Do You Know Who Benefits From a Loan Modification? By Marlon Baugh At Isnare.com Ezine Articles

Today more and more lenders are implying that they are doing everything within their power to help home owners that have fallen behind on their payments, but I am sure if you speak to anyone that has attempted to get a loan modification, will beg to differ as they tackle road block after road block from their lender.

Not only are home owners finding that it’s a mission to reach a work out officer within the loss mitigation department of their lender, but to make matters worst, if they do receive an approval for a loan modification from their lender, they are finding that new payments are as unaffordable as the original mortgage.

As more and more borrowers default on their loans for such reasons as job loss or an adjustable rate mortgages, lenders are finding that their loss mitigation departments are flooded with request from home owners who can no longer afford their payments. One of the main causes of this is lenders were not set up for the work load and mortgage restructuring that the rise in foreclosures have caused. The main purpose of servicing companies were to collect monthly payments from the borrowers as there were limited request to help home owners modify their existing mortgages within past years.

Most loan modifications that are offered by lenders result in either a temporary and minimal rate reduction and an increase in the principal amount owed, as the lenders tact on the arrearages with late fees and many other garbage fees that purposively arise from the mortgage going into default. Home owners will find that the amount they owe increases because of the missed payments and these junks fees and as a result the new payment that is being offered by the loan modification is even higher than the original mortgage payment.

In saying that, some home owners need to realize that a loan modification isn’t for everyone and that renting and starting over can be a better options for many, especially if you live in a state like Florida where many Floridians have loss in excess of a hundred thousand in equity over the last 2 years and the Florida market is still declining.

With a combination of the current U.S. economy and sub prime loans, foreclosures are far out pacing the number of loan modifications that are being done.

Many modifications done today tend to be unaffordable, because of no reduction to the principal balance of the mortgage and or a significant rate reduction and as a result we are now finding that over 50% of loan modification done within the last year have gone back into default.

One of the main duties of a servicer is to collect every dollar owed by the home owner for the lenders or investors that actually owns the loan, and this is one of the main reason that home owners are finding that their lenders are sometimes reluctant to modify their loan, as this could result in less income for them and the potential of huge losses for the investors or lenders that hired them.

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