Friday, December 4, 2009

Loan Modifcation is usually a waste of time

In rare occasions loan modification can make sense. There is a small group of people that are ideal candidates for loan modification and will turn out to be a success.The process should get a little easier and more standardized soon which is a good thing. I am not sure if it will increase the quantity of modifications but it will certainly make it quicker and easier to apply. The government is trying to standardize the process and they are offering banks financial incentives to the banks that comply with the new rules.

The problem is most people don't qualify to modify. Many people make enough money to afford their mortgage and most of the rest of modifiers make too little.

The reason it can be a waste of time to apply is it takes forever to apply for a loan modification at most banks. It is a painful process. After several months of agony and waiting the banks usually a very modest loan modification for a very short period of time. The typical loan modification is a slight decrease in rate for a limited amount of time. The bank as two other choices besides loan modification that often make better financial sense. Foreclosure and Short Sale both get the bank out of the bad deal now. They can cut their losses rather than slowly bleeding for years to come.

I could talk more about the way the banks analyze and make decisions and why it doesn't make sense for them to modify, but I want to make sure people are listening. Post a comment or ask a question and I will continue...

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