance. The only catch with this reasoning is that banks do not have to show similar evidence of good faith.
Another problem with the loan modification’s program is that while borrowers are asked to pay for their mortgage religiously in the loan trial, the foreclosure process continues unfazed. This is very disturbing. To think that a borrower is lulled into a false sense of security while notices of default turn into repossessions and ultimately evictions while the borrower is sweating blood in order to pay the mortgage on a house that very well maybe hopelessly underwater is tragic.
Some would say that the whole loan modification program can be used by banks to take a failing loan into the process and with Washington’s blessing milk a final three months of payments while offering nothing more than an empty promise.
Although there very well might be some truth in these words I think we might be forgetting the cost of processing a loan modification for a bank, the paperwork, the time and the paperwork involved make loan modifications expensive. In fact many believe that foreclosures are actually cheaper than loan modifications for banks. It would be interesting to know if this is still the case if we put three extra mortgage payments into the equation.
Before we get too emotional, many of us get ourselves into trouble by over borrowing and over spending on overprized homes. Foreclosure could in these circumstances be the reasonable route.
Whatever may be the case how sad that loan modifications could, by error or design, end up being simply a way of milking struggling borrowers from an extra three months of payments before foreclosing their homes.
Last 3 posts by Andrew
- Loan Modification Tips: How to Choose the Better Loan? - April 29th, 2010
- Top 5 Loan Modification Tips to Avoid Foreclosure - April 24th, 2010
- Banker's Choose not to Swallow Obama's Loan Modification Bitter Pill - April 18th, 2010
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