About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
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There was an enlightening article in the Washington Post recently explaining that in may cases foreclosing on a homeowner is more profitable for a bank than offering a loan modification. This might shed some light on why convincing banks to modify loans can be so difficult at times. Here are some excerpts:

Modification makes economic sense for a bank or other lender only if the borrower can’t sustain payments without it yet will be able to keep up with new, more modest terms.

A second set are those who are likely to fall behind on their payments again even after receiving a modified loan and are likely to lose their homes one way or another. Lenders don’t want to help these borrowers because waiting to foreclose can be costly.

Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.

These financial calculations on the part of lenders pose a difficult challenge for President Obama’s ambitious efforts to address the mortgage crisis, which remains at the heart of the country’s economic troubles and continues to upend millions of lives. Senior officials at the Treasury Department and the Department of Housing and Urban Development have summoned industry executives to a meeting Tuesday to discuss how to step up the pace of loan relief. The administration is seeking to influence lenders’ calculus in part by offering them billions of dollars in incentives to modify home loans.

Comments (0) Posted by G.R.A. Admin on Tuesday, July 28th, 2009


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