Loan Modifications and the Race Against Foreclosures
While there have been recent signs that the economy and real estate markets may be in the early phases of stabilizing, the foreclosure crisis appears to be rolling along unimpeded. The most recent evidence comes from a new study from RealtyTrac, Inc., an Irvine, California based housing research organization which reports that foreclosure filings in the form of default notices, scheduled auctions, and bank repossessions totaled a record 360,149 in July.
The total represents a monthly increase of 7% from June and a 32% rise from July of 2008. The month's total of foreclosure actions broke the existing record for the third time in five months.
Actual repossessions totaled more than 87,000 homes in July, up from about 79,000 homes a month earlier. The "sand states", where speculation in the boom was at its most rampant, posted the highest numbers in the rate of foreclosures. Nevada had the nation's highest foreclosure rate for the 31st-straight month, followed by California, Arizona, Florida and Utah. Las Vegas, Stockton and Modesto carried the highest rates among 372 metropolitan areas in the country.
According to industry watchers, the primary reason for the record setting month of foreclosures across the country is the unemployment rate, now standing at 9.4%. Another factor, separate from the recessed economy is the number of interest rate increases on adjustable rate mortgages pushing payments out of reach for already strapped homeowners.
The acceleration of foreclosure activity recently prompted the Treasury Department to summon executives of the major mortgage servicing companies to Washington to prod them into doing more
Loan Modifications.
At the meeting, Treasury officials estimated that 230,000 loan modifications were in the trial phase under the guidelines of the administration's Making Home Affordable program and set an objective of 500,000 loan modifications in process by November 1st.
With 3.5 million foreclosure actions estimated for the full year it will take much more than what the government's plan hopes to accomplish to have any kind of meaningful effect on the crisis. Additionally, the next round of loan modifications will need to be structured closer to what the homeowner needs than what the lender is willing to grant in the form of concessions.
There was much discussion questioning the viability of loan modifications after studies on the first rounds of loan modifications done in 2008 came out showing re-default rates at greater than 50%.
As it turned out, the biggest issue with the modifications included in the studies was that a majority of them didn't reduce payments for the homeowners and in some cases actually increased them.
What is working now are modifications which include both lower payments and principle reductions to bring the amount owed on the home closer to its current value. When negotiated by an attorney, the modifications yield better terms for the homeowner, a factor which also works in the favor of lenders because the chances for re-defaults are lessened due to mortgage payment levels which are sustainable over the long term for the borrower.
Please contact
Feldman Law Center today for a no cost
Loan Modification Consultation or call 800-662-5133
