by julie on September 29, 2009
Loan Modifications: An Effective Way to Stop Foreclosure?
We often get the question on whether a loan modification will stop foreclosure.
Unfortunately the answer to that question is: It Depends.
It depends upon the following information on whether a bank will stop foreclosure on a property that is in default:
1. It depend upon the bank. Different lenders have different rules.
2. It depends upon the financial situation of the homeowners. Banks have specific formulas on how they determine if a homeowner is qualified for a loan modification
3. It depends upon when the forcloure sale date it. If the foreclosure is less than a week away, many times the bank may not postpone the forclosure.
4. It depends upon whether the house has equity or not.
5. It depends upon the neighborhood the house is located in. Are there other foreclosures in the same neighborhood? Are homes selling fast or slow?
6. It depend upon who actually owns the loan. If it is a direct lender such as Wells Fargo, then a loan modification may be easier and a postponment easier as well.
7. It depends upon whether all the loan modification paperwork is in their hands compared to the foreclosure sale date.
8. It depends upon whether the house is your primary residence or a rental or secondary home.
For example, if you have an Indymac loan and it is a rental, then postponing the foreclosure using a loan modification most likely will not happen. Indymac does not do loan modifications for rental. If you have a Countrywide loan, their loss mitigation department encourages loan modifications. Same for Bank of America loan modifications.
So the real answer to the question whether a loan modification will stop foreclosure is that it depends upon your particular circumstance.
A decent loan modification professional and a 15 minute interview may determine if a loan modification is an effective tool to stop foreclosure.
Since April of this year, every San Diego real estate agent, investor, loan officer and title/escrow company has noted that real estate inventory in San Diego has diminished significantly. We spoke with one escrow company that does virtually all the closings for REDC, a large auction company in regards to this matter. Her response was that business was down about 40% since April. Banks appear not to be releasing their inventory. Thus San Diego short sale listings are selling like hotcakes.
Diana Olick, a CNBC Real Estate Reporter, reported an interview with Bank of America/ Countrywide on whether or not they are holding on to their bank-owned properties. Here is how they responded (as summarized in her report):
Bank of America – Countrywide:
- Foreclosure sales have been abnormally low since we learned of the pending implementation of the administration’s Making Home Affordable program. From that point, we delayed the initiation of foreclosure proceedings and sales for customers that may eligible for a loan modification under MHA. As a result of this policy, our foreclosure sales in recent months have been as little as half the normal pace we experienced before.
- Until a foreclosure is completed, Bank of America continues to exhaust every possible option to qualify customers for modification or other solutions.
- Now that Making Home Affordable programs are operational, we do project an increase in foreclosures as we exhaust every available option to qualify customers for modifications and other solutions.
- While we have very strong loan modification programs now available, unfortunately, these foreclosure projections reflect the increasing number of customers who will not qualify for loan modification because they have suffered major life events servicers can’t solve…primarily unemployment and underemployment.
- We do not hold foreclosed properties off the market. The vast majority of mortgages serviced by Bank of America are owned by third-party investors. We have an obligation to them to prepare foreclosed properties for market and sell them as efficiently as possible.
According to Ted Jadlos of LPS Applied Analytics, “Based upon foreclosure and REO timelines, it’s going to take at least 18 months to flush the system of our current problems. But to flush the problems in only 18 months, more problem loans need to leave the system relative to the new problem loans of today and tomorrow. That does not appear to be the case right now—we aren’t clearing faster than new problems are emerging.”
We feel that Bank of America – Countrywide is not exactly being above board on their “politically correct” response. We know of many San Diego and Orange County homeowners who are not in a loan modification, haven’t made a mortgage payment for over 10 months, an still have not received a notice of default. It’s a great time to get out of your mortgage and your debt through the short sale of your home in San Diego.
Call us at 1 (619) 631-4546 to get started today!
