There is a report out there which says that more than 20 percent of people who had their mortgages modified failed to pay mortgage payments for two months or more. That means that 20 percent of the people even after their mortgage payments went down were unable to pay their mortgages. This is really serious. The basis of mortgage modification was that since the houses were bought at inflated prices and high interest rates so the logic was that if we modify the loans and make the principal and interest rates low enough, people will be able to keep their homes and make payment.
But the rule was that if you keep making payment at the new rate for three months then your modification will become permanent. But some people (20 percent) have failed this criterion. It seems that majority of these folks were either not able to buy the houses at any cost or that they have lost their jobs and are unable to pay even these reduced payments. I will definitely go for the second part since it is illogical to believe that after going to all the hassle of loan modification, these hard pressed people will not pay their payments on time if they had the means (jobs).
Again it all boils down to the job market. If the job market comes back in 2010 we will eventually see a decline in forced foreclosure, otherwise these loan modifications program will be an exercise in futility and waste of tax payers time and money.
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