Why Lenders Don’t Want to Modify Your Mortgage, Part 2
In June, I outlined one of the main reasons why lenders do not want to offer a loan modification to borrowers in default. That was just one of the many reasons why it’s been difficult for borrowers to avoid foreclosure. (If you’re looking for the long list, that can be found in “How to Avoid Foreclosure and Stay Out of Foreclosure.”
According to a Default Servicing News article, Credit Suisse just came out with a follow-up report on loan modifications that were done last year. One-third of the Q3 2007 subprime modifications were behind on payments within 10 months. By March 2008, two-thirds of the loan modifications from the first half of 2007 were delinquent.
This correlates with the Moody’s loan modification report which found that 40% of subprime adjustable rate mortgages that were modified in the first half of 2007 are at least 90 days late by the end of Q1 2008.
As I’ve been saying for over two years now…
Getting a loan modification does NOT mean your problems are over.
If you want to avoid foreclosure for the long-term, this is just Step One. Unless you’ve spent a SIGNIFICANT amount of time focusing on your monthly budget and planning your next 12 months, you are at great risk of once again trying to avoid foreclosure.
And while it’s one thing to acknowledge that this is important, nobody’s doing it on their own. Even for the clients I’ve had who have paid attention to their finances in the past, I have found that there is always room for improvement- in many cases, VAST improvement.
The majority of my clients have tried to work directly with their mortgage company to avoid foreclosure and keep their homes before calling me because they find it difficult-to-impossible to get a loan modification. Many are simply rejected for any type of loan workout.
Without realizing it at the time, many of these homeowners are fortunate that their lenders did not cooperate with them.
While they come to me primarily to get a loan modification, what they don’t realize is that the in-depth analysis and planning that we do is a much more important key to their long-term success.
Doing the former without the latter is simply setting you up for failure.
While neither the borrower nor the overworked negotiator seem to consider this when trying to avoid foreclosure, long-term sustainability requires more than just a loan modification.
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