Many Borrowers with Mortgage Modifications Expected to Default
About 65% to 75% of mortgage loans modified through the government’s loan modification program but not backed by the federal government are expected to go into default, according to a report from credit-rating agency Fitch Ratings.
Too Much Debt
The report said that the main reason many home loans modified through the Home Affordable Modification Program (HAMP) are expected to go bad is because borrowers don’t receive help with other debt problems.
“Many of these borrowers still have very heavy levels of other debt, auto loans, credit cards and other expenses” Diane Pendley, a Fitch managing director, told CNNMoney. “We’re talking borrowers who don’t have cash reserves. If they did, they wouldn’t be in this position in the first place. It doesn’t take much for them to get in the same situation again.”
Mortgage Lenders Foreclose
A homeowner who defaults on a home loan that has been modified is likely to face foreclosure. Mortgage lenders are probably not going to give homeowners a second modification deal.
Asking for a Short Sale
Homeowners who find themselves in the position of defaulting on a mortgage loan that was previously modified, may be able to negotiate a short sale. A short sale occurs when a mortgage lender agrees to let you sell a home for less than what is owed on it. Mortgage lenders sometimes agree to short sales rather than deal with foreclosing on a property mortgage loan.
If you are about to default on a home loan that has been modified consider the following things that could help you arrange a short sale:
- Mortgage lenders are more likely to approve a short sale if you already have a buyer lined up
- It may take several attempts to contact your mortgage lender before getting approval for a short sale
- You must provide all documentation requested as soon as possible if a short sale has been approved
Arrange a Deed-in-Lieu Deal
In some cases you may be able to get your mortgage lender to agree to a deed-in-lieu deal. That occurs when you give back your property to the lender because you can’t afford to make monthly payments on a home mortgage. The mortgage lender is then free to sell the property to try and pay off the balance of your home loan.
There is no guarantee that your mortgage lender is going to agree to a short sale or deed-in-lieu. But if you truly believe that you are going to default on a home loan that has already been modified, contact your mortgage lender to discuss your options.
Tags: home loan, home mortgage, mortgage, mortgage lender, mortgage loan
