Loan Modifications Run into Trouble in Under a Year
February 25th, 2010 at 03:20am Under mortgage refinancing
A Big Push for Little Results
Last year, the federal government pushed lenders very hard to rework deals for thousands of mortgage holders. The drop in home prices almost collapsed the market. The feds wanted to do something for the individual homeowner and developed the loan modification program. Under this program, lenders were supposed to re-work mortgages to lower payments, principle, and/or interest rates whenever possible. A lot of homeowners qualified for a 20% reduction or more. It looked like good news for borrowers and the economy, too. However, according to the Office of Thrift Supervision, 40 percent of the borrowers who received a 20 percent reduction in monthly payments were delinquent again in less than a year. The news follows President Obama’s recent lash of the tongue at the expense of the banking industry, for not doing enough. The higher rate of default, post-modification, could justify caution among banks.
Tags: 75 billion dollar program, loan modifications, mortgage holders, the federal government, the unemployment rate
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