Top Five Reasons Loan Modifications are so Rarely Given

5..  The banks and lenders don’t care:  The banks will announce in their ads that they are on your side.  They really are not. They are on their side.  They have procedures in place, and a bottom line.  It is much easier for them to continue doing what they have been doing, and what they’ve trained their employees to do, rather than actually evaluate each loan to see if it will work as a modified loan.  In reality, everyone would benefit if more loans were modified.  But to do that, the lenders would have to change their procedures. That is a lot easier said than done.

4.  The banks have no incentive to do anything different.  Sure, the Federal Loan Modification program has $1000.00 incentives for each loan that is permanently modified.  However, that is nowhere near the amount of money the servicers (the companies you make your mortgage payments to) make  when the loan is still in default (behind). They can collect late fees and other fees the whole time.

3.  There is a huge documentation requirement.  Most people are not good at keeping records of their income and tax returns.  It takes so long, or it is so difficult for them to get the information together, that some people just give up.  Also, once they submit the information to the lender, the lender takes a long time to review it. So long that it is out of date by the time they get around to looking at it.  So then, the lender, if they haven’t lost the papers, request more documentation to update the file. There is a longer delay then.  And, people don’t follow through and provide the next set of documents.  So the process stops there.

2.  People just don’t have enough income to pay for even a reduced mortgage. Many of my clients have lost one of the jobs they depended on to make the payments.  Also, with loans adjusting higher because of adjustable mortgages, the payments increase.  By this time, the debtors just can’t make the payments, regardless of how low the payments go.  Also, there can be a second mortgage involved, and they can’t also pay for  that payment.

1.  There is no political will to change the system.  Let’s face it, the banks and mortgage industry has lots of money to “donate” to the politicians’ campaigns, from both parties.  So, if the industry doesn’t like the solutions, the politicians back off. They don’t want to see the cash well dry up.

Take a look at the recent New York Times editorial which sums up the problem nicely.  And then call me for questions and advice about your mortgage and what we can do to help solve your problems.