Here's a question: Why aren't the mortgage servicing companies pushing to get more modifications? The answer might be because they are servicing this note, and will probably service the new one, too - they get paid either way. So who benefits from a loan modification?
The problem for many owners of property may not be the house or the value, as much as it is the payment. With layoffs and decreased incomes, many people would stay in their house if they could afford the payment. Some owners are only trying to get the payment reduced to a level that they can pay. Their "lost" equity is not as much of a problem as the payment, because values will return some day.
What if those who are upside down were offered something like this:
The example Property value is $250,000 with a Current debt of $300,000 at 7% on a 30 year mortgage for a monthly payment of $1,996.00
If the owner of the note would allow a rewrite of the terms that keeps the principle at $300,000 but changes the note to 4% on a 40 year mortgage, that would make the monthly payment $1,254.
That allows the borrower to use $740 to keep paying their car payment, and/or other bills.
This keeps the income stream alive to the lender.
And, it allows consumers to pay more bills.
The note owner receives other benefits, too.
The occupant of the property already likes the home and wants to keep it.
With the payment adjustment, the lender will still get the original principle, and have an income stream while waiting.
The benefits of keeping distressed properties from affecting market values are many, and may even speed value recovery.
Communities get more stable.
Borrowers who were given this opportunity may be grateful, and possibly more loyal to the ones who allowed it.
The alternative to a re-write includes:
no income stream,
loss of principle,
expenses for foreclosing,
expenses for maintenance,
expenses for eviction,
decreased property values,
battered reputation
Maybe servicers charge extra fees for monitoring/managing a foreclosure. There is a solution out there somewhere, but it probably won't come from the servicing companies.
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