like it or not, .... Loan Modification is here to stay

Real Estate Agent with

There is a lot of news about loan modifications. In fact, due to the decline in home prices of Phoenix AZ real estate, we are a national leader in loan modifications.

On Monday, Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers.

Previously, Bank of America halted foreclosures in California and more then 2,000 homes in greater Phoenix.

JPMorgan Chase & Co. won’t put any more homes into foreclosure for the next 90 days while it implements a plan to help borrowers stay in their homes.

Yesterday, and most significantly, government sponsored entities and lending giants, Fannie Mae and Freddie Mac held a major news conference to announce that they too would be modifying loans for hundreds of thousands of borrowers.

The loan modification is here to stay. It may even pass sub-prime and credit crisis as the financial word of the year for 2009.

The question is : What is a Loan Modification ??

A loan modification is a permanent change in one or more of the terms of a mortgagors loan which allows the loan to be reinstated and results in payment the mortgagor can afford.

Loan modifications typically involve a reduction in the interest rate on the loan, a fixed rate mortgage vs. adjsutable rate mortgage (ARM), the term of the loan, principal, interest and fees (the arrears ) added to the loan balance to bring you current.

A loan modification can consist of any and or all of the above. The next question: Why would a bank or lender or the government want you to modify your loan? The government, through such programs as the Hope for Homeowners Act is pressing banks and lending institutions to work with borrowers in what is called “Loss mitigation” to modify loans for qualified borrowers.

Believe it or not, legal fees and related foreclosure costs for a home that is lost in foreclosure is often more costly to a bank then a loan modification (assuming the borrower can and still wishes to pay). Short sales have been the most common form of loss mitigation.

In a short sale, a bank agrees to take less money then the borrower owes when the home is sold. Bank have been (somewhat) adverse to short sales as they do not recover any interest, fees, principal in arrears, take a drastic loss int he home and lose a potentially paying customer.

Loan modifications have now emerged as the best alternative for banks as a way to keep a borrowers in the home , borrowers continually paying interest (which is how banks make money), and maybe most importantly keeping less bank owned real estate hitting the market for sale which further drives down prices.

Keep in mind that the government has established loan modification to help prevent more Americans from losing thier home. It is not something to be afraid of at all. In fact, for many, it is the best thing they have done since the day they bought their home.



Copyright © James Wexler *Why Loan Modifications for Phoenix AZ Real Estate?* If you are listing your home as a short sale in Phoenix Arizona or Scottsdale Arizona make sure you hire an agent who knows how to do short sales and has the experience to get the job done. Call 480.221.8080 to find out more about Phoenix AZ Short Sales and Scottsdale AZ short Sales

Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

James - Thank you for the very well written post on loan modification!  It's very timely!

Feb 25, 2009 12:28 PM
Suzanne McLaughlin
Sabinske & Associates, Inc. (Albertville, St. Michael) - Saint Michael, MN
Sabinske & Associates, Realtor

JAmes, I talked to two people this week who were looking for investment property in Arizona.  Unfortunately, they were already "hooked up" so I couldn't get them to you. But, things might be looking up for your area.  I also talked to a manager from AT&T who lived the Maricipa area.  She was astounded at property values.  Very disappointing, but clear out some inventory and those who waited will be saying, " I shoulda, coulda, didn't."

Feb 25, 2009 01:51 PM
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

I think "load modification" might be what happens now instead of "refinancing."

Feb 28, 2009 11:30 AM
Christianne O'Malley
Dickson Realty - Reno, NV
Exceptional Service - Delivering Results in Reno!

I think the loan modification will probably be the solution for those people who can't refinance. What about the folks whose credit scores went in the toilet because they employed a debt relief agency to settle their credit cards so they could stay in the house and ultimately afford the mortgage? With credit scores in the 500s now, how will they ever be eligible for a refinance? And how will it affect their ability to do a loan mod? Just some questions I thought I'd ask since I have a client in that predicament now...

Mar 04, 2009 12:38 PM