65% Of Modified Loans Will Default Again Anyway, Study Predicts

Many homeowners that couldn’t afford their home the first time around, can’t afford it the second or third, a new study finds. Fitch Ratings predicts that 55-65% of home loans getting modified will end up at least 60 days behind within a year. The percentage is even higher for those in subprimes…

…with 60-day delinquincies predicted at 65-75%. “Loan modifications hold clear value for many homeowners provided the modified payments are sustainable, but more often than not, reducing the home payments to an affordable level may not be enough to rescue borrowers who are overextended on other credit and expenses,” said Diane Pendley, a managing director at Fitch.

Many modified mortgages will default again, Fitch Ratings projects [LAT] (Scan: SyndProd)

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  1. Unsolicited Advice says:

    This is a powerful consumer-driven argument against loan modification programs. With second default rates that high, it could be said that such programs encourage borrowers to continue to bleed cash into a home only to lose it again. It is likely a better strategy for most people in such dire straits to go into foreclosure unless there is a reasonable assumption that the gap can be closed by a stronger job market or some other source of income.

    • floraposte says:

      @Unsolicited Advice: I don’t disagree, but I think there’s a difference between a prediction and a proven actuality. It’ll be interesting to see if the actual default rate on the modifications is higher, lower, or the same as predicted.

      • Unsolicited Advice says:

        @floraposte:

        Actual, reported default rates were lower but accelerating as Q4 ’08 ended. This was the beginning of massive efforts to implement renegotiated mortgages on a broad scale.

        [www.nydailynews.com]

        [latimesblogs.latimes.com]

        Keep in mind that several Federal moratoriums and other programs muddy the picture – every foreclosure moratorium’s end has been met with a massive flood of new defaults. Previously default mortgages, predictably, have drastically elevated risk.

    • TheObserver says:

      @Unsolicited Advice: I agree.

      One big thing those going into loan modifications overlook is that once you do so, you are now liable for the amount you owe on the property if you foreclose after modification. Therefore, it’s “better” to just foreclose and take the hit the first time, at least in some states (like California where they cannot take recourse).

      My friend is doing a loan modification, sounded good as he is saving over a thousand on his monthly payment. Yet when he tells me about it, it’s only good for 5 years or so. And then it goes back up again. Between him and his newborn kid (he already has three), unless he makes some astronomically huge increase in his salary, he might have dug himself a bigger hole.

  2. sanjsrik says:

    I’m not so sure why this is a surprise to anyone? Did we need Fitch Ratings to tell us that if they couldn’t afford their homes before AND they had high credit card debt, that JUST lowering their home payments would be enough? They still have high credit card debt. They didn’t get just subprime mortgages, they also had a number of credit cards that may have been maxed out because they believed they could refinance their homes and pay everything off on the other side. Now, their homes are worth less than they were and they still have high credit card bills they can’t pay. They were to borrow an expression, borrowing from Paul to pay Peter.

    • SacraBos says:

      @sanjsrik: The solution most likely then is to pay the mortgage, and stop paying the credit cards. The credit cards are unsecured. I’d rather get calls from collection agencies than get thrown out of my house.

      And depending upon the collection agencies, I just might be able to sue them for enough money to pay the credit cards.

    • BEERxTaco says:

      @sanjsrik: To quote Tim Wilson:

      “He’d borrow from Peter and write a bad check to Paul”

  3. Kaellorian says:

    If you make 40 grand a year and bought a 450,000 house or condo, you deserve to be bludgeoned repeatedly with rolled up copies of your credit score.

    One of the tried and true methods of purchasing a home – the down payment – needs to resurface with a vengeance. Saving enough for a down payment tends to demonstrate at least a modicum of financial responsibility. Everyone who wants to own a home should be able to – but let’s get them to the point where it makes sense for them – and for those that may be on the hook to bail a few of these idiots out. 20% minimum. Otherwise, keep renting. Rent a home. It works.

    • shepd says:

      @Kaellorian:

      Why bother with a down payment at interest rates creeping below 3%?

      Really, I’m a serious down payment advocate, but what’s the point when the bank is going to basically finance it for you?

      What we need is big fat interest rates like before so people have a REASON to make an investment in their house. The big interest rates also bring the prices down so people *can* put 20% in. Right now, 20% is a couple of years income in some places.

      • floraposte says:

        @shepd: Hey, where are you finding interest rates below 3%? I can’t find anything below 5% unless we’re talking ARMs, which…no.

        • shepd says:

          @floraposte:

          Here, although, I admit, it’s for Canada, and there’s a fair amount of catches (“Catch free” for a 3.15% rate here). I don’t follow US interest rates because I’m not interested in buying a house in the US. :)

          BTW: Interest rates hit 18% only a few decades ago and there were plenty of people who weren’t rich that owned homes. Homes also sold, at the time, for less than 3x yearly income.

          As far as people losing money goes, it can go one way or another. Either you can ask $230k and therefore force companies to pay an average wage that covers that (and enjoy the ensuing levels of unemployment that result, as we see right now, putting yourself at risk of losing a job too), thereby depreciating your own money considerably, or you can ask $100k and not require the above.

          Personally, I don’t care which way it goes, it makes no difference in the end. Although, the super-inflation version is rather risk for everyone, IMHO.

          • Skankingmike says:

            @shepd: wow 3% rate on a 3 year mortgage? seriously that’s your example?

            Yes there was 18% it was also at 20% in the very early eighties.

            And peoples homes cost 50,000 not 250,000 so your point doesn’t work.

            Nobody would sell at a loss of that magnitude what you suggest would be economic meltdown worse than the great depression.

            @Powerlurker: that’s pretty much the point.

            PLUS: for those that buy with low down payments and have to get Mortgage Insurance (which is all FHA loans) because you are most likely buying low market valued home now in just a few years you can reassess the houses worth and (in theory) gain equity in your home by property value going up. thus removing the need for the insurance and quickly reducing your monthly commitment.

            really if you can now is the time to buy add the 8k to the the deal.

            If you are financially sound then go for it.

            • shepd says:

              @Skankingmike:

              I’m not sure what interest rate you wanted me to post to prove that they are dipping below 3%, but “HSBC 2.75% 5-Year Variable Closed Mortgage” fits the bill here, but, as I said, it’s full of catches. You won’t have trouble getting ~3.5% in a 5 year closed, though. So, yes, seriously, that’s my example.

              You don’t find very many mortgages terms past 5 years in Canada. And for the VERY, VERY few places that do offer them, they will charge you a ridiculous amount for them.

              Of course, in Canada, we don’t have “No Recourse” mortgages. That probably helps with the rates.

              And yes, homes cost $50k back then. Plug it into the CPI and see why the housing market is so screwed (Hint: It should cost $132k right now.)

              Would we have a meltdown if houses were the price they *should* be? Maybe we would. We’ll also have a meltdown if rent remains tied to the CPI (And it will despite any attempts to change it, because rent is tied to income, and CPI tends to be tied to income as well). How does the meltdown play? Homeowners sell to move into apartments as they lose their jobs, that’s how. Houses become ghettos. Ghettos beget cheap prices.

              An example that’s local to me: Windsor, ON where you can buy houses for under $25k, despite them being at the “normal” $200k range only a few years ago. Too many jobs lost, too many people moving to apartments, the housing areas are ghettos.

              One way or another, prices on houses will either keep falling, or stay stagnant for a decade. My bets are on them continuing to fall, and I have CMHC on my side when it comes to that.

        • Elvisisdead says:

          @floraposte: Yeah, and at 5%, there;s points or a huge closing fees to pay.

      • Powerlurker says:

        @shepd:

        Because the reason a bank should be requiring substantial down payments is to make sure the buyer has some “skin in the game” and disincentivize efficient breech in the case of falling property values (which we’ve seen lots of in California, seriously, how can a bank be stupid enough to approve 95% LTV non-recourse mortgages). That having been said, as a buyer, if the interest rates are low and the bank is stupid enough to lend it to you, then why not, you’re not the one a hefty down payment is intended to benefit.

    • pecan 3.14159265 says:

      @Kaellorian: And this is precisely why we’re not buying a home. Apparently it’s kind of trendy for young couples to be looking, but I’m staying put in my apartment. I don’t have nearly enough money to be comfortable with putting a large amount of it on a home. Not to mention that a lot of the homes in my price range are fixer uppers – if you don’t have enough money for a downpayment, you don’t have enough money to fix a 30 year old home with a leaky roof, cracked walls and god knows what else.

      • subtlefrog says:

        @pecan 3.14159265:
        That’s the number one thing that scares me about owning. Particularly coupled with the fact that I’ve spent the past several years in areas where places can get easily trashed by hurricanes and earthquakes (Miami and now LA), the idea of ownership kind of makes me deer-in-headlights – even if we could come up with the money.

        Before people say that’s why you have insurance, I watched my landlords deal with the homeowner’s insurance people after hurricanes essentially destroyed the roof on my apartment so that every time it rained, it rained inside, too. The claim? Denied.

        I see the benefits of ownership. I do. But until things are more stable, in the market and in my life, I’m with you Pecan.

    • Unsolicited Advice says:

      @Kaellorian:

      Instructing someone to invest equity in a marketplace with subsidized interest rates at historically low levels is laughable.

      The government is tripping over itself to incentivize borrowing. Get a house for as little of your money as you possibly can.

    • Skankingmike says:

      @Kaellorian: @shepd:

      Personal responsibility goes both ways.

      Down payments mean nothing of the persons ability to afford a home.

      If interest rates were at 20% only the rich would have homes. Also the prices would not just arbitrarily go down due to high interest rates. EXP.

      Seller bought home for 200,000 8 years ago wants to sell for 230,000 in this economy is what he can possibly get for it.

      Buyer comes along offers the asking price and has 20% down. the mortgage payment is around 3000 a month not including insurance and property taxes. The buyer could potentially be paying closer to 3500 a month.

      the buyer would have to have a down payment of almost 75% in order to keep mortgage payments at the same rate as 3.5% down and 5% FHA loan currently.

      So what you’re suggesting is the seller should sell for 100,000 take a 100,000 loss and the buyer should just pay more money on a house?

    • sanjsrik says:

      @Kaellorian:

      This is unfair to those of use who used to be able to afford the downpayment but now can’t because it’s become such a high amount. Some of us have good jobs and good credit and are now being penalized because of the defaulters who couldn’t afford the homes they bought.

      • Unsolicited Advice says:

        @sanjsrik:

        Yes. You deserve a house, even though you have no equity to contribute, because you have cash flow and have been a responsible borrower. After all, pricing has gotten out of control! The solution is that you should take on debt at low, subsidized interest rates. That way, you can perpetuate the debt and pricing cycle that was responsible for creating a nation of people with no financial interest in the homes they “own.”

        Hahahahaha.

        The recession is over, kids! Not two years in and we’re already possessed of the same leverage mindset that created this disaster. To every little thing, turn, turn, turn.

      • Elvisisdead says:

        @sanjsrik: We’re ALL being penalized by defaulters and the industry that profited from them. Real estate agents, inspectors, contractors, title companies, lawyers, etc. to name a few.

    • u1itn0w2day says:

      @Kaellorian: Can’t agree more about the down payment . At least you have some equity and less to pay off – it’s that simple .

      And the 11-1 ratio for house price to yearly income – again I can’t agree more . It should be closer to 3-1 with the house price being no more than 3 1/2 times yearly salary .

      Yes there was fraud which should be prosecuted from the buyers all the way to the corporate executives @Luckwouldhaveit: . But it still took some niavetee and recklessness for much of this meltdown to happen .

  4. Skin Art Squared says:

    I think a lot of the home-buying madness stems from this idea that is implanted in everyone’s head from birth: That buying a house is the American Dream, and somehow defines your worth as a functioning human cog in the wheel of society.

    But why? I fell for that hype too. I’ve owned two homes and am now currently renting today. I rented before I owned those homes also. Looking at both sides of it from experience, I actually prefer renting. Sure you don’t get the nice fat mortgage interest write-off every year, but you also don’t have all the maintenance headaches & expense, HOA dues, anchors to one location, stress, etc.

    As a renter, if I decide I need a bigger or smaller place, or just a fresh location, I can accomplish that in 30 days. As a homeowner, I was literally stuck until someone was interested enough to buy the house and allow me to move on. That can take years sometimes.

    Maybe it’s time we abandoned the outdated 1950′s idea of growing up to be the Cunninghams. Even Fonzie was a renter.

    • HiPwr says:

      @BZMedia: I don’t mind the American Dream mindset. It’s the “society owes me a house” mindset that bothers me.

      • pecan 3.14159265 says:

        @HiPwr: I think this is what gets me, too. I know that home ownership is still one of those “defining things” – you own your home at 24, wow, good for you…somehow owning a home means you’ve arrived at life, and you’re really mature, or doing well. We’ve been able to see that obviously, maturity and good financial decisions can be lost on you at any age.

        But in this mad rush to own a home, I think people became very prideful and didn’t want to face the hard truths – so they tried to work around the fact that they didn’t have enough money. And along the way, other people helped with that delusion. But the idea that you are somehow entitled to own a home, or that in this great land of opportunity, everyone should have their own home…no wonder we’re in a mess.

      • Jevia says:

        @HiPwr: I agree. I know of a particular lawsuit involving a homeowner suing her real estate agents, the seller and the home inspector for alleged defects. She buys this $150,000 home while only receiving $800 a month in disability. How does this happen? I’m sorry, but if you have that restricted of an income, rent an apartment. Not everyone is entitled to own a home. She should never have been approved for a mortgage in the first place.

        She now wants $50,000 for problems with the home that she knew about when she bought the place. She won’t get that, but I’m sure she’ll end up with at least $10,000 of “free money” just by filing the lawsuit and settling. I bet she’ll still end up losing the home in foreclosure.

    • morlo says:

      @BZMedia: Owning land–REAL property–used to have value in freeing you from landLORDs. Now with HOAs, government seizures and unreasonable taxes, you’re right that becoming a serf is more appealing. And most people can no longer afford land anyway except at artificially low interest rates. But free possession of property and a high standard of living haven’t become old-fashioned just because they are gone. New isn’t always better.

  5. ArcanaJ says:

    65% Of Sky Will Fall Again, Chicken Predicts.

  6. Mary Marsala with Fries says:

    Yes, factually true, but SO MISLEADING!! I’ll manage to keep it to two points, though:

    1. Most people did NOT OVERSPEND ON A HOUSE, or if they did, it was only by *not underspending*, which meant they were perfectly able to pay until they lost their job or had their wages cut. Overreaching developers and wannabe rich people mostly lost their homes years ago, when values began to tank; most of what’s going on now is JOB- and INCOME-LOSS RELATED, and gahd the “it’s the victims’ fault and it can never happen to me cuz I’m smart” rhetoric needs to die, die, die. Could you make your payments on half your current wages? No? THEN IT COULD HAPPEN TO YOU.

    2. Part –a BIG PART– of the relapses and post-modification payment problems are because the MODIFICATIONS THEY’RE DOING SUCK. Banks are giving people the LEAST they can get away with, rather than looking at a budget and figuring out what can actually be afforded. (Part of this is because they’re overwhelmed and heinously disorganized, so they’re trying to get rid of the callers as soon as they can — much like the call-center games other companies play, actually.) I can’t *count* how many modification offers I’ve seen that leave the payments the same or even increase them — and many people will take their first modification offer, because they’ve fought so long and hard to get it and are afraid of foreclosure! (Our advice to combat this, by the way, is to KNOW BEFORE YOU CALL THE BANK exactly what payment you can afford to make on your current salary — even if that “salary” is unemployment. If you know that number and ask for it, your chances of getting a reasonable loan-mod offer are much, much better.)

    *sigh*

    Back to work…

    • ArcanaJ says:

      @Mary Marsala with Fries:
      “a BIG PART– of the relapses and post-modification payment problems are because the MODIFICATIONS THEY’RE DOING SUCK.”

      Precisely. Thank you for saying it, I couldn’t get beyond all the knee-jerk, ‘teh homeownerz was greedy’ bile.

    • UsefulThings says:

      @Mary Marsala with Fries:
      Could you make your payments on half your current wages? Yes

    • ARP says:

      @Mary Marsala with Fries: This is the beginning of the “Prime” mortgage meltdown. The majority of people didn’t buy too much house, had good (or good enough) credit, etc. However, the loss of a job has caused them to default. With savings rates at historical lows for many years, very few people have the emergency fund to maintain themselves for more than a few months.

    • Luckwouldhaveit says:

      @Mary Marsala with Fries: Mary, thanks for being a voice of reason here. I am working on the legal side of the loan modification business (we call it the bad lender business) and the stories I hear would just break your heart. The client whose case I am working on today had a significant down payment for this market – about $40K on a $400K home, which is quite modest. The lender and mortgage broker colluded to put him in a sub-prime ARM with a three-year term, after telling him that he was getting a fixed loan. My client doesn’t read or write English, and the mortgage broker’s agent “helped him out” by acting as a translator for him – but failed to provide him with the disclosures that showed that the loan he applied for was not the loan he was getting. Now, the housing market is down, and my client’s home is worth about 15% less. His low fixed rate is gone, and his payments nearly doubled. To take care of the arrearages and late fees, the bank’s loan mod proposal has him owing 110% of his home’s worth, at 7% – certainly not a break in the interest rate, and his payments will never get close to what they were and should be under what he was told his loan terms were.

      Think of the home purchase transaction as a chain – the real estate agent makes a percentage of the sale, the loan originator and mortgage broker make a percentage based on the amount of the loan (and often, a kickback from the lender for selling an ARM or other non-fixed “loan product), then the lender makes money – or used to – packaging the loan and selling it as a mortgage-backed security, which is bought by a pension fund or other conservative-minded investment group. All those parties in the middle of the chain? They’ve walked away with their money. Who is at either end? A homeowner who is desperate to save his home and the money he invested at purchase or in fix-up costs, and a pension fund full of teachers who are worried about retirement.

      • _NARC_ says:

        @Luckwouldhaveit:

        His low fixed rate is gone, and his payments nearly doubled. To take care of the arrearages and late fees, the bank’s loan mod proposal has him owing 110% of his home’s worth, at 7%

        What’s the Index+margin% that your client has? Rates are lower than ever, so he must have had a ridiculously low teaser rate.
        Prime is around 3.25% right now, LIBOR is .31%, and COFI is about 1.6%.
        Now is a great time to be in an ARM loan unless your margin is over 3%, and even then….

    • floraposte says:

      @Mary Marsala with Fries: Thanks for the info. Do you (or does anybody else here) have a pointer to stats about people undergoing modification–the percentage who are employed, have kids, etc.? I’d be interested in the picture.

    • Kimberly Gist-Collins says:

      @Mary Marsala with Fries: People SHOULD underspend on a house. They should put 10-20% down, and finance it for 15 years. If you can’t aford your house on one income in a pinch, then you can’t afford it AT ALL.

      And what happened to having several months of salary in reserves? If you don’t have enough left over each month to put to savings to fall back on when times get hard, then you can’t afford your house.

      • JeffM says:

        @Kimberly Gist-Collins: Where do you live? I think 10% down and the 20% down make sense- but 15-year mortgage?

        I just don’t think a 15 year mortgage is feasible in all areas to buy even a median priced home. The length of your mortgage seems somewhat irrelevant as much as the ability to pay your fixed rate mortgage for x months (pick the x that makes you comfortable) It’s awesome if you make a lot of money or live in an area with cheap housing but not everyone is in that situation.

        • morlo says:

          @JeffM: If everyone demanded those terms the houses would magically cost less, in a reversal of the magical process through which they tripled in value because of low government-fabricated interest rates.

    • Jevia says:

      @Mary Marsala with Fries: Actually, I think a lot of people did “overbuy” their homes. When my husband and I were house hunting, our mortgage broker said that based on our income and “known debts” (i.e. the credit cards and student loans, but not the day care bill or the private family student loan we had), we could “afford” a house/loan $100,000 more than what we felt was in our budget.

      Fortunately, we didn’t listen to him and stuck within our budget. Nine months after buying our home, I got laid off and our income was halved. But we didn’t totally deplete our savings in buying the home, so we had enough to fall back on and keep paying our mortgage until I did find another job. Since the new job paid a bit less than my prior job, it was doubly good we didn’t “overbuy” our home, so we still are able to comfortably pay our mortgage, while we wait for the economy to improve to hopefully get raises or better paying jobs.

      But I bet there are a lot of people out there that did listen to their mortgage broker and bought more home than they could comfortably afford, especially once the economy caused a job loss, or no raise/bonus, or other adverse affects on one’s income.

  7. H3ion says:

    But the low or no down payment really arose out of Veterans’ benefits following WWII and represented a government policy of encouraging home ownership. VA and FHA mortgages permitted young couples to purchase a home at a time when they probably couldn’t have amassed the savings needed for a 30% down payment. It was the extension of this policy to the conventional market, a heavy runup in housing prices, and a complete lack of serious underwriting that has led to the problem.

    If the government is serious about keeping people in their homes in this economy as a matter or policy (whether or not it makes economic sense is a different question) the only realistic way is to create a forbearance pool where a distressed homeowner can make payments based solely as a percentage of income with the government essentially providing a second mortgage for the balance so the initial lender stays whole until such time as the economy recovers and the homeowner can find employment. This may be prohibitively expensive but if a homeowner has no or little income, rearranging the mortgage payments is just plain useless.

  8. whydidnt says:

    So the article says 55-65% of modified loans will default within a year. Isn’t it a GOOD thing that 40% end up out of foreclosure? I don’t think the mortgage companies expected that all of these modified loans would end up being saved. However, if a percentage, even only 40% are saved, that’s a win for both the mortgage company and consumers. Even if the loan ends up in default, it allows the owner to live in the house longer. If it ends up in foreclosure down the road the owner still gets to live without payment for the foreclosure period. The mortgage company wins because they delay taking properties into inventory, hopefully in some cases until the RE market recovers and they can reduce their losses.

    I fail to see any negative in this, despite what Ben and previous commenter’s seem to state.

  9. Trencher93 says:

    If you have no job, what modification could help? The options now seem to be: (1) Huge tracts of abandoned ghost towns + refugees in homeless shelters/temporary housing (like Katrina) or (2) loan forgiveness to keep jobless people stable. Which will cost society less? We are now a socialist state which owns banks, so what option do we have other than have the banks take their haircut, the sooner the better, write off bad loans, and let people stay in their houses? Much cheaper and less detrimental to society than wave after wave after wave of foreclosures, displaced internal populations, and mass migrations to tent cities. I think we need a reality check. We need to get crushing debt off the books, have the irresponsible lenders who did it take a haircut and learn their lesson, and keep people in their houses, but only because the alternatives are going to be vastly worse.

    • csdiego says:

      @Trencher93: Except for chumps like me who would have liked to buy a house during the bubble and could have gotten some clown loan but didn’t because WE COULDN’T AFFORD IT. I know, it sounds quaint.

      Some of the newly-built subdivisions in the far exurbs probably should just sink back into the cornfields they were five years ago, but for the rest of us, foreclosed property is a good opportunity, and not an undeserved one either. Somebody is going to be holding the bag until prices shake out to what will clear the market. Either the banks will or the homeowners, or some combination thereof, but until the shakeout comes we’re all suspended in somebody’s fantasy world of million-dollar three-bedroom ranch houses.

  10. Miss_Ingperson says:

    I wonder what the impact of this projected 55-65% possible default of already modified mortgages combined with the resetting of Option ARM’s that are coming due starting next year will do to the already depressed housing market.

    I mean, it can’t be good, can it? You’re already dealing with the sub-prime meltdown and the beginning of the resession based home losses. What happens to those “homeowners” that have opted to pay less than the interest payments and already owe more than the house was worth 2-3 years ago, let alone last month?

    Not only do they owe say, 500 grand on a house currently worth 250, their rates will reset to current market value and they could be anything by that time from 1% to 20% (I remember the 18% mortgage my parents had in 1980-1).

    It’s a scary thought. I’m not American and I haven’t heard anything about what’s being done for these mortgages. Does anyone know?

  11. miguelggarcia says:

    There will only be predictors, I think that human nature needs to know “what’s going to happen” to feel more reassured, or scared depending on the situation. Right now, we are in scare mode; and when the economy is doing good, we are in “great news mode”.
    Everywhere, from crystal ball readers that work for $20 a session to “analysts” that made 7 figure salaries, they job is to keep our “need to know the future” satisfied. The problem is, nobody can predict the future. Sure, every once in a while someone will “accurately predict” something, and will make the news; but 99% of the time that same predictor was wrong and nobody goes back to his prediction track record to verify it.
    At the end, these guys (predictors) make, say 100 predictions a year and if 2 or 3 are right they will be remembered (probably a newspaper will pick the story and then ever other media) but conveniently nobody will notice the other 97 predictions that didn’t come true.

  12. Kimberly Gist-Collins says:

    If you can’t afford a house, you should not have bought it in the first place. These people don’t deserve to keep their houses at all. You know what we did when we got down on our luck and could not afford our house anymore. WE SOLD IT!!! We sold it recently too, in a bad economy. We sold it in a week because we actually WANTED to sell it.

    With that said, when you buy a house that is way out of your league, adjusting the payment a little isn’t going to help you. You still have a house you can’t afford.

    • Skankingmike says:

      @Kimberly Gist-Collins: you are aware that not everybody is living in a Mic Mansion right?

      Not everybody that is in foreclosure bought beyond their means.

      Maybe you didn’t catch the news about the unemployment rates being the highest in decades? Or health insurance costs sky rocketing.

      I know people who work in the Foreclosure business and i could tell you stories about Medical bills and deaths that, maybe if you had a heart, would make you cry.

    • ArcanaJ says:

      @Kimberly Gist-Collins: Sorry, you lost me with the phrase “these people”.

      You are, no doubt, a precious little snowflake of fiscal reason in a world gone mad, but you sound like a self-righteous bigot. What’s next? Shall we reinstate debtor’s prison for “these people”?

      Oh, and for the record, my family are “these people”. Fixed rate mortgage, borrowed far less than we were told we qualified for and still stuck with a mortgage that was ultimately beyond our capacity thanks to some shady dealings on the part of the mortgage broker and a long stint of unemployment. Oh, and our less than palatial bit of 70′s tract housing? Yeah, that’s worth a whole hell of a lot less than what we owe on it.

      Of course, being “these people” (deadbeats, scammers and lepers all) what are we doing about it? We’re trying to negotiate with our mortgage holder so that we can continue (after nearly five years with a spotless record) to fulfill our responsibilities, pay what we owe and keep our house. Yeah, we’re selfish jerks like that.

      • TEW says:

        @ArcanaJ: @Skankingmike: It is always sad when someone is forced out of their homes but Skankingmike you say you work in the foreclosure business. How would you allow people to stay in a home they can’t afford whether it be from lost job, medical bills, death, or greed and have it help them? Sometimes a foreclosure is needed because the people can’t pay their bills.
        ArcanaJ- I am truly sorry about your long stint of unemployment but the modification is in the banks best interest. The banks were doing this before the government was involved because they know that if you hand them the keys and declare bankruptcy they will be out of a ton of money. You don’t need to attack someone because they make a point. The truth is that most people needing this program can’t afford their payments and that is why they are modifying the loan. The post was about people needing to lose the home because only when the bad debt is cleared can the recovery start. I wish your family the best of luck.

        • Skankingmike says:

          @TEW: I don’t work in it, and it is sad. I’m just stating that not everybody is some greedy house buyer. And from what I hear most are not.

    • Karita says:

      @Kimberly Gist-Collins: There are a lot of people that WANT to sell their homes, and yet spend months or over a year trying to do so. Just wanting something bad enough isn’t always going to make it happen. I’m a real estate attorney, and I feel terrible about some of the things I’m seeing. But in the seven years I’ve been doing this, I’ve only seen one person who lost their home because they truly couldn’t afford it when they went into it – I worked on his closing, and it was obvious from day one.

      You may be financially responsible, and that’s great. There are a lot of people out there who are like you. But, and I see this on a daily basis, there are a lot of people just like you who also have a run of bad luck, and lose their homes for reasons completely out of their control.

      It’s a bad idea to make judgments about the situations of others when one really don’t know what one is talking about beyond personal experience.

  13. u1itn0w2day says:

    Same thing is happening with the mortgages is happening with the car companies . Too many just postponed the envitable . The only advantage now as with the car companies by delaying the foreclosure and bankruptcies it makes the economic kaos that follows a little more orderly . Alot of these people would’ve been in the dumps once an ARM went up or had just one smaller financial disaster like a medical bill , house repair , car or a combination of smaller financial catastrophees .

    In other words too many house buyers were already MAXED out wether they knew or not .

  14. Anonymous says:

    Loan Modification is a great tool for some BUT NOT for all. A lot of people feel they can be saved and hold onto their homes because, let’s face it, who wants to loose their home without a fight? With the previous market we were just in and lenders handing out loans, why wouldn’t everyone want to have a piece of the American Dream and own their own home?

    But now we as a people are facing foreclosures with the publics credit ratings dropping just as fast has home prices. This will be an even bigger problem in the long run unless people seek professional assitant to protect their credit rating so they can re-enter the home market once things pick up again.

    I am speaking from experience as I provide Loan Modification at NO cost and some clients have looked at their options and are planning ahead for the future. With help, people can avoid foreclosure! I hope this message motivates people as everyone has options.

    Loan Mods default rate bening so high, in my opinion, only means people are being mislead and taken advantage of.

  15. TEW says:

    I see the loan modification as a way to kick the can another 2-4 years. Correct me if I am wrong but the main point of these programs is to lower the payment. The only way to do this is to lower the payment of the principle thus making the home more expensive. Also it is going to make these people renters for life because they are enslaved by a home that they are not paying off. The poor saps will never be able to move because the home will be underwater for most of their lives. To me the best thing many of these people can do is throw the keys at the bank and declare bankruptcy. Their living expenses will probably be less. I am trying to wrap my mind on what is happing in 2-4 years but I can’t quite figure it out.

  16. MooseOfReason says:

    It’s not the percentage. It’s the people.

    All the government is doing is making the problem last longer and will do more damage in the end than if we just let the correction happen.

  17. Ashik Patel says:

    Well, the funnies part of the modification program is that it allowed people that could not afford to make payments to modify their loans. It did not allow those of us that could afford the payments but wanted to get a better rate. Thanks to poor loans given out and to those that took them, many owe more than their homes are worth.

  18. wejash says:

    Many, if not most, modifications being done by the servicing industry don’t materially reduce the monthly payment. Many include a large down payment requirement.

    Quite a few, when dealing with a borrower in default, actually require the borrower to pay regular payments PLUS, in order to get caught up over a limited period of time.

    That so many may actually perform is astonishing, actually.

    Many of us suspect the servicers are only working deals for temporary purposes. They have large inventories of homes to sell. So they make token deals to show they are complying with the rules when in reality they just don’t have room for more inventory right now.