Sounds like modifying your mortgage is the way to go and successful for lender and homeowner. On the surface it would appear so, but these statistics are very misleading.
During the last quarter of this year over 500,000 modifications, either permanent, trial or payment plans have been completed. This is comparable to the last quarter.
On average, modifications during the second quarter reduced borrowers' monthly payments by approximately $400 - $600 a month.
Sounds like modifying your mortgage is the way to go and successful for lender and homeowner. On the surface it would appear so, but these statistics are very misleading.
Why? Consider the fact that 47.8% of all modifications granted since 2008 have gone delinquent!
And think about the money spent. The average modification cost the homeowner $3,500 on average. They have to expend time, effort and undergo months of stress not knowing if they will be approved. During this time they will more than likely have to continue making their house payment, paying taxes and fixing what breaks.
So why do people go through all this only to loose their home in a couple of years?
Sadly homeowners have a desire to stay in their homes regardless of their economic hardships. They think a modification will solve their problems and will allow them to stay in their home and everything will be back to normal. But is $300 - $500 a month reduction going to make a difference? Probably not. The evidence concludes at least half the time it didn't work.
People aren't ready for the adjustments they will encounter. There is a new factor in their life called an economic hardship they haven't dealt with before. This will change the dynamics of a family's lifestyle. The frills are now gone, major expenses are delayed, social activities are on hold. Money is tight and kids cost money.
People start to wonder why they are paying interest on a loan which exceeds the value of their house. Even if the rate is 4% but it's owed on $100,000 of equity that vanished it doesn't pencil out. Modifying without principal reduction just isn't smart
They wake up to the fact that if they wanted or HAD to move for work purposes they could never sell their home. There's no equity. Again without principal reduction it's a dice roll.
What should a distressed homeowner do BEFORE they start the ordeal and expense of a modification?
Once a family resigns itself to securing their future instead of trying to hold on to their past by staying into what has become a bad investment they will make a rational decision to get a fresh start and weigh the options.
Things change you can move, if not the owner will be glad to keep you there for a long time because he doesn't have any equity so he can't sell anyway.
The next step is to maximize the leverage they have with their lender.
What's that mean?
Lenders generally will consider a modification, if that doesn't work they will choose to do a short sale as it is less costly than foreclosure.
A homeowner could just opt to choose a short sale. The benefit is that they are cooperating with you and you with them. In return you stay in the house usually at no cost.
Many times lenders will offer an incentive for a short sale especially if the homeowner is in foreclosure, as, again, it will save them money. Chase currently offers up to $35,000 to some borrowers to cooperate in a short sale that were in foreclosure.
Short sales usually take over six months to actually close and many times the buyer will allow the former homeowner to stay in the house rent free for a month or more. So six to eight months or more of free rent could be enjoyed.
So do the math. Compare your monthly savings NOT doing a modification and moving into a comparable house around the corner in six months with paying lawyer's fees, monthly house payments, taxes, insurance, repairs and maintenance for that same period of time. In an average situation it's probably $12,000 to $15,000.
This money IF SAVED and applied to a well planned and calculated move in six to eight months would make the transition very comfortable and undoubtably leave some money left over for emergencies. And the pressure and stress are gone.
Why don't more people do this instead of modifying their mortgage...ego, pride, peer pressure, and a thought process instilled in us all for 100 years of home ownership.
Once people can accept the paradigm shift our economy has created their lives the sooner they can get a fresh start and get on with their life without AN ANVIL AROUND THEIR NECK.
About The Author:Expert Mortgage Consultants in stopping foreclosures, principal reductions, modifications and
shortsale, Please visit our website at
http://mortgagemedic.org/loan-modification.You will talk to an experienced professional with 35 years of financial background and legal consultation.Call 888-833-2550 to speak with the author 10-4 Mon- pst
