Over 50% of Modified Loans in Default

According to this Office of the Comptroller of the Currency Office of Thrift Supervision news release, OCC and OTS Release Mortgage Metrics Report for Second Quarter 2009, when evaluated after 9 months over 50% of modified loans are 60 or more days past due. The news release doesn't actually say this.  You need to read the supporting documentation, OCC and OTS Mortgage Metrics Report, to see the grim statistics.

Modified Loan Performance (from the OCC and OTS Mortgage Metrics Report)

As shown in Table 3 below, the percentage of loans that were 60 or more days delinquent or in the process of foreclosure rose steadily in the months subsequent to modification for all vintages for which data were available. Modifications made in third quarter 2008 showed the highest percentage of modifications that were 60 or more days past due following the modification. Modifications made during fourth quarter 2008 and first quarter 2009 performed better in the first three to six months after the modification than those made in the third quarter 2008.

As shown in Table 4 below, Loan Modifications on loans held in the servicers’ own portfolios continued to perform better than on loans serviced for others. This difference may be attributable to differences in modification programs and the servicers’ flexibility to modify loan terms to achieve greater affordability and sustainability.

As you can see as more time passes the percentage of homeowners who stop paying their modified loans increases across the board.  The reasons are that loan modifications cannot help you if you lose your job, or have a home that is worth far less than the mortgage balance(s).

If you are a homeowner who is having a hard time paying your mortgage you should try a loan modification first even though it is a low probability proposition and over 50% fail.  At least a loan modification will buy you some time and help you in the short term if you can get approved.  I would be glad to provide you with some FREE help so that you can increase your chances of obtaining a loan modification.  If you live in the following areas, please contact me as I can help you solve your real estate problems since I am a Middle Tennessee short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR.

• Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
• Williamson County Tennessee: Brentwood TN and Franklin TN
• Davidson County Tennessee: Nashville TN and Belle Meade TN

Why Loan Modifications Won't Fix the Real Estate Market

It continues to sadden and anger me to read and hear the stories of homeowners who get the run around from lenders when trying to get loan modifications.  It is even more proof that the banks are incompetent.  What we all need to understand is that loan modifications will not solve this real estate market problem.

The reason loan modifications do not work is that over 50% of the people who receive loan modifications will re-default within 12 months. I am guessing that the figure is upwards of 80-90% when you extend the time frame out.  The lenders (servicers and investors) know this, and, as a result, have little to no motivation to modify loans.

The truth is that the loan investors (not the servicers) would prefer to do short sales, rather than loan modifications or foreclosures.  In a declining market this actually makes business sense.  Since the loan investors will likely have to foreclose later anyway they are better off doing it now before the market declines more and they end up with even less money from the foreclosure sale.  With respect to the loan servicers, there is a conflict of interest with their loan investor clients.  The loan servicers make more money by allowing loans to continue to be seriously delinquent and go all the way to foreclosure rather than approve loan modifications or short sales. The problem is that the loan investors reduce their losses more with short sales rather than foreclosures.  This is one of the reasons short sales are so difficult to get closed.  That is why short sale sellers need a "bulldog REALTOR" like me to close their short sales.  I am not afraid to pester the lenders to force a decision on a short sale.

The reasons loan modifications generally do not work are:

• Job Loss - Homeowners are losing jobs. You can't pay your mortgage if you are out of work for an extended period of time. The government needs to fix the problems (think laws, policies and taxation) that are causing jobs in the US to disappear.
• Negative Equity - Eventually, even the most stable of homeowners will give up paying their mortgage when they owe a lot more than their home is worth.

Therefore, regardless of whether more homeowners receive loan modifications or not, foreclosures and short sales will continue to get worse and housing prices will continue to decline.

If you are a homeowner who is having a hard time paying your mortgage you should try a loan modification first even though it is a low probability proposition.  I would be glad to provide you with some FREE help so that you can increase your chances of obtaining a loan modification.  If you live in the following areas, please contact me as I can help you solve your real estate problems since I am a Middle Tennessee short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR.

• Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
• Williamson County Tennessee: Brentwood TN and Franklin TN
• Davidson County Tennessee: Nashville TN and Belle Meade TN

A Disturbing Trend: Delinquent Homeowners Abandoning Their Homes

In my efforts to locate homeowners who are behind on their mortgage payments, or already in foreclosure, I have discovered a disturbing trend. It appears that many of these homeowners are simply abandoning their homes and ignoring their problems. This is a terrible idea. Until the bank owns your home, you are liable for anything that happens to or on your property. Beside the liability issues, "abandoning ship" does nothing to stop, or even mitigate your potential liability to the lender(s).

If you are a homeowner in financial trouble, please do not abandon your home. Follow the instructions in my blog post Question and Answer: What Should I Do if I Can't Pay My Mortgage?.

If you live in the following areas, please contact me as I can help you solve your real estate problems since I am a Middle Tennessee short sale, pre-foreclosure (preforeclosure) and foreclosure expert and REALTOR.

• Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
• Williamson County Tennessee: Brentwood TN and Franklin TN
• Davidson County Tennessee: Nashville TN and Belle Meade TN

Question and Answer: What Should I Do if I Can't Pay My Mortgage?

Question: What should I do if I can't pay my mortgage?

Answer: If you are a homeowner who cannot pay your mortgage payment(s), or are already in foreclosure, you should do the following:

1. Loan Modification - Even though you do not have a good chance of getting a loan modification approved by your lender(s), you should give it a try.  Therefore, contact your mortgage company immediately to discuss a loan modification.
2. Discuss your situation with a real estate attorney and/or bankruptcy attorney to discuss your options if the loan modification is not approved.
3. If a loan modification will not work, or is not approved, and you owe more than your home is worth and you cannot pay you mortgage, you need to speak with a REALTOR who specializes in short sales and pre-foreclosures (preforeclosures) to discuss selling your home.

If you live in the following areas, please contact me as I can help you get out of this situation.

• Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
• Williamson County Tennessee: Brentwood TN and Franklin TN
• Davidson County Tennessee: Nashville TN and Belle Meade TN

Bank of America CEO Will Resign at the End of the Year

According to this New York Times article, Bank of America Chief to Depart at Year’s End, Kenneth D. Lewis, will resign at the end of 2009. According to the article, he "celebrated his daring takeover of Merrill Lynch as the crowning triumph of a long career. On Wednesday, that conquest proved to be his downfall, as he announced his resignation after months of legal and political scrutiny over how the deal went down. Mr. Lewis leaves as Congress, the attorney general of New York and investors turn up pressure on the bank over not disclosing Merrill's losses and bonuses to shareholders. A federal judge recently refused to accept a settlement brokered between Bank of America and the Securities and Exchange Commission, saying the bank and the commission never fully explained how the decisions were made."

I think all the bank CEO's should step down right now as they have mismanaged their banks and collected millions in pay and bonuses despite their failings. The banks has completely botched the handling of pre-foreclosures, short sales and foreclosures. I am personally dealing with Bank of America on a short sale located in Murfreesboro Tennessee (Rutherford County TN) and I was able to get approval within 3 weeks, but it took a lot of phone calls and emails to push them to a decision. It just should not be that difficult. As a result of Bank of America's incompetence (and the incompetence of other lenders) there are more short sales and foreclosures in Middle Tennessee (in the Nashville TN area) than there should be. Goodbye Mr. Lewis!

If you are a homeowner who cannot pay your mortgage payment(s), or are already in foreclosure, my recommendation is that if you should do the following:

1. Loan Modification - Even though you do not have a good chance of getting a loan modification approved by your lender(s), you should give it a try.  Therefore, contact your mortgage company immediately to discuss a loan modification.
2. Discuss your situation with a real estate attorney and/or bankruptcy attorney to discuss your options if the loan modification is not approved.
3. If a loan modification will not work, or is not approved, and you owe more than your home is worth and you cannot pay you mortgage, you need to speak with a REALTOR who specializes in short sales and pre-foreclosures (preforeclosures) to discuss selling your home.

If you live in the following areas, please contact me as I can help you get out of this situation.

• Rutherford County Tennessee: Murfreesboro TN, Smyrna TN and La Vergne TN (LaVergne TN)
• Williamson County Tennessee: Brentwood TN and Franklin TN
• Davidson County Tennessee: Nashville TN and Belle Meade TN