Majority of Modified Home Loans Will Default
July 28th, 2010 Filed under: Forclosure Help — Foreclosure Author
According to a new report released by the New York based credit-rating agency, Fitch Ratings, a whopping 75 percent of borrowers who modified their mortgages through a government-sponsored program are on point to default on their loans within the next year. Those at the greatest risk secured mortgages not backed by the federal government took via the Obama’s administrations Home Affordable Modification Program.
Those in jeopardy of defaulting on their loans only have themselves to blame, as the defaults are occurring because of their own, not program, errors. individuals on the brink of financial ruin have created the problems themselves as after loan modifications were approved: they did nothing to modify the behavior that got them in trouble in the first place.
Diane Pendley (Fitch Managing Director) stated, “The HAMP modifications reduce housing expenses down to 31%…” however “Many of these borrowers still have very heavy levels of other debt.” Aside from their mortgage debts, the struggling homeowners are stuck with other financial obligations like credit card debt, car loans and month to month expenses.
Pendley notes that many of the borrowers who participated in the government backed loan modification process have very little expendable income or cash reserves. Her statistics indicated that 64 percent of the borrowers pre-tax paycheck is dedicated to other living expenses. The lack of cash leaves very little room for a margin of error.
If you are one of the unlucky masses, now is the time to strike back with the preemptive move of a short sale. Short sales involve selling your home for less money than you currently owe the bank and owners need to work directly with lenders to ensure the success of these transactions. For those in financial dire straits short sales can be a saving grace as it can prevent blemishes from wrecking your credit history as it will prevent the foreclosure process from occurring.
If paying off your home mortgage is causing you too much grief, unloading your property can help you breath a bit more easily. Not only will the pressure be off, but once free of the home buying responsibility, consumers can find more affordable housing options. When that happens, every extra penny needs to be applied towards any existing debt in order to prevent the same mistakes from happening time and time again.
