Monday, May 17, 2010

People Drop Out of Mortgage Mod. Program in Droves

I think they are simply walking away from their homes and renting.

More than 299,000 homeowners had received permanent loan modifications as of last month, Treasury said. That's about 25 percent of the 1.2 million who started the program since its March 2009 launch. They are paying, on average, $516 less each month.

However, the number of people who started the process but failed to get their mortgages permanently modified rose dramatically in April.

To complete the program, borrowers must make at least three payments on time. About 277,000 homeowners, or 23 percent of those enrolled, have dropped out during this trial phase. That's up from about 155,000 a month earlier, or a 79 percent increase.

So you have to fight for a year with the bank and maybe you will be able to pay $516 less on a home that is probably underwater? That does not sound like a good deal at all. Just walk away from the home and you might be able to pay $1000+ to rent instead. Also if you are out of work paying $516 less on a mortgage doesn't mean you still won't still lose your house.

I think the government should just pull back all of the programs and let the last gasp of foreclosures clear out the inventory once and for all. That way the banks can start again on an even footing and people can get back into the mortgage market after a period of renting.

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