Mortgage Brokers See Tightening Standards Contributing to Foreclosure
Mortgage brokers in California are complaining that tightened lending standards have made it more difficult for borrowers to purchase houses, and at-risk borrowers to refinance and avoid foreclosure.
Refinancing to avoid foreclosure rarely, if ever, made any sense. The borrower is typically looking at a higher- not a lower- rate when they get the new loan.
In addition, they slough off several thousand in equity, which goes to pay the originaation fees, and the innumerable other costs and charges that are incurred when a homeowner gets a new loan.
They’ve also complained that lenders are not doing enough for people who are not delinquent.
The fact is, the industry has done a very large number of “prophylactic” refinances and loan modifications. The unfortunate side of those efforts is that a number of those people have already re-defaulted.
Besides the obvious reasons why a lended would not ordinarily modify the mortgage for a borrower who’s current, the sad truth is that they may not be doing their borrowers a favor.
I’m getting calls from homeowners who were granted unsolicited loan modifications in the last 6 months.
Now, they have a legitimate hardship. Can we get these loans re-modified? In many cases, yes… but it IS an uphill battle, and it’s much more difficult than the process for a borrower who’s never had a loan modification in the past.
It’s clear to me, based on what I’m seeing, that some of these borrowers, operating on their own, are not getting a second chance at a loan modification.
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August 29th, 2008 at 12:40 pm
[...] bad news is that this will further constrict an already-tight mortgage environment, and takes one more option off the table for homeowners who want to prevent [...]