24 Nov 08 Too Early for Mortgage Loan Modification Verdicts?
Despite the best efforts of mortgage lending banks such as Citigroup and JPMorgan Chase to reach out directly to homeowners who face foreclosure, there is growing sentiment that no amount of bail-out can save this sinking home mortgages. “If it were just a matter of reworking these mortgages and renegotiating monthly payments, I’d feel a lot better about these programs. But there are just too many other forces at work,” said Debi Averett, founder of the widely read real estate blog HousingDoom.com.
Nationally, house values may have yet to reach a bottom, rising unemployment figure, and the difficulties inherent to negotiating loan modifications that have changed hands many times, to name just a few of those forces.
According to the Mortgage Bankers Association, the numbers continue to get worse: foreclosure filings increased 71% in the 3rd quarter from a year ago, and nearly 4 million homeowners are currently at least one payment behind, The Center for Responsible Lending, an advocacy group, has amended its estimate of the number of foreclosures expected from late 2008 through 2009 from 1.1 million to 2.2 million. Banks have responded in kind. Citigroup earlier this month imposed a moratorium on most foreclosures as part of a broad program aimed at preventing mortgage defaults and ultimately keep homeowners in their homes. The bank said mortgage holders facing foreclosure who want to stay in their homes can do so if the home is their primary residence, the borrower is working in good faith with Citi and can prove sufficient income to continue making renegotiated monthly payments. The banking giant recently said 130,000 borrowers with home loans totaling $20 billion have been targeted, in particular those in areas where unemployment is rising and homes prices sinking. In a proactive gesture, Citi said it will reach out to an additional 500,000 homeowners who remain current on their mortgage payments but who have been deemed having higher risk mortgages. Citi’s efforts mirror both in detail and spirit those announced recently by Fannie Mae and Freddie Mac, the quasi-government mortgage servicing giants now under governmental oversight, as well as efforts by JPMorgan Chase and Bank of America.
Each mortgage lender has proposed to assist homeowners with loan work-outs, in which the terms of home mortgages are voluntarily modified by the lending company to meet borrower’s current income. There is suspicion in some real estate corners that the private banks have stepped up their efforts to reach out to mortgage holders only under pressure from the government, which is holding out as a carrot billions of dollars of rescue funds. In any case, a number of very real obstacles stand poised to block the success of these mortgage loan modification programs. Read complete article >
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