Here is an interesting article from the Washington Post that describes the difficultiy many homeowners have with modified mortgages. See http://www.washingtonpost.com/wp-dyn/content/article/2009/02/02/AR2009020203163_pf.html
Some interesting statistics show that the avergage modification increases the principal balance. This is probably because some delinquency is added to the principal.
We just had a modification that changed the interest rate but not the payment amount. OK, it became interest only instead of negative amortization, but what good is it to someone that got a pay cut and can't afford the payments? At best it was a stop gap measure and the borrower knows it.
The lender approach is still playing the numbers with an outlook to making a profit - as the article points out once you get to the last paragraph! Capitalism is good and no one goes into business to make a loss.
But you have got to question where is the TARP money going and why is it not being targeted to the housing mortgage market to allow losses so the housing market and lending market can stabilize?
Copyright 2009 Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com. See our easy to find articles at Need Short Sale Information? - These Articles Probably Answer Your Question
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Unless the principal ultimately gets reduced to match the actual market value, in the long term the loan will fail. That's because people can't sell or refinance. And if the payment increases to more they can afford ...