OUCH! - Foreclosures Up 20% - Mortgage Litigation Up 100% - Modifications Still Stable

Mortgage modifications continue to be operating and in truth perhaps becoming a lot easier to get. This appears apparent as loan servicers completed and issued over 56,000 permanent loan modifications in the month of August.

In comparison, the two alternatives to a mortgage modification loan litigation and foreclosure are up 100% and 20% respectively.

In keeping with past practices over 85% of the modifications agreed upon carried a fixed payment for five years, whilst 68% offered a reduction in interest rate and principal.

The total number of loan modifications completed given that 2007 has reached four.86 million. The break down is roughly four million getting completed by servicers working with their personal modification recommendations and just about 800,000 loans being modified below the government's Dwelling Inexpensive Modification Plan (HAMP).

These numbers could sound high yet it should really be noted that there are more than 2.8 million delinquent mortgages in excess of 60 days late or longer.

These delinquent homeowners have four selections:

1. try a mortgage modification
   
2. short sell their household
   
3. lose it to foreclosure
   
4. sue their lender

Homeowners searching for 1 of these 4 selections, have a large number of pros, generally a law firm, to turn to for guidance.

Seeking a modification is almost continually the very first step taken. Unfortunately lenders and servicers have not been overly accommodating and numerous borrowers give up and seek a short sale in lieu of foreclosure.

Litigation, another choice, has turn out to be extra prevalent for two primary reasons.

The very first reason is that homeowners are granted "trial modifications" and then don't get a permanent modification. For this reason a number of plaintiffs have received settlements for breach of contract.

The second reason is the present investor of a note, grants a trial modification then sells the loan in the course of that trial period. The new investor of the loan doesn't honor the trial modification agreement arrived at with the earlier owner of the note.

The reason the new investor does this is that they have paid a fraction of the balance of the note and if they foreclosure a fast profit can be made. Thus the modification entered into by the original lender/investor is not as appealing. The courts have ruled in favor of the homeowner in circumstances such as these.

SUMMARY

A lot of homeowners instinctively have the want to stay in their homes at all expenses.

In reality spending funds on a modification and generating payments for many months for the duration of the negotiations is not worth the payment reduction offered by the lender when all is settled.

In reality roughly 50% of all homeowners granted a modification are delinquent once again within two years.

Maybe a brief sale to start with instead of a modification would provide the homeowner with a clean slate, save them funds and alleviate tension.

The fight to maintain one's home numerous times outcomes in foreclosure, bankruptcy and missing the opportunity to work with their lender through other indicates than a modification, such as the brief sale alternative.