Yesterday, I told you about the lending industry’s resistance to mortgage modifications as a solution to the foreclosure crisis.
It turns out that there’s another huge reason for lenders to dislike the use of mortgage modifications: Mortgage Modifications usually don’t work out.
According to Lender Processing Services, a mortgage payment processor that monitors 39 million of the 50 million mortgages in America:
- “For the industry in general, after mortgages are modified roughly 25% go delinquent again after just one post-modification payment”
- “More than half end up delinquent after several post-modification payments”
Let’s put this in plain English terms:
If 1,000 mortgages are modified, 250 of them will make at most one payment under the modified terms and then will default again
Of those same 1,000 mortgages, more than 500 of them will end up in foreclosure yet again after only a few months.
My friend, these are awful statistics demonstrating that the problem isn’t the mortgages, it’s the borrowers who never should have had a loan (of any type) to begin with.
Before the more sensitive among you get your panties in a wad, take note: This isn’t a suggestion that all foreclosure victims are fundamentally bad people. I know there are lot of people who had good jobs and were fully qualified for their loans are now unable to avoid default due to layoffs and other legitimate issues. But those aren’t the folks who are at the heart of this issue: It’s sub-prime borrowers who never should have gotten the loans in the first place, regardless of the terms.
Thanks for listening to today’s rant. Now let’s get back to some practical application:
Short Sales, as I’ve mentioned in the past several days, are going to be a key going forward. And frankly, it might be helpful to point out the horrible stats about mortgage modifications to loss mitigation reps when you’re negotiating short sales.
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As always, your comments are welcomed here at RealEstate.BryanEllis.com – and I encourage you to join our free upcoming Short Sale Training. Have a great day!