The good and bad about loan mods
Letters to the Editor
By Inman News, Wednesday, November 19, 2008.Bookmarking Sites
Re: 'Loan mods could restore confidence' (Nov. 17)
Dear Editor:
Loan modification programs are good and bad. I agree with Michael Mathis that these mod programs invite bad behavior by borrowers. However, here's the economic reality that we can't escape: With REO volumes swelling and lenders looking at massive loan write-downs -- sometimes as much a 50 percent or more -- of a note's value, losses will continue. If huge numbers of properties are dumped onto the market, continued volatility will ensue.
Loan mods can be a great answer. Let's consider the economics.
1) If a lender can do a loan mod and discount a note by 20 percent, keep the owner in the property and start having the debt serviced, it is a better deal than to lose 50 percent.
2) For the borrower, it is a chance to keep their home and have something of a fresh start.
3) For the market in general, it will begin to create value stabilization, which we haven't seen for nearly two years.
Speculators should not be afforded this opportunity. They gambled and it didn't pay off for them. I've made and lost money in real estate and in businesses, and that is the risk we take when we speculate.
Homeowners who, with some reasonable modification on their loans and payments, can right their financial ship should be given the opportunity. If the industry will get aggressive with these programs:
1) Lenders will take a smaller economic hit
2) More homeowners will keep their homes
3) Real estate markets will begin to stabilize
4) There will be a smaller burden for taxpayers of the future.
The vast majority of homeowners continue to make their payments on time and are to be commended for it. They are helping to maintain some market stability. A carefully administered loan mod program will help increase that market stability. Those who have paid in a timely manner need to know how important they are in that they are maintaining some reason in the market.
The mortgage meltdown in the U.S. has contributed significantly to the worldwide economic problems we all face. A way to get things back on track is to create a lot more stability in the U.S. real estate market so let's get on with a prudent loan mod strategy.
Mike Ela
President
HomeSmart Reports
San Juan Capistrano, Calif.
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Submitted by Flavia Brown on November 19, 2008 - 8:37am.
Don't count on lenders generating a very attractive loan modification. They will do mods, but it is in their best interest to "give in" just enough to satisfy the Feds's pressure to do mods. They will ignore past RESPA and TILA violations; and forensic loan audits aren't in their vocabularies. Therefore, in the best interest of borrowers, the answer is attorney-backed independent loan modification companies.
Submitted by Ross Milroy on November 19, 2008 - 8:49am.
Mike,
I agree that we need to look for alternatives to stabilize real estate values, and this should include a realistic plan for loan mods. In the Miami market, however, we are up against so many macro as well as micro issues that have literally created the "perfect storm" - rising unemployment, deflation, massive oversupply, tightening credit, negative equity, rising defaults, adjusting ARM's, resetting Option ARM's, excessive real estate taxes, and a general lack of confidence.
This leads me to the point that lenders as well as our city, county and state leaders, are not taking responsibility for what needs to get done. As lenders are taking back over 95% of the properties at auction their books are swelling with REO properties , real estate taxes continue to increase, and the local county appraiser has still not determined if they are going to recognize short sales to reflect the market in 2009. Additionally, according to Florida law, if you purchase a property in foreclosure, your actual purchase price does not reflect the market value used for determining your taxes. Unfortunately, these are just a few of the real issues we deal with on a daily basis.
So you can buy a waterfront condo at 50 cents on the dollar, but then the combined PITI is unaffordable to many as the taxes and maintenance fees alone are higher than the actual mortgage payment!
Unfortunately, I do not think that loan mods alone will stabilize the real estate market.
Ross Milroy
Managing Broker
Miami Angel Properties, LLC
http://www.miamiangelproperties.com
Submitted by Mike Fuller on November 19, 2008 - 4:39pm.
I tend to agree with Mike. I also believe that Loan Mods are only a piece of the puzzle. Another piece is that the banks need to be much more aggressive in getting these REO properties off their books. Combine this aggressiveness at the short-sale step to prevent the foreclosure step and everyone will save money, time and frustration. Let's get this economy moving people and quit fooling around!
Michael Fuller
Vice President/General Manager
RealEstate.com, Realtors
Oregon/SW Washington Region
michael.fuller@realestate.com
Submitted by Jose Lopez on December 1, 2008 - 11:54am.
The only way that lenders will agree to a loan modification is if there is true hardship on the part of the homeowner, AND, it can be shown that one of the following will happen:
1. Approve a loan modification, or,
2. Approve a short sale, or
3. Lender takes the property back in foreclosure.
These are the options for the lender, and if they are smart, which to this date they have not proven so, they can rewrite the mortgage and hope that the added time allows the homeowner to get back on their feet.
Jose Lopez
Broker Assoc.
Coldwell Banker Res. R/E
www.sellsarasota.com
www.fl-repos.com