Loan Modification Mess: Are Lenders Dragging Their Feet
By Ilyce Glink
Are mortgage lenders waiting to modify loans because they're hoping the loans will self-cure?
Historically, loans that are less than 30 days late will often "self-cure." That's the industry jargon term for a homeowner who figures out how to catch up on his or her mortgage payments and start payment them on time each month.
In fact, the majority of mortgages that are delinquent even up to 60 days will often self-cure. Lenders know from years of watching these mortgages self-cure that homeowners would like nothing better than to ensure their home stays out of foreclosure, so they do whatever it takes to make these payments on time.
But once a mortgage is more than 90 days delinquent, few homeowners are able to catch up on their payments. That's why loan modifications originally targeted those homeowners who had fallen so far behind.
But the conventional wisdom isn't working right now -- and I think a lot of that has to do with how deep and how painful this Great Recession has been, and how much home values have dropped.
If your home was worth
After all, in some places you know it could take the bank up to a year to actually foreclose on your house and take possession -- you might think you'll be able to stay in the home for free for all that time.
(Of course, it isn't really for "free," but maybe this kind of thinking explains the stomach-churning drop in the delinquent mortgage cure rates.)
It also doesn't help that the longer it takes to complete a loan modification (and the big box lenders are taking months to make something happen), the more likely someone will lose a job, get divorced, get sick or have something else happen to dampen their earning prospects.
According to a new survey from
These are dreadful numbers. And, according to Fitch, without President Obama's Making Home Affordable mortgage loan modification programs, the cure rates would be even lower.
You can't fix these kinds of problems with an
What will fix the cure rate is helping people find jobs that pay them a decent wage, like building much-needed roads and bridges, or retraining them for a job of the future, perhaps in technology or a green industry.
That's where a good chunk of the remaining stimulus money might need to go.
Ilyce R. Glink's latest ebooks are "Save Your House From Foreclosure" and "The Clutter Collector: How to Get Rid of Clutter Everywhere In Your House," which are available at her Web site, www.thinkglink.com. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11 am-1 pm EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
(c) 2009 REAL ESTATE MATTERS DISTRIBUTED BY TRIBUNE MEDIA SERVICES, INC.
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