More Than Half of Homeowners Currently Facing Foreclosure Have Had Loan Modifications Before

[Leo Kingston]

In early June 2015, Black Knight Financial Services (BKFS) released data showing a sad and surprising trend in the number of delinquent homeowners facing foreclosure.

In some metro areas in particular, over 60% of homeowners who are 90 or more days late making their mortgage payments have already been through one or more government or lender home retention programs.

While the data is based on approximately 952K delinquent mortgage loans all over the United States, the highest percentages of assisted homeowners still facing foreclosure are located in Washington, D.C., Maryland, Texas, Georgia and Connecticut, although a combined total of 28% of all delinquent homeowners are located in only 3 states – New York, New Jersey and Florida.

Real estate investors may not be surprised to read that more than half the homeowners who sought and received help to stay in their homes and get back on their feet financially in some areas are still struggling.

Personally, I’m not surprised because many families simply bought more house than they were ever going to be able to pay for, no matter how highly they were rated by mortgage calculators when they originally applied for a mortgage.

Many homeowners chose to buy too much house and they are suffering as a result.

The majority of people who go through weight-loss programs and actually lose weight seem to gain weight again after completing the program. They choose to participate in a program with special diet meals, and it may work well while they are eating those restrictive meals, but unless they consciously change their eating habits they are mostly likely going to gain weight again. It’s that simple.

Well, the way I see it, homeowners given the advantage of mortgage modifications and special payment plans with lower monthly payments are like dieters. Unless they made lifestyle changes and cut other monthly expenses, assistance in making their mortgage payments is not going to solve their problem. It just gives them more money to spend elsewhere
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However, the Federal government doesn’t see the problem the way I see it.

The Home Affordable Modification Program (HAMP) is 6 years old now, and it’s been extended again. The fact that the overall number of delinquent home loans and the number of foreclosures in process is down since HAMP began in 2009 tends to distract from the reality that both foreclosures and delinquencies are still more than double the number before the sub-prime mortgage crisis became apparent, starting in 2007.

Now there are 12 separate loan programs for homeowners listed on MakingHomeAffordable.gov. It’s a whole menu of options for homeowners with different circumstances, since HAMP is only available for mortgage loans originating before January 1, 2009.

But the real estate market has improved in most markets over the last 6 years, so banks and mortgage lenders are tending to utilize short sales and allow foreclosures to proceed instead of making concessions on behalf of delinquent homeowners. If a home is likely to sell in a reasonable time period, a sale seems to be the best solution for all concerned.