Mortgage Modification Meltdown
Article by jitesh arora
Loan modification programs these days are still not reaching house owners, who are in the need of prevention of foreclosure and creative financing, and in a large number of cases, these bailout programs backfire even if they reach the concerned individuals.
The National Association of Consumer Bankruptcy Attorneys (NACBA) has made the following comments on issues related to such meltdown problems:
* When the loan modification schemes are written, less than one out of ten of them result in lower principal balance on the current loan.
* More than fifty to sixty percent of the loan modifications turn unpaid interests and fees into larger, debts towards the end of the mortgage.
* Less than thirty five percent of the mortgage modification schemes reduce the monthly payment burden on the house owners.
* More than Forty five percent of loan the modification programs include hidden costs and increased payments.
The home loan modifications, which is granted upon the lenders approval, makes permanent amendments in the terms and conditions of the currently existing mortgage, with the intent of lowering the monthly payments and make the loans more easy and affordable to the house owners.
These schemes are basically designed for the house owners who are struggling in order to make their mortgage payments, and not for those people who are eligible for refinanced loans or those who can comfortably pay their mortgage installments.
The mortgage modification is one of the best methods of providing some relief to the house owners and stopping foreclosures, for those who are not eligible for refinanced mortgage, which, on the other hand is a program which provides completely new loans to pay off the existing home loans.
Other option include short sale, in which the lender decides to forgive some part of the debt if the owner finds a buyer for the house), filing for bankruptcy. Or auctioning – All these options cost the consumer his house.
The loan modifications generally do not require any fees to be paid to the lender and involve the mortgage holder or lender to lower the interests to make monthly payments easier or the conversion of mortgage with adjustable rates (ARM) to fixed rate mortgages (FRM) with a term of 30 years.
A mortgage is one of the most complex forms of transactions which exist. loan modification are also an unknown region for most people, therefore the people need someone who can take them forward through the whole process and tell them what they need and what they don’t require.
Along with reducing interest rates and locking in the rates of interest, less common modifications also include addition of missed payments to the remaining loan balance and extension of the term of loan.
A reduction in principal is the least common feature of loan modification, where the lender lowers the principal balance on the mortgage.
Reduced principal along with large interest reductions, were the core of the FDIC’s (federal deposits insurance corporation) loan modifications program: “The loans modifications program guide”.
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