Loan Modification Foreclosures about to Explode

[Joe Cassandra]

It's weird...

I just read this post today on Marketwatch

https://www.marketwatch.com/story/heres-the-hard-truth-about-the-mortgage-markets-that-isnt-being-told-2020-04-02?mod=home-page

The gist is that many mortgage companies since the 2008 recession have been doing a lot of loan modification programs for those behind their payments. 

(for those who don't know, basically, they take your behind payments, throw them to the back of a new loan, and you start again). 

I say it's weird because the house I just closed this week, the seller went through this. They went through loan modification...but still got behind... and were close to foreclosure. The only reason foreclosure held off was because she filed for bankruptcy. 

Have you run into any of these loan modifications?

[Tchaka Owen]

@Joe Cassandra - while the author is not entirely wrong, there's a component he left out - which actually messes up his hypothesis: many of the loan modifications involved new terms, particularly lower rates. 

If you're at 6% and get a mod at 4.75%, you're not only getting the relief of several months of payments being put at the end, your monthly obligation goes down by over $155. That might not seem like much, but that could be the difference for those needing a small helping hand. One type of mod that was common around 2011-2013 was a graduated one. Use the same scenario as above, but you get 2 years at 2%, 2 years at 3% then permanent at 4% (this is merely an example). That gave immediate relief along with 4 years of ramping up - that's HUGE. Compare that to the image in the article of no rate relief.