Payday Loans Online No Credit Check Instant Approval Mortgage Companies Are Reluctant To Modify Loans - Here's Why
When the Making Home Affordable Modification Program was announced, most people familiar with the mortgage industry felt it would be very successful. It would enable many people facing foreclosure to save their homes. Also those who had invested in those loans facing foreclosure would lose far less money through loan modifications than they would through foreclosures.
Yet by mid December of 2009 the results from the program have been less than spectacular. Through the first nine months of the program, trial loan modifications had started on only 23% of the loans eligible for them. Permanent modifications had only commenced on 1% of the loans.
What happened? How could this occur?
Initially it appeared that mortgage companies supported the program. After all they said they desired to help people save their homes from foreclosure. Yet many have been very reluctant to get involved in the program. It took quite awhile for many of them to agree to participate. Even after they started to participate in the program, they have been very slow processing applications and approving people for trial loan modifications. They have been just as slow in converting people to permanent loan modifications.
There are two main reasons why this happened.
The first is money. Mortgage companies normally make more money on following a loan through to foreclosure. When they start the foreclosure process, the companies tack on late fees, penalties and additional interest to what the person already owes.
In addition mortgage companies do not generally lose money on a foreclosure. When the home is sold, the companies are repaid any advances they made and recover all of their expenses before any of the investors get paid. So they have no lost any money on the transaction.
Before they modified their first loan mortgage companies had to increase their staffs to handle the volume. They also had to increase the size of their offices to house these people. Along with that they had to provide them with desks, computers, phones and office supplies so that they could do their jobs. They also had to train them.
All of this cost the mortgage companies money upfront before they started to get any payback from the loan modifications. As they reviewed the applications they had to have property valuations and credit reports. These were additional costs. The mortgage companies realized that it would be quite awhile before they would be able to offset the expenses they incurred. While they eventually should recover their costs and come out ahead, it would be quite awhile before they were able to do so. So, in effect, they were advancing money and this was a cost to them.
Also guidelines had been written years ago by Fannie Mae and Freddie Mac. This was before the concept of modifying a loan as it is being done today was ever thought about. These old guidelines are still in effect today. Under them mortgage companies fare better by following the process through to foreclosure.
The second reason is that loan modifications under the Making Home Affordable Modification Program have led to a complete upheaval in the way mortgage companies handle those cases where people fall behind on their loan payments and are threatened with foreclosure.
Prior to the start of the Making Home Affordable Modification Program, mortgage companies handled foreclosures in a totally different manner. When a person fell behind on their loan payments and the foreclosure process started, a mortgage company started tacking late fees, penalties and interest on to what was owed. All of these were added up and a letter was sent to the person letting them know how much they owed.
There were some negotiations. However for the most part, the person was told that if they wanted to save their homes, they had to get current on their loans. To do this they would have to pay off the total they were behind. They would have to do this over a certain number of months. Their monthly payment would be increased. Once they followed through on this and the shortage was paid off, their loan would be current again. Their obtain instant approval payday loans online no credit check tonight payments would drop back to what they had been before they fell behind. They would save their homes.
On their own each person had to figure out where they were going to get the additional money to make their new higher monthly payment. Many had to borrow it from whomever they could, relatives, friends or others they knew. The mortgage companies did not care where they got the money for their payments. If a person could not get the money, the foreclosure would just move forward. The home would be foreclosed on. The person and their family would have to move.
Even back then before the current crisis started, the loss mitigation departments of most mortgage companies were not staffed adequately to handle the volume. However, no one paid attention to it. The foreclosure procedures were automated. Once the process started, it just flowed along.
With the Making Home Affordable Modification Program, there was a radical change in the way the mortgage companies handled these loans. They now had to look at modifying secure no credit check payday loans online instant approval today. For that their business model changed. They had to determine whether the person facing foreclosure would be able to make reduced lower payments and save their home. They also had to determine how much the monthly payment had to be reduced for this to occur.
To accomplish this the mortgage companies had to build an underwriting platform on top of the servicing platform in their loss mitigation departments. Their systems were not designed for this nor were they adequate to handle the increased volume they had to handle.
The work required to modify loans also increased significantly. Mortgage companies started getting a large volume of phone calls from people facing foreclosure who were not represented by lawyers or counselors from housing or non-profit agencies. These people wanted to know what they could do to save their homes. These people were unfamiliar with the Making Home Affordable Modification program. They had to be educated.
The mortgage companies found that the people in their loss mitigation departments had to spend much more time on the phone with them. They had to hire more people to handle the work.
Once people were hired, they had to be trained. Frequently the training provided has been inadequate. So now the loss mitigation departments are staffed with many new people handling a large volume of phone calls. In addition these people have to review applications and determine who may be eligible for loan modifications.
As the staffs increased the mortgage companies had to increase their office space and provide the new people desks, phones, computers and other office supplies so that they could do their jobs properly.
Current projections are that the large volume of work to be done will only continue until the end of 2010 or 2011. After that it will drop off.
Many of the mortgage companies have had to weigh whether or not it is worth it to increase the size of their staffs, train them and provide the equipment and office supplies they need to do their work when they'll only need these people for a short time longer.
For these two reasons mortgage companies have been very slow in taking the steps to modify loans as requested in the Making Home Affordable Modification Program.
So a problem exists.
Loan modifications will help people facing foreclosure save their homes. Investors will not lose as much money with a loan modification as they would with a foreclosure. Yet the mortgage company, the middle man, does not want to do it. They make more money on a foreclosure. They also don't want to add more people at a tremendous expense for a very short period of time.
At the end of November of 2009, the Treasury Department announced that they were displeased with how slowly the mortgage companies were processing applications for loan modifications. They added that they were going to start reporting the reasons mortgage companies were not doing a better job. They also added that penalties would be assessed.
While this may cause some mortgage companies to speed up the work they do, they will be doing so reluctantly. They will probably continue to fight it each step of the way.
The first major change that is necessary is to make it more beneficial financially for a mortgage company to modify a secure instant approval payday loans online no credit check with hummingbird loans than to foreclose on a home.
The second change is that the Treasury Department has to help the mortgage companies automate their systems to speed up loan modifications. This can be done by standardizing the process. This will reduce the amount of people that have to be hired and trained.
The mortgage companies should also look at outsourcing some of the work involved with modifying loans to independent contractors. That way they won't have the overhead when the volume of requests for loan modifications drops substantially.
As a real estate investor since the 1980's Mark Elkins has seen the devastating impact foreclosure has had on common ordinary people. This has led him to study and gain much knowledge and insight into how to help people in foreclosure to take the offensive, reverse the process, save their home and minimize their losses. Please visit his website, http://www.stopforeclosureanswer.com. Please check out his blog at http://www.stopforeclosureanswer.com/stopforeclosure.
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