In spite of many loan modifications that have been granted to many homeowners, most of them still end up facing a foreclosure. What then can be attributed to the failure of loan modification to solve impending foreclosure?
Here are a couple of factors that work behind why loan modification does not work in the long run:
The Economy is Weak. The economy is just too weak that even if the government has set that loan modification payment not to go beyond 31% of a family’s income in its HAMP program, it is still not enough. The main culprit here is the lack of income to pay these mortgage payments. No matter how intelligently crafted the loan modification is to accommodate the financial challenges of a household, this will still not work in the long run since there is basically income where to get payments for the modification.
Discernment Issue. When do home owners have to decide that it is best to leave his home and walk away? Most home owners now, as compared with their counterparts in the previous generation, do not want to leave their house even with the inevitability of a foreclosure. The HAMP’s program in modifying mortgage loan has the tendency to make the loan amount higher than what the house price worth. If this is the case, homeowner should just walk away and settle for something which can benefit him.
Loan modification may be a popular term nowadays and a solution many homeowners want to use to get them out of distress of facing foreclosure. Still, the question is does it work permanently.