This seems like the same shady type of crap that helped get these borrowers in this mess to begin with

Typically what we would do at Wells was roll the delinquent amount back into the loan balance. It would result in slight mortgage increases.

My lender (Wachovia/Wells Fargo) is still thinking about it or what to-do. I call them every week to hear the same story. Well, if the interest rates keep dropping I'm fine, until I run out of money in a few months, thanks to double job loss in our family... some pity please!

@xrmb: My condolences. I hope things turn around soon.

You know not all the people in need of a loan mod were living beyond their means. Some were duped from FIXED RATE LOW APR loans INTO an ARM loan...

My mother in law has tried in vein several times to get the loan modified or something, the lender refuses to budge rathering we walk away knowing they'll make a profit when the market goes back up.

So let this be a lesson RETAIN COPIES OF EVERYTHING AND DON'T LET LOVED ONES, OR EVEN LIKED ONES BE RUSHED INTO AN AGREEMENT WITHOUT A THIRD PARTY POURING OVER THE AGREEMENT AND GETTING A NOTARIZED COPY OF THE CONTRACT.

@xrmb: I've been trying since it was announced, and get the same run-around. It's great that the government makes these plans that require big businesses to help the consumers, and the businesses can then drag their feet for as long as they want. They're not making a good-faith effort in any of this.
Screw them, it's gonna cost them more when I stop paying and they have to go into foreclosure proceedings than if they were willing to work things out.

I think alot of people don't even want modified loans at this point , They have simply given up since they've become more aware of the housing market & prices now . More so than when they bought the house .

Still though when you have modified loans increasing to supposedly prevent foreclosure should any number be a surprise here .

I think the problem is most people aren't particularly savvy when it comes to finances so if they've been burned once they're probably reluctant to try anything else again.

I took a first time homebuyer prep course offered through a United Way office in September, before I bought my house and I was surprised at how many people couldn't understand the very basic concepts being taught. There was a multiple choice test at the end of the course and I was the only one to get every question right. A lot of this stuff was pretty redundant to me, stuff I had picked up from casual reading.

I'm just a 22 year old, high school grad with 2 years of credit card fraud prevention experience who happens to have good credit. I'm a full time homemaker now and a wise one at that.

I was the youngest person in the class so I'm sure some of the others thought I was kind of cocky particularly when I mentioned that I was eyeballing a house that I believed to be under valued as compared to similar sales. The house was in fact under-valued and in very good shape, the sellers were in the middle of a divorce and needed to unload the place quick so the hubby and I jumped on it.

Yup, bankers are the best and brightest.

We're looking into a loan mod ourselves. Despite having done many things right (fixed interest rate, not borrowing the full amount we were approved for, etc.) we still got stuck with more mortgage than we should have.

The problem is that there are three programs and not everybody qualifies for all of them. We qualify for only one of the three and the hoops you have to jump through make it almost impossible to get approved without the help of a professional. You need a pro to get you through the paperwork and, more importantly, to deal with the mortgage company. (If the mortgage company can get to you, they will often do their best offer you an alternate loan mod on their terms; terms that are unlikely to help the distressed homeowner in the slightest.)

Trying to go it on your own to get one of these programs is like applying for a grant without the help of a grant writer.

Add to that the fact that participation in at least one of these programs (the one we qualify for, I don't know about the others) is VOLUNTARY on the part of the mortgage company and things get really sticky.

But it's early days yet. Considering how rapidly things have been happening with the economy, I think it's a bit early to be calling the loan mods anything other than a complicated work in progress.

Surprise surprise, banks are greedy. :)

I know the article blames the "payments actually went up, or didn't go down much" on rolling missed payments and fees into it - but I wonder if some of it is people who have ARMS, I/O's, negative amortizations, ect - if their rates are about to adjust/reset, the modified loan could be higher than their current payment - but lower than the payment after it adjusts/resets.

@Megan Squier:

I bought in 2006, and I used Maryland's More Home For Less program for first time buyers. If you buy a house in the county I did, you have to go to an info session and a one-on-one counseling session conducted by a nonprofit community group. When I did my counseling session, you had to bring 3 months of credit card statements, pay stubs, bank account statements, ect. I wasn't in great financial shape - I was putting 10% down - but the woman running the session pretty much told me that I was one of the best she'd seen and that most people who did it had trouble coming up with 1%.

@madanthony: Well, that's the whole point of the loan modification - to change the terms of the loan so that the loan terms are better for the homeowner so that they don't go into foreclosure: changing the ARM to a fixed rate mortgage with a reasonable interest rate so that they DON'T reset to a higher interest rate, reducing the amount of the principle (rare), forgiving late fees so that homeowners can focus on paying the interest and the principle, etc. The banks will take a hit when they do it, but it's a smaller hit than they'll take if they foreclose. So the fact that so many of the "modified" loans are no better than or even worse than what the homeowners had before demonstrates that the banks are missing the point, and so the problems continue.

As Bargaineering pointed out, banks are greedy, and they suck at look at the big picture.

@Hil-fish:

But my point is that a modified loan may appear to be worse if the payment is higher than it is now, but may actually be an improvement if the payment is lower than what it would be in the future after it resets.

If that's the case, then maybe banks aren't quite as greedy and don't quite suck at the big picture as much as the figures would suggest at first glance.

This is why at my loss mitigation company we are able to charge a fee because we represent the borrower to ensure that the modification obtained is actually beneficial and a reduced payment. Most of our clients have attempted their modification on their own but get crappy offers. I have saved some people as much as $80k over the life of the loan =). Not all loan mod companies are bad!

@PSN: kingpsyz: I feel for your mother-in-law, PSN. When we went to our broker to close our loan, suddenly our fixed-rate loan - that we had discussed at length with our broker - had been transformed into a 5-year ARM. I caught the change and made the broker re-write the loan as discussed, but I am an attorney, used to closely reading contracts, etc. I was shocked that this broker, who was recommended by our agent, a good friend, would do this and think that I wouldn't notice, or that she was doing us a favor.

The most hopeful thing out there at this time is part of the new Homeowner Affordability and Stability Plan, the website is www.makinghomeaffordable.gov. Under the modification portion of the plan they are trying to reduce housing pmts to be within 31% of the borrower's gross monthly income. However since the guidelines came out 1mo ago, most servicers are not ready for it. It's still completely optional, but a better chance for Fannie Mae or Freddie Mac owned loans (can check if yours is on that website). It doesn't apply to FHA or VA loans at this time. Also, it could turn out like Hope for Homeowners which was an complete failure.

I work for a HUD-approved housing counseling agency and help homeowners at risk of foreclosure. It's very frustrating because some lenders want the borrower to present a budget with surplus funds at the end of the month in order to qualify for a modification, and I think the majority of people who I talk to are in the negative! It isn't always possible to get to a surplus at this time, which is part of the reason borrowers fall behind in the first place :(

@PSN: kingpsyz:

Always someone else's fault. It amazes me.

@rochec:

Holy hell. How can you blame the consumer in this situation? The banks were directed by the feds to start refinancing... AFTER we provided the banks with billions of dollars... and they don't seem to understand the deal.

The banks scammed people into ARM loans by telling them that the ARM loans would be a lower price, and that the ARMs would *NEVER* go up.

It isn't "always someone else's fault," but keep in mind that *NOT EVERYONE IN THE WORLD IS A FINANCIAL ANALYST, HAS THE MONEY TO HIRE A FINANCIAL ANALYST, OR HAS A DEEP UNDERSTANDING OF BANKING*. That's WHY THEY RELY ON THE PEOPLE WHO OFFER THEM A LOAN, and TRUST THEM TO PROVIDE A FAIR DEAL. Because the person offering the loan is SUPPOSEDLY AN EXPERT IN THE FIELD, and IS NOT SUPPOSED TO HAVE ANYTHING TO GAIN FROM PROVIDING A LOAN THAT THE BORROWER MAY NOT BE ABLE TO PAY BACK.

It is ENTIRELY THE BANKS' FAULT THAT MOST OF THESE LOANS ARE GOING INTO FORECLOSURE. Yes, some people are idiots. Some people make poor financial decisions. But most of these people MADE POOR FINANCIAL DECISIONS BASED ON WHAT WAS PROMISED TO THEM AS SOUND FINANCIAL ADVICE.

If someone goes to a pharmacist and the pharmacist gives them cyanide instead of their prescription, do you then blame the consumer because they don't have every prescription thoroughly examined by a chemist?

@madanthony:

The banks do suck, and are as greedy as the figures would suggest at first glance.

The people taking advantage of this are primarily those who cannot afford their current mortgage. Obviously, if they cannot afford their current mortgage, the only way to provide them with a mortgage they can afford is to make the number go DOWN.

Stupid breakdown follows:

You have one hundred dots: ( 100x. )
And I borrow twenty of your dots: ( 20x. )
At a 10% interest rate: ( 22x. )
And I can afford to pay you one dot per year: ( . )
But you've sold me an ARM which *could* go up to three dots: ( ... )
But you swear that I'll never have to pay more than one dot: ( . )
And then you jack my payment up to two dots after two years: ( .. )
I can still only afford to pay one dot: ( . )
I will default, because ( . ) < ( .. )

The end result is that you loaned me ten dots: ( .......... )
And I paid you back two dots: ( .. )
I still owe you 8 dots: ( ........ )
Before you break even: ( ......... )

And then you "refinance" so that I pay you two dots: ( .. )
I can still only afford to pay you one dot: ( . )
You say that two dots: ( .. )
Is less than three dots: ( ... )
So the refinancing terms are 'better' because I'll never have to pay three dots: ( ... )
But I'll still default because my one dot: ( . )
Can never become two dots: ( .. )
And you sell the house for two dots: ( .. )
You still lose six dots: ( ...... )
In addition, you had to pay for paperwork and lawyers to foreclose, so you really only get something like four dots: ( .... )

If, however, you refinance and my payment is one dot: ( . )
I don't default, and you still get one dot per year: ( . )
It takes longer, but instead of getting four dots: ( .... )
You get 22 dots: ( ...................... )

Those dots are worth less over time: ( ............... )
But those dots are still more than these: ( .... )

In addition, each year, I'm paying you one dot: ( . )
Which is more than you get if I default: ( )

Short version:
If I can pay: ( ...................... )
If I default: ( .... )
Refinance/default: ( .... )
Refinance/can pay: ( ............... )

(I so wish I could format that better here. )

First, modifications are only for people that truely need help. If you have no income, sorry, you dont qualify, dont even try. second, unless your payment went up due to an arm change, try refinancing instead, a mod will not help you.

The first reason payments go up due to a mod, is like it was mentioned before, the past due payments are rolled into the loan balance for the remainder of the term.

But the second reason, and most likely the culprit of the increased payments, is that, at least with our company, a requirement of a modification, is you MUST have your taxes escrowed. And if your a fannie or freddie account, you MUST have your taxes AND insurance escrowed. So even though the mod lowered the payments by a decrease in interest rate, the payment shoots right back up once the escrow is considered. ANd if you are behind on your mortgage, you are probably behind on your taxes, and that will of course increase payments more as their will now be a HUGE shortage in your escrow...

My 2 cents

Be Careful. On the website Makinghomeaffordable.gov - "If you have already missed one or more mortgage payments - contact your mortgage lender immediately or call 1-888-995-HOPE (4673) to reach a HUD-approved housing counselor."

The above number leads you to a For-profit consumer counseling company. HUD says that they are not responsible for privacy of your information with these firms. That sounds a little scary.

Go to a local Consumer Credit Counseling org.

Oh yeah - I don't understand why Private Lenders get to say NO to modifying your mortgage. And there doesn't seem to be a Gov agency to complain about horrific customer service from your lender.

@jefino:

So you get to modify a mortgage you can't pay into a mortgage you can't pay?

Who in the hell wins in that situation? You still can't pay the mortgage. The bank still loses the major part of your loan.

Greed, malice, and stupidity reign supreme.

Most lenders that I deal with try to get rid of people seeking help by offering them some ridiculous modification, hoping they'll take it and go away (I guess?). People who get a decent offer usually have to either hire a lawyer/negotiator or keep bugging the lender incessantly until they get a meaningful offer.

@RvLeshrac: The bank winds up winning, because they can take the foreclosed property and "mark it to mystery" - eg, hide their true losses.

@pal003: "I don't understand why Private Lenders get to say NO to modifying your mortgage."

Possibly because the government has no business or right to interfere with private transactions? Seriously, could you imagine someone you lent money to coming over and telling you that, well, that thousand bucks you lent is now seven-hundred-fifty, and oh well, suck it up, times are bad?

@PSN: kingpsyz: Everyone in need look up NACA, they'll hook you up.

@jefino: The problem comes when you are upside down. Unless you have absolutely spotless credit and you are within 110% of your house's worth you won't be able to refinance and that was the case before the collapse...I'm sure you won't be able to refinance unless you have equity.

The purpose of a modification is to get you into a home loan that you can afford if they want their missed payments they're going to have to lower your interest rate anymore. That almost sounds more like a forebearance than a modification.

A bank that is actually interested in being profitable will either forgive your debt -- the part that is upside down, give you a fixed interest rate you can afford, or both.

@Erwos: The bank wins temporarily. They were making out like bandits before, they got to keep the house, sell it quickly undervalued and then collect insurance...thus leading to the collapse of AIG. I say temporarily because it's all going to them...it kind of has, but if they continue with that attitude we're going to have a lot more bank failures before this is over.

@ArcanaJ: I absolutely disagree about getting the help of a "professional." I've worked in default servicing for a few years now, and the overwhelming majority of these "professionals" don't do anything you couldn't do yourself. They DO send out nice, legal sounding, semi-threatening letters to the lender...that don't do anything. They DO often charge hefty fees, often directly related to the amount of money you have in your bank account at the time you speak to them. These "professionals" range from people who really will work for you (but don't do anything you couldn't do yourself) to those who make some kind of nominal effort-- a handful of calls to the lender, so it looks like they're doing something-- to justify the fees they charge, to those who take your money and are never heard from again. If you're absolutely convinced you need a lawyer or a loss mitigation firm to help you, be very careful about who you go to and do some research on them first.

@rochec:

Your ignorance amazes me. How can one be so unable to comprehend the english language and yet operate a personal computer?

She makes well enough to afford a home, she had a FIXED RATE LOAN, she needed to refi to help a family member, she specified that she must keep a FIXED rate and absolutely did not want a ARM loan.

Her broker told her everything was fine, and next thing you know he's putting liens on the home and being investigated by the Feds. Still doesn't help us or get her loan fixed so they're putting her into forclosure now.