According to Amherst Security Group LP’s Laurie Goodman, the U.S. loan modification program is “destined to fail” because it doesn’t confront the real problem of negative home equity that is driving foreclosures.

Goodman was speaking to congress according to a Bloomberg article.

A senior managing director, Goodman states that the drop in home values is the main reason for the defaults and that lawmakers need to urge the lenders to decrease the principle on homes where the outstanding mortgage balance is greater than the value.

She states that if there is not change, 7 million of the 7.9 million people who were behind on their mortgages in the third quarter will lose their homes.

Julia Gordon, senior policy counsel at the Center for Responsible Lending, told the committee that “Homeowner equity position has emerged as a key predictor of loan modification re-default, more so than unemployment or other facts.”

A mortgage “cram-down” bill that stalled in Congress earlier this year will also be attached to the broader financial regulatory legislation and voted on this week, said House Financial Services Committee Chairman Barney Frank. The cram-down provision would let federal judges lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court, even if the lender objects.

Representatives from both Bank of America and J.P. Morgan Chase state that many borrowers are not turning in their paperwork and therefore may not be able to successfully complete the modification process.

While it is important to note that the borrowers need to stay on top of the process if they hope to be successful, a number of borrowers have reported that the banks were unwilling to work with them or stalled and them foreclosed on the properties while the modification was still in process.

If you or someone you know may be in the process of losing a home, there is NO time to waste. We are currently working with a company who will assist the homeowner through the modification process to make sure it is done correctly and to stay on top of the lenders. You DO NOT have to be behind in your payments to qualify, you just need to show that your housing costs (principle, interest, taxes, insurance, and association dues) are greater than 31% of your income. If you think you may qualify, click here before it is too late.

Scott

Your Trusted Mortgage Adviser!