Chief executives of Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. received a letter from Rep. Barney Frank, chairman of the House Financial Services Committee. This letter was requesting more action from these lenders be done to assist homeowners in who owed way more on their mortgages than what the mortgages are worth. Second-lien mortgages were emphasized in this letter as well.
Lenders are making it difficult and in most cases are unwilling to write off or restructure second mortgages. Making homeowners quit making payments and look for other options that will help them financially. If selling their home means they will be better off financially, that is what most homebuyers are going to do. They will turn to a short sale when their attempt with working with their lender fails. Why would any homeowners keep any property if they keep losing money? This will prevent the consumer from having any type of equity on their home, debt will only pile up.
If lenders want to decrease their inventory of foreclosure homes, options need to be made available to those who are ready to give up. Bank of America has stated that they are willing to help consumers who want to modify their first and second mortgages. The other three banks had not made a statement regarding this matter. Short sales will be prevented if lenders chose not to work with consumer on their second liens. If the first lien holder agrees to sell the house less than what it is worth and the second-lien holder decides to disagree, then Foreclosure will be the next step.
The Obama administration will introduce a new plan, Home Affordable Foreclosure Alternatives Program. Those who received a modification under the Home Affordable Modification Program would simultaneously qualify for a restructure on their second mortgage. For homeowners who do not qualify for a loan modification will have financial incentives available in order to prevent foreclosure. Instead they can short sell the property or deeds in lieu of foreclosure, meaning the borrower will give up the title of his property and in return will receive relocation fees. Under this same program second-lien holders would be paid 3% or up to $3,000 of the remaining balance they owe.
Senior managing director at mortgage-bond trader Amherst Securities Group LP, Laurie Goodman said if banks are required to write off second mortgages their capital would decrease. Some banks do not want to write off loans because some of the properties might still have value after the foreclosure. If lenders find that the borrower has assets or income the borrower will be responsible to pay off the debt. When borrowers do not have resources available to pay off the debt lenders are less likely to collect.
Contributor, designer & admin for JohnHart Gazette.
Geez, I have tried so hard to get a loan mod. My bank won’t help me. What can I do?
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The Government helped out the big corporations, but who bails out the average Joe on the street? No one. Banks are dragging their feet with loan modifications. Why? Because if real estate values go up, they wont have to show as big a loss. In the meantime, thousands of fine folks are losing their homes. We now reveal Insider tips to avoid foreclosures.