The home loan industry has been steadily resisting giving homeowners any principal reduction breaks throughout this real estate inferno.The government has been all over it to do mortgage modifications at a reasonable clip in an effort to keep the foreclosure epidemic from getting out of control. The banks have been slow in helping out even with them. The ones they have channeled through have generally been rather tame, all too often leading the borrower to redefault within months.
Mortgage loan providers, banks and investors that is, have obviously decided to change course somewhat.In a fresh report from OCC, or the Office of the Comptroller of the Currency, a regulator of national banks, the numbers show that in the first quarter 3.1% of loan modifications included principal cutbacks. More importantly, in the second quarter it had jumped to 10%. The report offered little information on how much of a reduction was done on an average. Still, the implication is that more of the same should be coming.
The real estate market continues to struggle and mortgage foreclosures threaten to go on, or even grow, at an alarming pace.Banks must have realized that a meaningful rebound is still a distant dream, and even if it comes soon, it predictably will be a gradual one. Therefore, to cut their losses a principal reduction increasingly appears to be the thing to do. It doesn't have to be all the way down to current market. As long as it is large enough to keep the homeowner in his residence with an affordable mortgage payment, both sides are likely to end up winners.
Southern Nevada - Las Vegas, Henderson, Anthem, Summerlin, Green Valley, Southern Highlands and Mountains Edge among its communities - homeowners would be some of the major beneficiaries of this shift in thinking. Scores of them are underwater here and are straining to hang in there with high mortgage payments. Many have decided to walk away from it, just handing the keys back to the lender. This development, by the way, probably is also weighing in on the banks' decision making. Although there are no stats to back it up, it is easy to see that the hard-hit areas, like Arizona, California and Florida, Nevada's partners in crime, are getting more attention tied to this issue than others.
Many banks are now in a better financial position to loosen up their strategic thinking. The siege mentality seems to be lifting. Some have even been able to raise new capital to start tidying up their demolished balance sheets. This new direction, as long as it holds, will also assist in keeping Congress from enacting the cram-down legislation, rumored to be still alive and kicking.
Realistic thinking appears to be making a comeback to the mortgage marketplace.