3 Reasons Mortgage Modifications Are Failing

In February, with great fanfare, the government announced a mortgage modification program targeting loans backed by Fannie Mae (NYSE: FNM  ) and Freddie Mac (NYSE: FRE  ) . It was designed to stem the surge in foreclosures and give the little guy a chance. A bailout for the average Joe, to fix housing and get the economy back on track.                    

Yet the program has begun with little more than a whimper, as shown by the percentage of eligible mortgages granted trial modifications through July:

Bank/Servicer

Percentage of Eligible Mortgages Granted Trial Modification

JPMorgan Chase (NYSE: JPM  )

20%

GMAC

20%

Citigroup (NYSE: C  )

15%

Wells Fargo (NYSE: WFC  )

6%

Bank of America (NYSE: BAC  )

4%

Greentree

4%

Carrington

4%

Bayview

3%

Select Portfolio

3%

Wachovia*

2%

Wilshire

1%

National City**

0%

Source: U.S. Treasury.
*Part of Wells Fargo
**Part of PNC

The slow start might seem strange, because banks are supposed to have an incentive to modify their hearts out. Save a mortgage that would otherwise default, and the bank forgoes the agony of foreclosing -- in theory, anyway. Furthermore, the program gives mortgage servicers incentives -- up to $4,000 -- for every successfully modified mortgage.

So what gives?
Many factors are stalling the modification process, -- not the least of which is the crushing demand banks can't keep up with. But a recent report by the Federal Reserve Bank of Boston gives a few less obvious reasons.

1. They called your bluff
Modifications cost banks money. By either reducing current payments or forgiving debt, the bank is making a sacrifice that benefits the homeowner.

Banks know this. And homeowners know this. Naturally, there's an incentive for homeowners to try to game the system, intentionally skipping payments to become eligible for a modification, even if they don't actually need assistance.

The Boston Fed report elaborates on the outcome of this. In summary: "[M]ore than 30 percent of seriously delinquent borrowers "cure" without receiving a modification; if taken at face value, this means that, in expectation, 30 percent of the money spent on a given modification is wasted."

Thirty percent isn't a trivial number. And it's only logical to assume banks are not oblivious to this fact, declining modifications they feel aren't worthy.  

A recent article in The Wall Street Journal highlighted the brazen tactics some housing counseling services encourage homeowners to take. "Some borrowers say they are being told to stop making loan payments and seek a modification later," the article noted, to which one homeowner responded:

To be told I should do something to put my family in this risky position doesn't make sense. I had a lot of faith in the system. For me, it's really shocking and jarring to see that the system doesn't work.

Shocking, indeed.

2. They think you're a lost cause
As I showed last month, the redefault rate on modifications is ghastly. Ninety days out, nearly half of modifications are back in default, making it nothing more than delaying the inevitable.

Now think of this from a bank's point of view: It can foreclose today and sell the house at today's price, or foreclose down the road, and sell the house at a price that has likely since declined. When prices are falling, it's often more profitable to foreclose today than to give a homeowner a second chance.

Again, from the Boston Fed:

[T]he lender has simply postponed foreclosure; in a world with rapidly falling house prices, the lender will now recover even less in foreclosure. In addition, a borrower who faces a high likelihood of eventually losing the home will do little or nothing to maintain the house or may even contribute to its deterioration, again reducing the expected recovery by the lender.

3. They're basking in fees
Credit card companies love people who don't pay their bills on time. Banks love people who overdraw on their checking account. While this doesn't seem intuitive, the amount of fees they can suck out of delinquent customers is staggeringly large.

Same goes with homeowners. As borrowers miss payments, late fees rack up. The longer they're late, the more fees accrue. And a mortgage servicer often can't collect those fees until the house is sold in foreclosure.

Again, from the Boston Fed: "[T]he rules by which servicers are reimbursed for expenses may provide a perverse incentive to foreclose rather than modify."

In short, foreclosure can be easier, quicker, and perhaps more profitable than a modification. The New York Times quotes a Florida real estate lawyer who summed up this situation nicely:

It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen. I don't think they're motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It's a license to do whatever they want.

Granted, this seems to contradict problem No. 2. Thus, note that tacking on fees while waiting to foreclose benefits the mortgage servicer, not the investor that holds the loan (which, in this case, are usually bundled mortgage securities).

Your turn to chime in
Have any stories about the modification process -- for better or worse? We'd love to hear 'em. Feel free to share your thoughts in the comment section below.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (35) | Recommend This Article (37)

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  • Report this Comment On August 13, 2009, at 1:00 PM, callmike2 wrote:

    To provide a balanced report, the writer should also consider the borrower's perspective. As I discovered, the closing costs I was quoted for refinancing ranged from $1800 - $3500 for a loan in the $100,000 range. Additionally, while the fixed interest rate was preferable to the adjustable rate, it was still at the regular interest rate for 30-year mortgages. When we asked how we were supposed to come up with $3500, the lender said it could be added to the loan. How is a program like this going to help anyone??? It provided no relief in our situation. Why not take some of those billions that this ill-advised administration is throwing at ineffective programs and provide some mortgage assistance relief to families. $500 a month to get over a rough spot would help more than these rigged up refinance packages. Also, if/when the Cap and Trade bill is passed, you might as well stick another $300 monthly onto the utility bills and the rate of foreclosures is going to increase again.

  • Report this Comment On August 13, 2009, at 1:01 PM, tmtm736 wrote:

    I know so many people in Miami that are abusing the loan modification program. One in particular said she stop paying mortgage even though she can afford the mortgage and has no money issues. She said she paid a lawyer and he said to stop paying the mortgage and after 6 months the bank will modify her loan and he will take care of it all. So she's saving the 6 months of payment and the tax payer will probably end up paying for her mortgage while she has 6 months of mortgage money to enjoy. Miami is the place to be if you want to make easy money during the boom and now after the bust :-)

  • Report this Comment On August 13, 2009, at 1:01 PM, TMFHousel wrote:

    callmike2,

    That's a great perspective. Thank you for the input!

    -Morgan

  • Report this Comment On August 13, 2009, at 1:02 PM, timepasskaro wrote:

    Yes, the program is not working and I am one of few fools who trusted the program in first place.

    History: Got approved for re-finance in December'08 at 4.75 % and have to pay ~$175.00 in MI. Heard about the government program with no MI and decided to wait.

    Bank took more than 6 months to approve my refinance request, and thus previous Credit and Appraisal were out dated. They re-appraised my house even lower, this time counting only foreclosed home in my neighborhood.

    Current: Now I don't have much equity, despite the fact that I pad $110000 in principal. The interest rate the bank is offering is much higher even after paying 1 point and have to put more money down in principal to bring LTV to 95%.

    Original purchase price: 430, paid $110K in principal and still current.

    The process and the program sucks, it’s like squeeze more money from genuine home owners and give them to risky / failed home owners.

    Come on give us a break.

  • Report this Comment On August 13, 2009, at 1:26 PM, Francorp wrote:

    In the grand scheme of things, it again becomes clear that nothing in life is free....even when your own government tells you it will be free! I am buying Freddie Mac stock though, FRE is being handed the silver platter much like C and BAC have been, seems like a gift investment to me.

  • Report this Comment On August 13, 2009, at 2:50 PM, hidywho wrote:

    I am currently having my paycheck garnished and it results in my total home mortgages, including both 1st and 2nd, are now approximately 80% of my net take-home pay. I called and asked for mortgage modification from Carrington and they said that I don't qualify because according to their formula, I don't have a hardship. It seems that their formula does not provide any allowances for garnishments, 2nd mortgages, taxes, catastrophic losses, or any other such expenditures. And if we pretend that none of those real world things exist, then there would in fact be no hardship.

    The problem is, I can't seem to get the others to pretend that their debts don't exist.

  • Report this Comment On August 13, 2009, at 4:58 PM, OCJeff wrote:

    I am confused by the last point. If the homeowner cannot legitimately make their mortgage payments, how can the servicer reasonably expect to receive payment on the penalties and fees? It seems the epitome of trying to bet blood from a stone. Perhaps these are treated differently somehow or since the servicer may be different than the mortgage holder, they have nothing to lose by trying to extract the additional fees.

  • Report this Comment On August 13, 2009, at 5:02 PM, plange01 wrote:

    most mortgage changes fail simply because these loans never should have been made.mortgage salesmen on commision sold customers anything to make money..ex treasuary secratary alan greenspan was totally fooled into lowering rates much to low by wall st and created the great housing expansion and its later collapse that has sent the US into a depression...

  • Report this Comment On August 13, 2009, at 5:12 PM, OneLegged wrote:

    There may be another incentive on the part of lenders to not foreclose. If they keep a troubled mortgage on their books they can now value it at something other than market value while many times continuing to accrue late fees. If the bank follows through on the foreclosure the house is auctioned off and the depreciated home's value is set in stone which makes their bottom line not look as good.

  • Report this Comment On August 13, 2009, at 5:24 PM, GCshipbuilder wrote:

    I found out through numerous telemarketing calls and some following research that the modifications are NOT refi's. Most of these posts are concerning people going to banks looking to refi. That is not the same. The modifcation program, as I know it which is limited, is supposed to modify a mortgage WITHOUT the homeowner having to repay closing costs. Yes, it is unfair that those of us making our mortgage payments do not get the chance to refi at a lower rate, but unfortunately that is the way it is. The rates as they are are decent but not great. If you are paying your mortgage fine, I would wait. Stop flooding the system with refi's for mediocre rates.

  • Report this Comment On August 13, 2009, at 5:54 PM, valswilliams wrote:

    While you do have many abusers not everyone is doing it; however, with the economy being as it is most people are suffering. I have two home (primary) and a second home that I purchased to help a friend that was losing her home due to financial problems. When I purchased the home it was with the understanding that the friend would repurchase it within 2 years but now that the bottom have dropped and she is now divorced I'm suffering because she can no longer afford to pay her mortgage and I can not afford to pay 2 mortgage. Beside that I lost my job so we only have one income. At this point I don't have a choice and I want to do the right thing. She want to stay in the home but at half the mortgage and I just want OUT. I'm not sure what to do. I admit we owe but what can we do especially now that at the time of purchase the house was work 315K and now I can possibly sell it for 215K.

  • Report this Comment On August 13, 2009, at 6:26 PM, artbros wrote:

    Carrington Mortgage Services (one of those noted on the matrix) with a 4% modificatioin success rate, or should we call it a 96% failure rate, is being sued by Ohio's Attorney General for unfair and deceptive practices. Do a google search on it. These so called "modification" programs from Carrington and others of their ilk are nothing more than thinly veiled attempts to extort money for past payments BEFORE they will even attempt to modify. While no one disputes that they have the right to collect on a past debt, the process they have created is clearly without merit. If 30% cure what about the other 66% that do not? They SHOULD take the hardship package from the defaulting buyer analyse it right off the bat, no strings attached, and THEN workout a program with the borrower that fits their needs. Instead, they refuse to even look at it until you send them some of the past due payments. For someone in a real hardship position this is impossible. Many of them, 66% of them according to this article, throw up their hands and go into a full fetal position until the hammer falls. If people without hardship are missing their payments on purpose, they should face criminal charges when they apply for modification, just like someone who commits welfare fraud. Because that is what mortgage modifications are, nothing but government welfare. Trickle down welfare from banks that are sucking at the taxpayers teat. If Obama wants to get this program working he needs to put some teeth in it. Bite the banks and bite those committing fraud.

  • Report this Comment On August 13, 2009, at 7:24 PM, LydiaVorst wrote:

    Since the lending banks just got a huge infusion of cash from us, the taxpayers, via the government bank bailouts, I fail to see how they have much of an incentive to help people modify their mortgages.

    The bailout money helps offset their loan losses on the mortgage and the foreclosures allow them to keep the loan assets, that is the houses.

    A Bank of America representative told me that tshe has not seen the principal reduced on any mortgages.

    Interesting article from Bloomberg:

    http://www.bloomberg.com/apps/news?pid=washingtonstory&s...

    about the bailout, and how $9.7trillion that government had committed to spend would have paid off over 90% of all US mortgages.

  • Report this Comment On August 13, 2009, at 8:04 PM, RobtAlan wrote:

    I am in the modification program. I need the modification as the loan I was originally promised when I built my home was changed by the lender. My business fell apart with the recession and my clients all stopped paying their bills. My bank is no longer in business taken over by the Feds and so I hold them in a little less contempt. The Feds have cut my payments for 6 months to see if a modification will work. (This is my belief. So the Feds aren't stupid, they are learning and the program appears to be working.)

    The lady in Florida who is trying to take advantage of the system and doesn't need the help will get found out and when she does there will be penalties and interest assessed. They just have to look at her tax returns. Her lawyer will be harder to prosecute, but somebody had to have lied about the numbers and I'll put my money on the greedy rip off artist. With everything being done electronically, most records are an open book.

  • Report this Comment On August 13, 2009, at 8:32 PM, shewrites1102 wrote:

    The loan modification program is totally bogus and is another "sleight of hand" by the Administration to keep the banks mollified while it rapes the taxpayer. We tried for 9 months to modify with Saxon (recently highlighted in the WSJ as the worst of all lenders). They ignored us into default. After hiring an attorney, we got a temporary loan mod that lowered the IR but tacked on late fees and Saxon's legal fees on the back end of a 30-year. Didn't matter, we couldn't handle it so now we are battling to get rid of it in short sale. In 30 years, we never missed a mortgage payment. Now we hope to sell it to an investor who will get rent from us. Always follow the money trail.

  • Report this Comment On August 13, 2009, at 9:56 PM, kamuirei wrote:

    Completely unrelated to the post:

    Dear MF,

    Can you add the ability to give a thumbs down to posts? I think this would greatly reduce the "spam for recs posts" and raise the overall quality of content by both MF staff and users alike. From a marketing standpoint you would instantly know which articles are more favorable to your audience.

  • Report this Comment On August 14, 2009, at 12:57 AM, QuestioningIt wrote:

    My comments, my low level mortgage industry employment perspective, and my personal loan modification horror story: Your points, "banks are supposed to have an incentive to modify their hearts out ... program gives mortgage servicers incentives .... for every successfully modified mortgage" and "by ... forgiving debt, the bank is making a sacrifice that benefits the homeowner" Then citing the Boston Federal Reserve Report "[M]ore than 30 percent of seriously delinquent borrowers "cure" without receiving a modification", and go on to add, "nearly half of modifications are back in default". "Again, from the Boston Fed: [T]he lender has simply postponed foreclosure; in a world with rapidly falling house prices, the lender will now recover even less in foreclosure." I take issue with the Fed Report and the conclusion of most articles on the subject published in the last few weeks. The Fed Report compared apples to oranges.

    Your article CORRECTLY makes the points "Credit card companies love people who don't pay their bills on time. Banks love people who overdraw on their checking account. While this doesn't seem intuitive, the amount of fees they can suck out of delinquent customers is staggeringly large. Same goes with homeowners. As borrowers miss payments, late fees rack up. The longer they're late, the more fees accrue. And a mortgage servicer often can't collect those fees until the house is sold in foreclosure."

    I agree, "Granted, this seems to contradict problem No. 2. Thus, note that tacking on fees while waiting to foreclose benefits the mortgage servicer, not the investor that holds the loan ..." Your article correctly makes the point there is the contradiction between borrowers seemingly "gaming the system" (taking bad advice from advisors charging them to "help" them, or thinking being late is a ticket to ride to modification heaven while ignoring the destruction of their FICOs and future buying power), and "nearly half of modifications are back in default" in 90 days. My perspective is the Boston Fed Report is erroneous in its conclusion the "... lender has simply postponed foreclosure; in a world with rapidly falling house prices, the lender will now recover even less in foreclosure", because the vast majority of modifications the Fed looked at did NOT reduce principal (to 90% of valuation per HAMP guidelines) or reduce rate, and were NOT done using the DTI guidelines of the HAMP meaning a 31% DTI for mortgage payments. The Fed failed to recognize the facts those non-gamer late borrowers had struggled for months, and in the process used up their reserves, and maybe accrued larger credit card debt before reaching out for help, and/or the profoundly affected unemployed borrower that has had the financial rug ripped-out from underneath. I would like to see the Boston Fed do a report on HAMP guideline modifications only, for the subset of still employed.

    Returning to the erroneous conclusion the " ... lender has simply postponed foreclosure ...". It may look good for a servicer to appear to give a borrower a break, but if the mortgage DTI is 55% and there was no principal reduction, it could be said the servicer is gaming the borrower, the lender, AND the Fed, and IN FACT WANTS TO POSTPONE FORECLOSURE. Your article's best point is the servicer's fees go up monthly, BUT IS WRONG in stating "In short, foreclosure can be easier, quicker, and perhaps more profitable than a modification". In real life, the actual practice is the servicer DOES NOT WANT A QUICKER foreclosure because the profit is GREATER in delaying. That is why, in my opinion, just like credit card companies that make MORE money on extending a problem than solving it, foreclosures AND SHORT SALES are delayed by the servicer for months so they can increase their profits (not the lender's). In the case of short sales, too often the new buyer walks away, and the existing borrower starts all over at a lower sales price, all the while the servicer compounds their profit. Short Sales are the LAST thing a servicer wants to happen.

    Concerning the point " ... in a world with rapidly falling house prices, the lender will now recover even less in foreclosure". And so it is. The servicer is morally and ethically NOT intent on lessening the lender's loss, because it is not part of their agreement, and besides, banks do not have morals ... only people do ... sometimes. If I understand correctly, the servicer gets ALL their accrued fees from the final sale of the property FIRST (the more the better for them), and the lender gets what remains from the property that was likely NOT maintained, and had likely lost HALF its currently already devalued market price. One might wonder WHY is it not important for the LENDER to want a "better" outcome? Look at the functions of the mortgage modifications as they are currently being done (NOT in accordance with the government's HAMP guidelines): The servicer has no RISK and functions only to create better profit for itself, which is maximized the longer a single foreclosure takes, AND the MORE FORECLOSURES THE BETTER (as compared to the pittance the HAMP program offers, or its intended goal of stabilizing the market and economy). Your point is the lender will recover less, but the lender has NOTHING TO LOSE as it has already past the RISK on to the those that are stuck with poorly performing bundled mortgage securities. In fact the lender's function is to find NEW mortgages on the horizon, and sell MORE securities. They made their money on the now failing loan when they past off the risk, and want to do it again ... like the savvy bank CEO says, "Never hold risk". If they suffer ANY loss now, it is a tax write-off to be set against TARP funds and/or ongoing zero percentage Fed window loans, but surely will NOT be allowed to affect senior management's bonus structure. (Thank their bean counters, and the tax code for big banks.)

    It seems to me Roubini said it all in September, 2008 " ... socialism for the rich, the well connected and Wall Street. A socialism where profits are privatized and losses are socialized with the US tax-payer being charged the bill of $300 billion ...." Well Roubini said that when it was a mere $300bn. May I add to that, tax payers AND a significant percentage of no longer middle class consumers that find themselves relegated by decimated FICO scores to seven years of wondering in the desert of HIGHER interest rates (higher yield future profit credit). It is my opinion that until lenders (mortgage note "holder") banks are legislated to return to the business model of being required to actually hold or keep a significant portion of their mortgage portfolio, and servicer banks (debt collectors primarily benefitting from borrower's failures) are legislated to reduced fees, this all will continue.

    Not that it is important, but this author worked several years part time in various loan officer positions in order to have time to care for my disabled wife. I was NOT highly trained and educated in the field, and had no management or higher positions from which to be as knowledgeable as many of your readers. So anything I have an opinion about should be taken with a grain of salt. My last position was that of a mortgage loan officer in the Portfolio Retention Division of World Savings Mortgage Bank. That bank's business model was different in many ways than any we have discussed; it NEVER sold a single ARM (it did not bailout on the risk by taking the profit and running away, like virtually all major banks do when they sell the paper as a collateralized debt obligations); and we serviced ALL our own mortgages (we kept the relationship with us the holder of the note, and the customer/borrower, thus having a permanent shared risk with them). My primary task was to modify existing loans from ARMs to fixed rate loans (at very competitive interest rates usually about 0.25% above the going rate) for a minor one time charge of about $500.00, and we kept the term (years remaining) of the loan the SAME. We did NOT force our customers into starting over with a new 30 year refinanced loan, and thousands of dollars of refinancing fees. When Wachovia shut down our division after buying the bank, it set itself up and many of its World ARM loan customers for failure; Wachovia destroyed the very mechanism that could have saved its World Savings portfolio, which was better underwritten than their portfolio of ARMs, and ALL originally 80% LTV with WORLD's OWN IN-HOUSE HONEST APPRAISALS (a key business model difference). Insiders have told me it was Wachovia's inability to replicate the modification system World had in place and was shutdown, AND Wachovia's own ARM portfolio that blew up on them leading them to their own demise, all thanks to their own not-so-brilliant leadership. (So please excuse my laughter when I read it and other banks are slow to train people, or get started in the modification process. If that is so, fire all the CEOs, and find mature rational adults capable of recognizing reality.)

    Writing about negatives does NOT solve a given problem. Suggesting solutions is ignorable, but at least stimulates exchange of information, if not creating solutions. So no doubt these suggestions will be considered ignorant by many or most, but it is my opinion at this point in time modifying loans one-at-a-time can not work. Mass modifications makes since IF it really is a goal to curtail the losses to the borrowers and stabilize the economy. It would be MUCH simpler to take every pay option ARM, freeze the mandatory annual increase of Minimum Payment feature; reduce the interest rate by half or two thirds of each mortgage's MARGIN, for a set time (say 48 months) with a provision resets are suspended; AND legislate lower or maximum servicing fees for the same 48 months, so it motivates servicers to achieve success. If the government wanted to reimburse the lender banks half their margin loss, it would seem a sound investment. I do believe the accounting mechanism for this is rather simple in that every mortgage statement has a clear margin calculation. (I do NOT think ANY bank cares about stabilizing the market; it is as if they are not citizens of our nation, just leaches on the economy so please forget the moral hazard rejoinder.) OR, here is another idea, use the national housing valuation data that has been recognized as more accurate than individual time consuming personal one-on-one appraisals, and through computerized billing department data, just automatically DO a million loan modifications a week using the government plan (HAMP) guidelines, and see if that works after a while.

    Unless you change direction, you will end up going where you are headed. The nations housing valuations are not going to stop falling, and the mass destruction of the middle class will only accelerate, unless we change direction. But one person suggested to me I am just wrong because it is better to wipe-out most of the middle class, and all their net worths, and all their children's educational futures, and any hopes they will ever retire, etc. to achieve real market prices for homes as fast as possible, so we can start the bubble over.

    My mortgage loan is serviced by Countrywide (I started with First Horizon Mortgage), but Bank of New York holds the note. I too attempted to obtain a mortgage modification through Countrywide, and was told it was approved by them, but that Bank of New York supposedly disagreed. I was told by a Countrywide employee Bank of New York has a policy of NO modifications, and even if they wanted to agree, they could not get the permission of those that now have an interest in the note (collateralized debt obligation) because they could not economically contact all those entities, or practically achieve unanimous concurrence. I contacted Bank of New York by email and asked they verify the information, but after they acknowledged my inquiry, they have never gotten back to me. When I started I had an 810 FICO; told the truth on the application under penalty of perjury; had steady reasonable income above my U. S. government pension; and my down payment was $185,000.00 which resulted in a $450,000.00 jumbo ARM (NOT a subprime loan). I later added a $75,000 second and spent ALL the money on the property from landscaping, a structural addition, to upgraded insulation, NOT vacations and new cars like some. I will go into foreclosure soon as my unemployment income has expired. I will not be able to "self cure". My $185,000 down payment and out-of-pocket closing expenses is gone. The property is worth what I can get someone to pay, regardless of owing less than $525,000 (imagine that, a pay option ARM with NO negative amortization), but I am located in a tiny town of less than 20,000 people (and shrinking) near Las Vegas, NV where the unemployment rate is profound, vast sections of the city is foreclosed subdivisions, and at 62 years old I will not be able to start over with nothing down, a permanently disabled wife, and a FICO of 525 to 575 which is inevitable.

    My personal solution may sound odd, but my government pension, and my wife's Social Security disability income, will allow us to live in another (second world) country where we can save some of our income, pay as we go free of loans, and far away from the land of the perpetually debt ridden, where banks tell Congress, the citizenry, and the President what rules they decide to live by.

  • Report this Comment On August 14, 2009, at 11:31 AM, believeuhe wrote:

    Another country is sounding better all the time. I heard that over 16% of every Government dollar goes back out in direct pay to either a Government program or employees of the Government. You can't help those that don't want to help themselves, only prolong the inevitable and that includes health care. For instance if you are a person who is often late to work, gets fired often or does not go to work at all, I don't want to pay for your health care - sorry. It is not an automatic right to have a family, a home, a regular Doctor and a car. These things are best appreciated when they are earned. If this country continues toward socialism, it will do so without me.

  • Report this Comment On August 14, 2009, at 1:35 PM, c0wpatty wrote:

    My son bought a house at the height of the boom for $465K with a 20% down ARM. Wells Fargo services the loan which is owned by Freddie Mac. This house now appraises for under $150K, my son applied for a loan mod in 11/08 after his income dropped and just rec'd. his offer. They'll lower his payment (but not his principal) by loading up the shortages on the back end. He would never ever be able to sell his house as the loan balance of $370K would just increase over time. My son would be willing to rewrite a new loan for $200K which he could afford but they said "Can't do. Talk to Freddie Mac" Only problem is, you can't. I tried. You have to talk through the servicer. So Freddie Mac will be lucky to get $130K out of this loan from a short sale instead of the $200K and my son loses everything. But Wells Fargo will still get a fat fee for handling a forclosure or a short sale. They just have no incentive to make things work out so the lender and the borrower both lose more money than is necessary.

  • Report this Comment On August 14, 2009, at 1:48 PM, stonebusted wrote:

    I am afraid that the average american is screwed. Banks, the legal system, and congress should all be put on trial judged by juries selected buy lot.

  • Report this Comment On August 14, 2009, at 3:37 PM, rob0nv wrote:

    The problem that surfaces in nearly all discussions of this problem is a fundimental disconnect between the views of the average homeowner and the views of the lenders/servicers.

    To the average homeowner, mortgage debt is a matter of personal honor and integrity. To the banks this is a matter of business. Lets look at the consequences of swapping views.

    If the homeowner views the mortgage from a business perspective, then falling housing values relative to the amount of debt becomes a significant factor in deciding whether making a mortgage payment is a good decision. In most parts of the country, rents never rose in tandem with the housing price bubble, so it is cheaper to pay rent for the same amount of space than it is to pay a mortgage. Even more so when you factor in maintenance expenses that are largely borne by the landlord. Whether or not you have the income to pay the mortgage is irrelevant when you are making the business decision of how to spend money and accumulate wealth. If you owe more than the value of your home, and you believe that housing values will continue to fall - or if you believe that the time required for the value of your "investment" to return to par results in a rate of return below what you could get with other kinds of investments - then the smart business move is to abandon the mortgage, go rent and invest your money elsewhere.

    If a lender (or servicer) views a mortgage it holds as a matter of honor and integrity, then the very last thing it wants to do is foreclose on a struggling family. From that point of view, falling housing values relative to the amount the debt becomes a significant factor in deciding how to work with the borrower. The loss is already there on paper; foreclosure merely realizes the loss and makes it permanent. Tacking on fees is nothing more than a bookkeeping artiface, moving money from one account to another but not changing the bottom line which is dictated by the value of the home. Further, every foreclosure presents the unpleasantness of throwing a family out coupled with the business foolishness of putting another asset for sale in an already over-saturated market. The lender's most honorable choice is to work to keep the family in the house by crafting a payment plan that 1) recognizes the borrowers current circumstances with payment levels they can really afford; 2) recognizes the loss both sides have taken in the housing market, perhaps by reducing principal (possibly in exchange for sharing future gains); and 3) avoids punishing the homeowner through fees and penalties that tend to put the homeowner in a worse position. The most honorable choice is probably also the best business choice, but I digress.

    This disconnect is a big part of the problem and our failure to deal with it - and results in the oddity of our distaste for the homeowner who makes a sound business decision, and our puzzlement at the failure of lenders/servicers to make the moral choice to try to help homeowners through this "spot of bother" in a way that can really work.

    Lenders are not about to be driven by virtue, so the only way to solve the disconnect is for homeowners to become business people. That means that you recognize losses where you must and reposition your money to build for the future. That means you take a tactical view of your relationship with your lender - you decide what terms you need, you demand them, and walk if you can't get them. That means you take a hard look at the mortgage paper trail and seek weaknesses. The wild securitizing of mortgage debt and frequent sales - how many times has your mortgage changed hands? - may well mean that the paperwork is all screwed up. Who really owns the note? Can they actually produce the original note, which is required to foreclose in most cases? Does the current note holder actually have rights in the Deed of Trust securing the note? Mortgage law is local and ideosyncratic, but the market for securitized mortgages was international. Consider the potential and go to war with the lender. Use bankruptcy as a tactical tool (it is for business; why should families have to play by different rules?).

    Horrified? Don't be. Now you are leveling the playing field with people who made a fortune underwriting loans - then dumping them through securitization on other "investors" - then reselling them over and over again. They set themselves up to "service" loans creating an obvious, fundimental conflict of interest with the investors they sold the loans to. Do you think they didn't know a bubble was forming? Don't bet on it - not when at the height of the bubble they were offering "option-arm" loans at 125 LTV with no income or asset requirements (some wags noted that all you needed was a heartbeat to qualify).

    Business is business, and when both sides treat it that way you might actually get better decisions and better results.

  • Report this Comment On August 15, 2009, at 12:05 AM, newdebster wrote:

    As with any system that attempts to financially assist individuals, there are always folks that take advantage. I just this week closed my loan modification with BAC which took more than seven months through the nonprofit NACA organization due to backlog! These are the folks that have been doing neighborhood stabilization and attacking preditory loan practices for 22+ years! Kudos to them! They didn't just jump on the bandwagon to make a buck.

    While my total debt owed didn't decrease, I did get out of a lousy subprime "30 year option arm". Truly the worst ARM product ever on the market. NACA also worked with BAC to get me a payment I can better afford than the ARM I had. They have a 10 step process that really makes the homeowner look at a total budget in attempting to keep their homes. Since they are "not in it for the money", so to speak, I think it really helps folks not get suckered into high fee situations to save their homes.

    Even more interesting NACA has a home purchase program with a network of realtors, lenders, and title folks that agree to adopt NACA practices and policies. They are not going to put you into more home than you can afford!

    I couldn't be more pleased at having the biggest example of the American Dream--my home!

  • Report this Comment On August 15, 2009, at 10:42 PM, DanielZuma wrote:

    Thank you all for such a wealth of information.

    I started out with $125,000 equity in my house, but thanks to falling real estate prices, there is very little of that left. I have an adjustable rate mortgage which is now at the lowest rate it has ever been. Even though I spend substantially more than half of my fixed retirement income on mortgage, taxes and insurance, etc., I am still able to make the payments.

    But, when the rates start going back up again, it won't take long before the small cushion I have accumulated to be depleted, and for the payments to exceed my brake even point. At that point, I will be completely and utterly at the mercy off the vicissitudes of the mortgage modification process.

    In other words, by the time I get to a point where I am considered "in trouble" it will already be too late for me. I could, of course, purposely miss a couple of payments in order to signal my distress, but then I would be considered "gaming the system." I might even fall within that 30% category of people who "self-cure." But even if I am able to slide by for some indefinite period of time, there is still that predatory ARM lurking in the background, just waiting for the economy to heat up again, which it inevitably will.

    As I understand it, even if I were to get a loan modification, it wouldn't necessarily get me into a fixed rate mortgage. What I am hearing is that mortgage modifications are temporary. Fixed rates only remain fixed for 48 to 60-months, after which you are back in the same old trap.

    Nothing is going to change unless there is a fundamental shift in the balance of power between borrower and lender. If anything, this whole mortgage modification business strengthens the power of the banks by giving the false impression that the government is doing something for borrowers when in fact it isn't. This is not the Hope and Change I voted for. It is just a cynical attempt to undercut the outrage and demand for change to curb the power of the banks to engage in predatory practices.

    I guess it was too much to hope for that the Democrats would act on behalf of the little guy instead of monied special interests. We are saw the same thing being played out in credit card "reform." And we are seeing it again in health care.

    The economically rational and efficient thing would have been to expand Medicare to everyone, but instead it looks as though we are going to get a mandate that forces everyone to buy private health insurance under slightly advantageous new rules. The government will no doubt subsidize those who would have difficulty paying, leaving the for-profit insurance companies (which serve us so well now) to rake in guaranteed locked-in profits.

    Likewise, the government could have set up a non-profit agency to lend directly to people in or near foreclosure, but instead, the Obama Administration went the much more costly rout of propping up the current crowd of for-profit buccaneers, with their $200 million salaries, corporate jets and bonuses. And the right wing still has the nerve to call Obama a socialist!

  • Report this Comment On August 17, 2009, at 8:15 PM, acds1 wrote:

    The loan modification industry is a joke.

    Here is how I know. I have a client that has PROVEN a loss in income. Now they have asked there lender for a loan modification package, I helped them with the paperwork. They recieved a letter from their lender stating it would take 45 -60 days to review the paperwork. In two weeks they called my client, and told them they had a luxurious life style and need to get rid of their debt. I personally have never heard of such a thing said to a client that has just lost over 80K in annual income and that is current on their payments.

    To add insult to injury, I called the bank with my client on the line and went over the W2's and income tax returns and added up every aspect of the income for 2 years and could prove a loss. The rep assigned to the account still insisted that the items my client has to still pay for are not needed.

    This whole mess derived from greed, and what really sucks is the greed that continues and the ones that REALLY need the help are shafted.

    Hey but Obama's for change.............sounds like the same song to me!

  • Report this Comment On August 20, 2009, at 11:39 AM, ajcoulter wrote:

    My wife and I have been asking for assistance from Chase Home Loans since January 2009 and have been unsuccessful. It is now August 2009 (seven months), and my wife and I are struggling to make our monthly payments.

    In May 2006, my wife qualified solely to purchase our current property in Gaithersburg, Maryland for the purchase price of $536,000.00. At that time, she had been working at the same company for three years and was making a significant amount of money. In October 2006, we got married and moved into the new house with the hopes to build our family at this location.

    Unfortunately, in 2007, my wife was laid off from her job. At the time, we had savings which helped us to stay current with the mortgage and other bills. It took me a while to find a good stable job and during the searching period our savings declined significantly. At this time, our main concern was to keep the mortgage current so we borrowed money from my parents, his parents, and siblings, because of fear of ruining my credit which I have worked so hard to keep in excellent standings.

    My wife has been at her current job for almost a year, but we are and struggling to keep ends meet due to the fact that both of our salaries are not any where near what I solely made back in 2005 and 2006, and the value of our home has significantly decreased to approximately $350,000.00.

    We do not want to lose our home, the home that we have built so many wonderful memories in and worked so hard to purchase. However, Chase has

    not responded. They told us that we must stop making payments for them to even consider a modification. This is so unfair.

    To say the least we don't know what to do. If anyone has any suggestions please let me know.

  • Report this Comment On August 20, 2009, at 12:31 PM, MIbusiness wrote:

    I am an appraiser in Michigan. I could see this coming a mile away with every homeowner I saw. Some I tried to tell them what are you thinking?! But 100% of them just went along for the ride, telling me that it was none of my business. One lady I knew was getting screwed, come on $11k in closing costs on a $100k loan? Yet she replied:"but the loan guy is really nice and I like him". Okay so now this mess is here, congress passed the July 2008 housing act which makes the APPRAISERS have to go back to school!?. I'm currently attending college to get my "Certification" that congress says I must have. They want us to have 21 credit hours in 7 core subjects. Subjects such as Finance, Statistics, Algebra, Business law, Macro-Micro-economics. This is some crazy I tell you. What they SHOULD have done is created a law that states anyone GETTING a mortgage must take a Finance course in budgeting! That would have been more logical.

  • Report this Comment On August 21, 2009, at 12:16 PM, hddad8080 wrote:

    I had started my odyssey to obtain a modification in Feb 09. After providing all the required forms and personal information were submitted to the mortgage company for their review. After one month (not receiving any calls or mail from them) I contacted them to find out my status. I was informed that they were "ramping up" for the announced Obama plan and I should call them in a month or two. This became their response for every time I contacted them to the present. During this time frame the following excuses were, your "information package" was lost or not received. Calling back the next day another "agent" told me that all the information I sent them was indeed in their computer files and they are presently reviewing the "details" of the Obama plan (since I have a FredyMac mortgage) which, are changing every week. (I found out that this was a fabrication in an attempt to increase their time line.) In June I was requested to update and re submit my information and they will reorder another appraisal. (2 so far ) Neither appraiser even got out of his car to look at the house and property. the Mortgage Co. would not reveal the amounts, however I found out they were based on a "short sale" which is significantly lower than that obtained by a commercial appraiser I contracted with who actually did an on site comprehensive appraisal. Here it is, 7 months later and I am still getting the call back in 1 to 2 months reply.However, they are now not using the Obama plan but rather are looking at an "in house" modification. When will it end? I am still current on my payments, but that does not seem to bother them. I guess that they will "drag their feet" until I bail out or die, whichever comes first. An old adage: Figures don't lie but a lier always figures.

  • Report this Comment On August 21, 2009, at 7:30 PM, ssaadat1 wrote:

    This whole Re-MOD is a sham. the bankc are not interested in modifyiny the loans at all. We have been trying to get out loan modified with the CITIBANK for the past year. They hvae declined us twice. In April they said that we can qualify for a new HAM supplemental program and approved us over the phone. All we had to do was to pay $3317 for the 3 months trial period and send the verification of the income. After making 3 months payment in July we received a package that say that the trail period starts in July for the nex 3 months and asked us to provide another set of documentation. We did everthing they asked for and sent the payment. They called us lat week and asked us for more paperwork which we sent. they call today and they denied us saying that we do not qualify. The whole thing was just a SCAM in my opinion to get money out of us. I am telling them that I can comfortably afford the modified payment and even more if it needs to be. They are not willing to listen. It seems they prefer to foreclose rather than get the money.

  • Report this Comment On August 22, 2009, at 3:42 PM, earthaug wrote:

    It is too bad that in this time of crisis one good solution has been blown completely out of proportion and discredited by the government, Mortgage Servicers, Mortgage Companies, Banks, and scam artists. Any company that is collecting upfront non-refundable money to modify your loan may not have your best interest in mind. Any company that is recommending that you become late or not pay your mortgage payment does not have your best interest in mind. The one answer to this Real Estate/Mortgage problem is Loan Modification! If a homeowner has had a hardship, has the ability to pay a lesser payment and wants to stay in their home we should absolutely find a way to help them do so. This one act of common sense would change the face of the economy by keeping people in their homes, stabilizing home values, prevent bankruptcies, relieve pressure on lending institutions, and enable the real estate business to move forward with new home construction.

    The problem is the government, banks, Mortgage Servicers and scam artists have messed this simple solution up so much the homeowners in need do not know where to turn. A good, reputable loan modification company that acts as a third party representative for the homeowner in negotiating with their lender for a loan modification is the answer for homeowners in need. Someone to wade through the paperwork, regulations, correspondence, and political process of a loan modification is the only way the homeowner is going to get true professional help dealing with banks, lending institutions and servicers for all the above mentioned reasons. And all we hear is how bad loan modification companies are but let it be known there are many great loan modification companies doing great work every day helping solve this disastrous economic condition of foreclosures, short-sales, decline in home values and the disruptive conditions of a displaced family. And it is too bad that the government can’t see that the Mortgage Companies and Mortgage Servicers along with the scam artists are the problem and it is sad that only the private sector of good people with good intentions who are offering professional loan modification representation are truly making a positive difference in homeowners lives while doing their part to stabilize the economy.

    So, before you quickly denounce loan modification as “not working” understand that it is working everyday in good companies across the country. As an example look at Nation’s Home Bailout a small loan modification company in Chicago, IL that offers loan modification representation and is paid only when they have delivered an acceptable loan modification term to the homeowner. Loan modification is part of the answer to our economic problems, support trusted, and professional third party representation for homeowners and let good people help homeowners stay in their homes.

  • Report this Comment On August 26, 2009, at 12:17 AM, crashdamage1957 wrote:

    Just for some perspective; back in 1990 somthing, i had a 5 year adjustable go from 8.50%to 9.50 %. I evaluated refinance offers and found one with low closing costs at 6.5% Called up my bank to get the payoff amount, and when i told them of my plans, the rep said, " let me put you thru to our Modification dept" Never heard of such a thing, but i got an immediate reduction to 6.50 %, the prevailing rate at the time, and no closing costs, saving me thousands in interest, just for the time it took to make the phone call.. No tactics, no dishonesty, no BS.( Sold that home in 2002 and financed the new home with a 20 % downpayment and a 15 year mortgage at a fixed 2.99%.)

    My how times have changed....

  • Report this Comment On September 01, 2009, at 1:52 AM, jimhenry0109 wrote:

    I own a condo and have an outstanding balance of $140k, consisting of $104k primary and $36k secondary. I took the home equity to consolidate debts. At the time the property was valued at $163k but now it is valued at $134k. I'm looking to sell because i am engaged and will be moving into my fiancee's home. Check http://www.obamamortgagerelief.org/. If I have a buyer who offers me within say $5-7k of the outstanding, can i agree to assume a loan on the residual and pay the bank the difference over time with interest? The same bank holds both mortgages.

  • Report this Comment On September 05, 2009, at 3:56 AM, Barbaralawgrace wrote:

    Certain mortgage companies like Wells Fargo are involved in sham foreclosures, extortion, and falsified Internal Revenue form 1099-A's. (*1099-A's enable mortgage companies to receive just or unjust tax advantages). News of courtroom judges who are dismissing foreclosure cases because of no proof of owning the note is not always a coincidence; too many lawyers are deliberately filing false foreclosures in collusion with mortgage companies.

    Such schemes foster sham real estate FLIPPING and blighted neighborhoods. Hence, it is not hard to see why certain mortgage companies are not too interested in making loan modifications which are fair. A mere investigation of 1099-A's filed by mortgage companies with the IRS, will expose various aspects of this longstanding White Collar collusion involving real estate and foreclosure frauds –likely, another S&L mess!

    Also, when attorneys intentionally file false foreclosures naming defunct mortgage companies, or companies which no longer hold the notes, they often ILLEGALLY affix Collection Fees far exceeding "Acceleration Clauses." As such, it becomes even harder for people to recover their properties. Even worse, those property owners become evicted despite that they never lawfully lost ownership of their properties. If property owners sue for "Unfair Debt Collection Practices," collectors make more even $$$$ through protracted litigations --which Wall Street Investors often incur the legal tab! Some collectors attorneys even file in Bankruptcy Court falsified motions to "Lift Stay" pleadings to accomplish SIMULATED AUCTIONS of illegally foreclosed properties.

    For proof of Wells Fargo, Lehman Brothers collusion with unscrupulous lawyers to cheat homeowners and the IRS, see:

    http://www.lawgrace.org/2008/08/08/my-august-8-2008-statemen...

    http://www.lawgrace.org/2008/09/14/lehman-brothers%E2%80%99-...

  • Report this Comment On December 09, 2009, at 5:17 AM, HAZARDOUSBANKING wrote:

    Dear members:

    Greetings: I am in the boat like a lot of you with respect to attempting a mortgage modification. I would love to tell the whole story, however, it would take too long. The short of it is: I used to be self employed with my own highly successful company that did well even in the hardest of times. I became fully and legally disabled approx. 6 years into our mortgage. Spinal cord compression. So, I am fully and legally disabled. My wife and I have tried to work with Wells Fargo Home Mortgage for more than a year and a half for a reduction in our mortgage. It finally came to a head when back in June of this year I finally found online the contact information to the president of the banks Mortgage dept.

    After contacting her (Ms. Cara K.Heiden) she referred me to a Mr. Sidman. I must say, Mr. Sidman actually got the process moving within one week. He was very nice and extremely helpfull, the way the rest of the staff should be able to do, but they don't and or can't because of internal controls. We played the "paperwork game" over and over both before and after working with the office of the president. We actually finanally got approved for a trial loan modification in late August.. Wow, I thought!! We made the 3 trial payments plus a fouth at the same rate as the modification. Then, all of a sudden the communications stopped and Our phone calls were un-returned. Then we received a "request for additional information" as we understood it was going to be requested to re-verify our situation. one of the UGLY issues that stuck out on the bottom of the request letter was a paragraph using very specific information that we were using for income to pay for our loan and living expenses. I should say that the bank did in fact cut our initial mortgage down some $450.00 from the original monthly payment. (only temporarily) But all of a sudden the paragraph stated that in order for the SSDI income to be considered usable income towards our verifiable income, the bank is insisting that it be "guaranteed by the SSDI". and that the income had to be "guaranteed for a period of not less than 3 years".

    Now, we all know and I did call the SSDI to reverify that they don't write "speculative" guarantess for Disability even though with my case, "i'm fully and legally disabled for the rest of my life". The bank has found something else to try and use against us poor soles in the world not to give us a modification so we can stay living in our piece of crap 70 year old 900 square foot house. It is a roof over our head and we love our neighbors. Additionally, if the bank repossess the property because they have now stated that the process "can't continue" they won't get $hit from any other buyer because no one will be stupid enought to purchase this chicken farm which also has a signifcant amount of unbuildable land do to "controlled wetlands" within the property. So, I ask, why destroy someone's life? Even though I have been found to be Disabled back in 2004, technology has progressed enough to allow for an experimental surgery. If it works, It will still take another 2 plus years for me to be able to return to work.. and then, like everything else, there is NO guarantees that it will do anything to improve my current situation, in fact, it could even go the other way and cause total and permantant paralysis (parallized for the rest of my life). I also have a young wife and 2 very young minor children that don't deserve what has been handed down in our lives. No one does!! It also forced me to have to close my company that had 15 employees. So, it truely affected a lot of other folks as well. I'm not a "dead beat" never have and don't want to continue down this road. I'm willing to try the surgery to possibly return to the work force just like President Obama wants. So, why doens't the bank take this and cut the crap of making unrealistic and impossible demands like having a SSDI letter of Guarantee? ISN'T THAT DISCRIMINATION AT IT'S BEST? I've seen a few other online folks stating they've also gone through the whole trial process and completed in successfully, but then denied to do the impossible and unrealistic request from the bank. After all the employess and especially the upper management really should have more of a HUMAN HEART THAN THAT!!!!

    Sooner or latter, both our government and the institutions will get a serious surprise when the multi-billion dollar law suits start to hit the courts because the american citizens simply won't lay down and take it anymore.

    for those of you who haven't seen another web site, check out: loansafe.org. the creator of that website has made a claim that he's found some legal entity somewhere in the country that is looking for 1,000,000 seriously pissed off people to fill a very large and heavy hitting class action law suit.. They claim the estimate to be in excess of 500 billion.

    I strongly urge all of my fellow readers to check this out!!

    additionally, for those of you who haven't heard yet, there is a new bill coming: H.R.4173 that WILL GIVE THE bankruptcy judges the ability to "modify" mortgages. Which, I know it was defeated before, but you see what happens when enough americans get upset. There is suppose to be a website as well for all of us to go to to sign a "allowance" partition. find it!! please do it!!!

    I know there are some that abuse the system, but there is no way that the banks are loosing 30% if they don't foreclose on the properties.. All they will get is more upset americans that will walk away, the buildings/homes will be vandalized, burned or whatever, as it's already happend in the extremely hard hit areas or foreclosures..

    I truely feel for people.. We don't deserve to have a government that's not working for us, the people. just as the constitution states that-- the should be working for the people. Also, on the above mentioned website there are many individual blogs that deal with american homeowners with all different banks and it they discuss the facts of the trials, errors, successes ( in a few cases) and how they're being treaded in all the cases. It's a very good place to check out.

    FOR ANYONE WHO MAY BE A ATTORNEY, I WOULD LOVE TO HEAR FROM YOIU WITH RESPECT TO OTHER LEGAL ISSUES THAT ARE NON-MORTGAGE SPECIFIC THAT NEED TO BE ADDRESSED AS WELL.

    I would greatly appreciate all comments to my above blog.

    good and bad. Everyone has a right to voice opinions and helpful facts.

    Thank you all very much for your time.

    Sincerely

  • Report this Comment On January 30, 2010, at 3:49 AM, goodkarma911 wrote:

    Based on my income today, if I were to apply for the current mortgage on my home, there is no way I would/ or should qualify. So exactly what is loan modification?

    Noted above by someone - that there are government funded incentives for the bank to modify your loan. That would be true. The servicer is paid $1,000 per modification, and an additional $500.00 if you are not in default. Nice.

    First off I wish that everyone would indicate what State they live in because it seriously makes a difference, and here's why.

    I live in Michigan, we are dying in Michigan because we are a corporate state. In that I mean, there are little or no consumer friendly or consumer protection laws to truly benefit the "consumer". Everyone has seen MI in the news, high unemployment, property values plummeting, and if you didn't know, we pay ridiculous amounts in utilities and taxes. Our cost if living is very high.

    So for all of those unemployed people out there in MI, who have lost their jobs and hold a mortgage, you hold a special place in my heart.

    Our debt collectors have the ability to file judgments and garnish wages and bank accounts. So lets look at that.

    Recently unemployed. Spouse has taken a reduction in wages due to the current economy. Nothing you could have done to change either of those circumstances. Unemployment, does not pay enough to manage your debt. You focus on your basic needs and your family, not your cc debt. So, your creditors sue you and begin garnishment. Most people keep their house payment in the bank. Your creditors have now been given permission from the state to seized your accounts. Now your in default, because your house payment was in the bank, along with groceries and other needs. (oh, by the very banks your tax dollars just bailed out)

    So you apply for a loan modification. I have not yet spoke to anyone who has begun this process that has finished it, that has benefited. Their still in underwriting, need these docs refaxed, been denied, blah, blah, blah...

    In our situation, I have been laid off (in this economy) and my husband has had a pay cut. We received paperwork and I will send it in because the payment is slightly reduced. Here's the issue.....although my payment has been reduced, it has not been reduced enough for us to possibly maintain the mortgage. The bank ask for information regarding your wages before sending your paperwork. So, I can only guess that if we feel as if our home is a "moral obligation" we will somehow struggle through, stressed out and have no life, to keep our house. If we choose not to and just walk away......then the bank could, and I believe will, file a deficiency judgment. The only way to avoid that is to file bankruptcy (another horror). Since the banks have basically dictated the laws governing bankruptcy, most people will not fall under Chapter 7.......so, the bank will get their money. Meanwhile, reselling the property with a new tenant!!!! It all appears to be by design? Also, George Bush initially set uo the "Hope Plan". It did not begin with Obama.

    So,,, If your thinking about walking away, without bankruptcy in Michigan, then rethink that one, unless of course it's you intention to file bankruptcy.There are other consumer friendly states that a defieciency judgment is not allowed. Seven actually, those have the option ;-)

    In every other state it's a win-win for the banks anyway you look at it. I believe the forclosure crisis has been created by the banks. They temporarily modify your mortgae to bring you current on thier books, knowing default is immenent, then they foreclose which used to be higher costs for them? Now that they have reviewed your current financial situation, - foreclosing and selling it to someone in a better postion, while writing of losses (which they will eventually go after you for) is a great day for the bank.

    The only hope at this point is the ability....atleast in the case of bankruptcy, of the judge to "restructure" your mortgage.

    I wish you all the best, good luck!

  • Report this Comment On February 21, 2010, at 11:13 PM, p2pk wrote:

    Please stop complaning.

    If you think about it this is a investment web site.

    The housing market has lost its value 3 times in my life time.

    And it will happen again in 15 or 20 years. do your home work and you wont get burned next time,

    If you are disiplined you will invest and be on the banks side next time. The golden rule. who ever has the gold makes the rules. What goes up must go down. or puts and calls.

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