Mortgage Loan Modification Re-Defaults Expected To Be 60-75%!
Submitted by Tim Harris on June 18, 2010
Are loan mods the solution….well, no.
Not if you consider the fact that its widely believed that up to 75% of all loan mods will re-default.
Agents who are speaking with potential short sale sellers, what is one of the top reasons sellers give for not listing their home?
“We want to try a loan modification”
Share this article with your howeowners. Let them know that statistically very few mortgage loan modifications actually work beyond the initial period.
What homeowners don’t understand is that they will often be required to forfeit many ‘rights’ they may have. For example, we have seen loan modifications that literally make it so if the homeowner misses (or is late) on ONE payment during the trail mod their home is rushed into foreclosure, don’t stop at GO. Additionally, its a rare mod indeed that actually cancels out the negative equity. In other words, the mod may lower the payment temporarily but, the negative equity is still there.
Another fun fact, most mortgage loan modification are only for 3-5 years with a balloon payment often times including ALL that they still owed including their late fees, missed payments….etc
And don’t forget, homeowners have to qualify for a loan mod. Its treated like a fully documented loan application. Many homeowners won’t qualify for the home that they are currently living in!
Loan Modifications are clearly not what people think. Understand what mods are and aren’t…counsel your homeowners so they know what they are signing themselves up for.
Its no wonder why, up to 70% of all loan mods fail…..
Source: SNL.com
Economists and analysts predict redefaults will severely plague loan modifications, including one projection that 70% of all modifications will fail.
In a recent report projecting the level of shadow inventory in the housing market, Standard & Poor’s analysts noted that they assumed a 70% redefault rate on loan modifications in the study.
Diane Westerback, S&P’s managing director of global surveillance analytics, told SNL that the previously reported 30% to 40% redefault rates typically only count borrowers after two or three months of payments. A year after the modification, Westerback expects redefaults to hit between 60% and 70%.
