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 refinancing programs to customers. However, there is an unfortunate corollary. The government program is much more successful for the few who can use it, as private financial institution refinancing are twice as likely to end in default.
Bank loan modifications outpace HAMP
The Home Affordable Refinancing Program, or HAMP is quite simple. Distressed homeowners apply for a loan modification via the government. An individual gets a trial refinancing of the financial institution loan they bought their home with, if they meet the right criteria. Then they have to get all the way via the trial period. If it is successful, they get a permanent modification. In the first 90 days of refinancing, less than half are successful permanent modifications. According to CNN, of those that default out of the federal program, 44.5 percent end up with a modification from their loan lenders anyway. 2 financial institution modifications made for every HAMP modification.
Banking institutions have greater delinquency rates
Unfortunately, there are also much more defaults on bank modifications. Fewer than half of HAMP applicants accepted complete the trial phase. Of those, 11 percent default again. On the modifications made by lenders, 22 percent default. However, there is a reason for that. Of the few who are successful within the HAMP, the average reduction in monthly payments is $608. Financial institution mods do not do as well. The average bank mod lowers payments by $307. That may be enough to create breathing room for some, but definitely some homeowners will nevertheless be running for payday advances to keep up.
Good real estate will follow good employment
Just about every economic indicator, like housing, won’t really improve until jobs does. Everything else will follow. There have been some causes for hope. Nevertheless, full recovery will take awhile. All signs point to an extended recovery period.
Information from
CNN
money.cnn.com/2010/09/24/news/economy/Mortgage_modifications_redefaults/index.htm
