And now, the truth starts coming out...the banks would rather foreclose than do a loan modification out of a belief that many people are capable of "self curing" their default and don't need to do a loan mod.
The problem is that modifying mortgages is profitable to banks for only one set of distressed borrowers, while lenders are actually dealing with three very different types. Modification makes economic sense for a bank or other lender only if the borrower can't sustain payments without it yet will be able to keep up with new, more modest terms.
A second set are those who are likely to fall behind on their payments again even after receiving a modified loan and are likely to lose their homes one way or another. Lenders don't want to help these borrowers because waiting to foreclose can be costly.
Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.
Great article for those of us trying to help people get a loan modification. The strategy has to be to convince the bank that your homeowner is in the first category AND giving them a loan mod will be make it possible for them to continue making their payments. I am trying to work with a woman right now whose husband was a car salesman for 28 years. Lost his job over a year ago. Can find nothing. She is a nurse working full time for one hospital and per diem for another medical center. She has tried the government's HOPE and HERO approaches on her own and was declined each time. She purchased her home with a no doc loan a few years back at 11.69%. She is hoping to get a loan modification to lower it to 7% (does not sound unreasonable). She has fair credit at about 650. She is getting frustrated because at this point she has exhausted all of her savings but manages to keep paying her mortgage each month. She is living on the edge right now and it is driving her crazy. Up to this point she has wanted to do everything on her own. I am hoping to lend a hand as she is a very decent, hard working woman and I just think the 11.69% she is paying is ridiculous. Any advice?
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