There have been some interesting developments related to loan modifications and the Obama administration’s response to the less-than-successful policy of pushing loan mods as a solution to the foreclosure crisis. Here are a few recent articles I thought to be interesting:
- Barrack Obama uses his decreasing political power to exert pressure on top mortgage companies to modify more loans – see article from CNBC here
- Apparently, the Obama administration doesn’t understand that lenders frequently have more financial incentive to foreclose rather than modify a loan – see article from NY Times here
- The mortgage industry realizes the politically negative ramifications of being perceived as foreclosure-mongers and respond to the NY Times article – see the CNBC article here
So if you wonder why your loan modification that seems to be a “no-brainer” isn’t being approved, it may be because your lender expects to make more money in junk fees and other charges than they could by modifying your loan.
Of course, I’m no insider in the mortgage business. If you are, I welcome your comments about this – please use the comments area below.
Thank you for reading http://realestate.BryanEllis.com … have a great day!
Well Duh it is not going to work and one doesn’t have to be and insider to figure that out.
Simple and I do mean simple economics will explain it all.
Chris B.
Well Chris (nice pic btw) it is certainly easy to fugure out that the mortgage company many in fact do better on a particular single house by foreclosing that by modifying the terms of the mortgage. This would seem to work because that is what they are largely doing. Proof positive that all they really give a pile about is their own bottom line. Not unlike you and I but the consequences of what these huge multi billion dollar corporations have macro economic consequences unlike myself and perhaps you too.
Consider . .
The mtg holder forecloses and takes the house to REO. They will have to liquidate eventually and when they put it on the market. This adds to the inventory glut of similar REO inventory available to buyers. This further depressed prices. This triggers more foreclosures and helps no one.
Or would it make more sense . .
The mtg holder modifies that loan which does not have to include a reduction of principle. This keeps the house off the market preventing it from exacerbating falling prices and speeding the recovery of prices overall. This slows the rate of new foreclosures speeding the recovery of the economy. The bank waits a few years to get paid in full which, incidentally, is part of the risk they took when they made/purchased the mortgage.
Excuse me but I must go pass a kidney stone now.