A federal loan refinancing program will probably be less successful than a bank loan modification is. Qualified individuals can get a home loan modification via a government program. However a good idea it seemed, the program has been less successful than hoped. Banks, of their own volition, will extend modification programs to customers. This isn’t really a victory for the Libertarian crowd though. It turns out that private modifications are less successful than government refinancing. Homeowners are two times as likely to default on a private modification.
Much more people get bank loan modification
There’s a simple enough idea to the Home Affordable Modification or HAMP. A homeowner that gets in trouble can apply for a loan refinancing that starts with the feds. The government works in conjunction with the homeowner’s lender. If certain criteria are met, they receive a trial modification on the bank loan for their home. If the trial is successful, then they get a permanent modification. Unfortunately, less than 45 percent of all permanent modifications stick. Of those who default on the government modification, according to CNN, about 44.5 percent get a refinancing from their bank. There are two financial institution modifications made for every single Home Affordable Modification Program modification.
Much more delinquency on bank modifications
Unfortunately, there are also more defaults on bank modifications. Of the few people who get a permanent mod through Home Affordable Modification Program, 11 percent default again. On the modifications made by lenders, 22 percent default. However, there is a reason for that. Usually, Home Affordable Modification Program mods reduce monthly payments by $608. Bank mods don’t do also. The average bank mod lowers payments by $307. For some people, that may be the main difference between success and failure, however those already running for pay day loan will likely not be helped too much.
Housing tied to employment
If unemployment doesn’t subside, no other sector of the economy will improve. There are small slivers of hope. Nevertheless, full recovery will take awhile. All signs point to an extended recovery period.
Articles cited
CNN
money.cnn.com/2010/09/24/news/economy/Mortgage_modifications_redefaults/index.htm
