The Extent Lenders Are Willing to Go

Lenders and borrowers have been going through a tough battle over loan modifications. Some lenders are willing to help, while others are not as cooperative.

What one lender is considering:

Loan Value Group LLC is considering paying underwater homeowners, who can afford their mortgage payments, in hopes that they will keep their homes instead of walking away.
Applications have already been prepared for other investors who would like to participate.
A program is set to test this idea with a few hundred borrowers.

Program rules and regulations

Cash reward is offered depending on income, negative equity and geographic region.
Individuals who will cause more damage to the company if they chose to leave will receive a greater amount.
The reward will grow for five years, as long as the client continues making payments.
The borrower can collect the reward after the mortgage is paid off or they may choose to use the amount to pay-off the remaining amount.

The idea behind the proposal is that the amount offered to borrowers will be high enough for them to reconsider walking away.

Who is funding this program?

According to lenders’ calculations the program will pay for itself. Keeping underwater homeowners in their homes rather than having them walk away and having the property sit in the banks inventory; will save them a lot of money which will help fund the program.

Why would homeowners want to pay more than what their house is worth? How much could possibly be offered that will put the homeowners at ease about keeping a home that is worth a lot less than what they are paying for? What if homeowners decide they do not want to pay off their home? In this case, they would have spent the money that they could have saved if they decided to move, instead of keeping the house. There are too many unanswered questions for this proposal. Consumers and investors might not be willing to take such a high risk.