Federal mortgage mods one half as likely as financial institution loan modifications to result in default

An individual in delinquency on a mortgage is more likely to get a financial institution loan modification to stick than a government one. It still is a simple enough premise. Certain people can qualify for a mortgage refinancing via the government. It has not been that big a success. As a result, banks are stepping to the void to modify the mortgages of customers on their own. This isn’t really a victory for the Libertarian crowd though. Homeowners are more likely to default on payments if they receive a financial institution refinancing.

Much more bank loan refinancing than via Home Affordable Modification Program

The Home Affordable Modification Program was part of the stimulus programs of a couple years ago. Also referred to as Home Affordable Modification Program, it has a simple enough premise. Distressed homeowners apply for a loan modification via the feds. An individual gets a trial refinancing of the financial institution loan they bought their home with, if they meet the right criteria. Their loan gets permanently modified if they successfully get through the trial. Unfortunately, less than 45 percent of all permanent modifications stick. That does not mean all of them end up in foreclosure. As outlined by CNN, about 44.5 percent of all individuals who default on the government modification get a refinancing from their financial institution anyway. Presently, banks are far and away the biggest source of modifications for distressed homeowners. For each Home Affordable Modification Program refinancing, there are 2 financial institution modifications.

Much more delinquency on bank mods than Home Affordable Modification Program mods

Unfortunately, there are also more non-payments on bank modifications. Fewer than half of HAMP applicants accepted complete the trial phase. Of those, 11 percent default again. On the modifications made by lenders, 22 percent default. However, there is a reason for that. Generally, Home Affordable Modification Program mods reduce monthly payments by $608. However, bank mods usually lower payments by $307. That may be enough for some people. For homeowners already stretched to the limit, they’ll still probably be running for payday advances.

Employment has to increase before housing

Just about each economic indicator, like housing, won’t really increase until jobs does. Anything else will follow. There are small slivers of hope. Most indicators point to the recovery being slow however steady.

Articles cited

CNN

money.cnn.com/2010/09/24/news/economy/Mortgage_modifications_redefaults/index.htm