Principal Reductions And Loan Modifications Not Lender Friendly
Today’s focus is in relation to Loan Modifications. We speak in relation to them briefly on occasion, but we don’t generally talk a lot in relation to them. Fred got a call from some friends that were simply wondering what their choices were in the current economic era. They are essentially spending every dollar they make every month. They are not behind on payments, but they are only keeping up. One of their associates recommended that they merely walk away from the home and another friend recommended that they try a loan modification with a principal reduction. There is a prospect that the lender would reduce the loan balance.
Fred would like to identify what everybody else has experienced with loan modifications. He’s simply wondering if anybody has actually seen evidence of a successful modification to a principal balance. There are thousands of spectators that watch Shortsalepowerhour.com, but Kevin and Fred have still not met anybody that has done a principal loan reduction.
We can assume that there are a few good reasons that banks do not do principal reductions on a normal basis. If the banks did this for a few house owners, everyone would be doing it. There wouldn’t be any incentive for home owners to pay their existing mortgage.
However, if the banks agree to a short sale, they get their cash right away. Then they can lend out that capital once more with a new loan. The short sale is undoubtedly the greatest choice for the bank and for the home owners. As further proof from HAMP itself, the government sponsored loan modification program, 25% of all HAMP modifications are at least thirty days late. The short sale is clearly the finest alternative for the lender and for the house owners.
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