Loan Modification Help
If you are trying to modify your loan, the information below will provide you with some invaluable insight as to what to expect. First off, be weary of anyone who ask for upfront fees or talk about loan modifications like they are a sure thing; the reality is that they are the furthest thing from it. Every homeowner in distress wants a loan modification and believes they will get one. Who can blame them? The truth is that effective loan modifications have nearly vanished. So few homeowners now obtain effective relief that for all practical purposes, loan modifications should be considered a myth. The following knowledge guide will provide you with detailed information about the loan modification process and provide insight as to the statistics involved with receiving a modification. Nearly every short sale client we have serviced was at one time trying to modify their loan. Nearly all of them reported to us that the time spent trying to modify was a waste and that they should have done a short sale earlier. We are not saying this because we are Short Sale Realtor’s. This is the truth. Don’t take our word for it; the numbers don’t lie.


Call us today at 916-788-8826

The Truth About Loan Modifications… Where Do We Begin?

Every homeowner in distress wants a loan modification and believes they will get one. Who can blame them? The truth is that effective loan modification has nearly vanished. So few homeowners now obtain effective relief that for all practical purposes loan modification should be considered a myth. Yes, some homeowners do obtain a beneficial result but the statistics paint a bleak picture for anyone relying upon that result. According to the U.S. Treasury Department only about 9% of the homeowners that need mortgage relief are getting it through loan modification (with Making Home Affordable or non-government modifications). Of the 1,214,085 trial loan modifications started under the MHA program only 299,092 have resulted in a permanent loan modification. THAT IS LESS THAN 1 IN 4! The results are even worse if we look at loan modification in general (government & non-government), fewer than 1 in 10 homeowners in need have obtained effective relief. Bank of America, for example, has only finalized 12,761 permanent modifications out of a total of more than one million eligible borrowers. Wachovia Mortgage has made 330 permanent modifications out of 86,461 eligible homeowners. And so far, about 60,000 applicants have been disqualified overall.

Statistics show that of those who were fortunate to have their loan permanently modified an increasing percentage of modifies have been re-defaulting on their loan. The following provides a breakdown of each lender’s re-default rate after the institution of a permanent modification.

 •   Bank of America – 33%

 •   Wells Fargo – 29%

 •   American Home Mortgage – 26%

 •   Ocwen – 24%

 •   GMAC Mortgage – 23%

 •   JPMorgan Chase – 22%

 •   CitiMortgage – 20%

 •   Litton Loan Servicing – 20%

In plain English this means that 33% of those who obtained permanent (not trial) loan modifications through Bank of America have since re-defaulted on their loans. Ouch!

In addition, Moody’s affirms, “a loan that is modified and [then] reported as current is three times as likely to default over the ensuing twelve months as is a current loan that has not been modified.”

So why isn't loan modification working? In simple terms, most homeowners cannot get one and even when they beat the odds and obtain a loan modification it does not effectively solve the two most important issues for homeowners in need:

Reduced Income & Negative Equity (Underwater)
Most distressed homeowners have experienced a significant reduction in household income and the value of their home has declined substantially so that they owe more than their home is worth. Less income to survive with and little or no equity left to fight for. Loan modification, in most cases, does not reduce the loan balance and does not reduce monthly payments enough to be effective. Sadly, many loan modifications actually result in an increased monthly payment! 3 - 8 months of work to get a loan modification that results in a higher monthly payment! Does this sound like effective relief?

If loan modifications were working as well as everyone hoped then why are so many homeowner's re-defaulting?

Even for the fortunate few who have had their payments reduced by more than 20% the re-default rate is over 40%. We understand and empathize with a homeowner's desire to keep their home. Short Sale may or may not be the best option available to you. Given the disturbing facts about loan modification every distressed homeowner should look at all of their options and formulate a contingency plan before it is too late.


Call us today at 916-788-8826