Posts (RSS)Foreclosure Still Imminent Despite Lender Assistance and Loan Modification
California foreclosures are still on the rise despite pressures exerted by government officials on mortgage companies to help families with troubled mortgages. In a survey conducted by the nonprofit group California Reinvestment Coalition last April, homeowners who sought help from mortgage counselors still ended up in foreclosures.
The data was taken from mortgage counselors coming from 44 different organizations authorized by the federal government to provide mortgage counseling. 68 percent of these counselors had clients who still ended up in foreclosures despite receiving help.
In a similar survey conducted last September, a slight improvement on the figures was achieved, although foreclosures still topped the outcome for homeowners seeking loan modification. More than 11,600 homeowners from California have been assisted by these agencies last September.
Although many lenders have pledged support to prevent foreclosures, counseling agencies have reported difficulties and frustrations in communicating with lenders who are very unpredictable. Lenders were either slow in providing assistance to borrowers or would lose processing documents thus delaying the loan modification process even more.
The goal in mortgage modifications is to prevent home repossession by making monthly amortization payments current through affordability. Payments, inclusive of taxes and insurance, should be within 30 to 40 percent of a family?s monthly income flow. Lenders can achieve this by cutting down on interest rates, extending loan terms typically from 30 to 40 years, or providing a reduction on the principal.
However, bank experts mentioned that even with a reduced payment scheme, troubled homemakers might not have sufficient income to continue paying for these mortgages, and would still end up in foreclosures.
This statement is backed up by survey results from counselors who stated that 85 percent of homeowners they are working with already have reduced incomes and are underwater in their loans. Due to this, banks and lenders will most likely refuse a reduction on the principal that could make a substantial reduction in payments. Until a concrete solution can be done in the next few months, troubled families will most likely lose their homes.