mortgagemodification

“If it were just a matter of Mortgage Modification and the renegotiating monthly payments, I’d feel a lot better about these programs. But there are just too many other forces at work,” said Debi Averett, founder of the widely read real estate blog HousingDoom.com. Home values that have yet to reach a bottom, rising unemployment figures, and the difficulties inherent to renegotiating mortgages that have changed hands many times, to name just a few of those forces. Meanwhile, the numbers just keep getting worse: foreclosure filings rose 71% in the third quarter from a year ago, and nearly 4 million homeowners are currently at least one payment behind, according to the Mortgage Bankers Association. The Center for Responsible Lending, an advocacy group, has amended its estimate of the number of foreclosures expected from late 2008 through 2009 from 1.1 million to 2.2 million. Banks have responded in kind. Citigroup earlier this month imposed a moratorium on most foreclosures as part of a broad program aimed at preventing mortgage defaults and ultimately keep homeowners in their homes. The bank said mortgage holders facing foreclosure who want to stay in their homes can do so if the home is their primary residence, the borrower is working in good faith with Citi and can prove sufficient income to continue making renegotiated monthly payments.

A homeowner will receive on average 250 cards and letters from folks who try to do business with families in distress,” said David Petrovich, executive director of the Society for the Preservation of Continued Homeownership, a nonprofit group in Ocean Township. “The key is to not immediately rush into paying for a service without first reviewing the decision with someone else.”

The Smiths are far from alone. The housing market began to collapse in 2008, when buyers couldn’t keep up with their escalating mortgage payments and went into default. It sent the economy into a tailspin. Home prices fell. Consumers stopped spending. Workers lost their jobs. And foreclosures rose even more.

Servicing is costly, and increasing loan modification increases the costs of servicing. While the practice of modifying loans shows promise, the practice is highly risky, both to the consumer and the lender, and substantially unproven. Moreover, there are currently no industry standards for a loan modification and financial reporting, and no consumer safeguards to monitor or prohibit predatory practices. Modification will not be suited to helping avoid the massive defaults expected as a result of ARM interest rate resets, which account for the majority of the industries problems into 2008. Legislative pushes to mis-apply the practice to those ends will substantially worsen industry performance. One of the key reasons loan modification has grown has been to skew financial reporting of delinquencies, modifying loans to help borrowers make a few payments and then aggressively reaging the accounts to classify them as “current,” instead of “delinquent.