HAVE YOU HAD ENOUGH LOAN MODIFICATION? Well, I don’t know about you but I am LM’d out. I have never spent so much time researching and writing about a subject about which I have absolutely no interest. I’m sure by now we’re all Loan Modification "experts" anyway so alas and thank the heavens here’s my third and final Loan Modification post.
I am going to keep this one short and hopefully somewhat sweet. This post will basically discuss the future of the budding loan modification industry; a future which may be in doubt. While there are indeed many legitimate LM companies and attorneys in the midst of hundreds of thousands if not millions of Loan Modifications Nationwide the big question still remains…… how long will the recycled “MODIFIED” loans remain current?
According to statistics released by www.loanworkout.org, about half of all modified mortgages fall back into arrears within six months. There is also disagreement over whether mortgage modifications are effective in minimizing losses for investors. http://loanworkout.org/2009/02/loan-modification-lawsuits-looming-in-the-near-future/. This is primarily because the loans should never have been made in the first place and the LTV’s are so upside down that it will take years for the loan to ever pencil thereby dramatically reducing the incentive and desire for the homeowner to keep the home.
Additionally, as many as 3 out of 10 borrowers had no business ever purchasing a home in the first place and were more or less just stuffed into a deal by a greedy and could care less lender. Many of these borrowers never had the desire or financial wherewithal to honor the loan agreement in the first place. They just leveraged and re-leveraged their mortgage thereby exhausting their home equity like an ATM machine in order to purchase all the toys they had always dreamed of. Hence this whole debacle has resulted in one of the most artificially inflated economic growth spurts in American history.
WHEN OR WILL WE SEE MORTGAGE PRINCIPLE WRITE-DOWNS? After spending the better part of this year studying the subject, it is my personal opinion that the final solution will rest in the governments hands. As much as I hate to say it and as much as I’m against all the government intervention and literal takeover of the “American Free Enterprise System” I feel the only way this mess will ever sort itself out is when the FED mandates a principle and interest write down across the board.
THE INVESTOR IS THE ELEPHANT IN THE ROOM. Most importantly, however, many folks fail to realize that all these lenders no matter how big or how small they are have one thing in common….. “INVESTORS”. Therein lies a very significant problem. The main reason principal and even interest LM’s are not being done in the volumes that all these LM companies and RE attorneys and scams had hoped they would is because the INVESTORS that all these lenders are beholding to are not budging. In fact, they’re threatening major law suits against the lenders if they even think about messing with the principle.
That’s why it will eventually have to be mandated by “BIG BROTHER” at some point. So in conclusion I will simply state that the entire LM concept is in question and should be held to great scrutiny by RE practitioners as a whole. If the subject comes up with your clients, which it surely has and will continue to do, my advice is to simply tell them to seek legal council from an experienced RE Attorney or try to solicit help from the myriad so called FREE government sponsored LM programs currently in place. Frankly, I wouldn’t even recommend referring anyone directly. It may just come back and bite you right in the shiny hiney someday. So be very careful.
Following are some of the many sources and references I accessed in compiling the research for this series of posts on Loan Modifications. I strongly suggest you access them anytime you wish to refer a client or a friend or should you ever consider looking into this as a potential career field. But as a final word. Proceed down this road very carefully. It is full of treacherous pot holes.
http://www.youtube.com/watch?v=lo_G6GSEFjM: NEDAP New York
LOAN MODIFICATION COMPANIES - New Business Model or Risky Scam? Chapter 2. Resources For Home Owners In Need of Loan Modification Advice.
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