Should I Accept A Loan Modification?

by Jenner on April 24, 2013

Daily we hear the question “Can I get a loan modification?”  Of course, in an ideal world who wouldn’t want to keep their home?  The real question owners should be asking themselves is, “If I am offered a loan modification, should I accept it?  In its Quarterly Report submitted to Congress today, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) released some staggering numbers relating to modifications.

Of the owners who jumped through all the hoops, submitted all the paperwork and made all the phone calls necessary to qualify and receive a HAMP permanent mortgage modification the failure rate is outrageous.  As of March 31, the modifications done in the third quarter of 2009 have a default rate of over 46%. 46% – half are right back in default!!  SIGTARP is concerned that these defaults are not declining as planned but actually increasing at an alarming rate.

The owner’s goal with a loan modification is to have their monthly payment reduced to an affordable amount, end their mortgage crisis, keep their home and stop their plummeting credit rating.  The result is actually the opposite for hundreds of thousands.  Roughly half of those 2009 modifications just extended the owners pain by 4 years!  Their house is in default again, their credit is taking a hit and they are right back on the edge of foreclosure. Instead of having the nightmare behind them, they have been living it daily for four more years!

Comparatively, those who ejected, ie those who participated in a short sale, have had 4 years to rebuild their credit.  They are now in position to take advantage of lower property prices, great mortgage rates and are capable of purchasing a house they can actually afford to own.  Those who took advantage of a short sale early are in position now to buy your house, either in a a short sale or at auction.

So, remember, just because your lender offers you a modification it may not be in your best interest to accept it.  Evaluate your position, talk with an accountant, make sure you are in a position to afford the house.  They sold it too you once when it was out of your price range, God knows they will do it to you again.

 

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If you are behind on your mortgage payments and concerned you will become a foreclosure victim, a piece of good news in an otherwise cloudy sky.  Lenders have allocated the resources and systems to, for the first time ever, complete more short sales than foreclosures.

While short sales remain a complex and arduous process, utilizing a skilled real estate agent will remove the burdens from the owner and enable them to complete the process with minimal effort and often at no cost.

Click here for the full article on Bloomberg Business Week

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