Are mortgage loan modifications really working…Well, no.
Matter of fact, it appears that the Obama Administrations HAMP program (major element of HAMP being loan mods) may be canceled very soon.
Wells/ Fargo describes how their loan modifications work…or don’t work. What is not discussed are the terms of a typical loan modification. For example, most loan mods are only temporary. Most loan mods do nothing with the negative equity. Most loan mods will temporarily reduce the borrowers payment by 50% (give or take). What happens to the 50% they are not paying? It’s added to their unpaid loan balance. You get the idea. Loan mods in their present form are nothing other than more…extending and pretending.
It’s crucial to help clients understand the true ramifications of a loan mod. Bottom line, its temporary relief. The negative equity remains with the home 99% of the time. For many underwater owners the smartest move truly is a Short Sale.