*snip*— 30 year-old mother of four and accountant for the State of Tennessee
*snip*— her monthly mortgage payments from $1,347 to $977.45.
*snip*— the new rate had been locked in the remaining 30 years of her home loan.
*snip*— TSU graduate, with an unemployed husband, spent much of her day at home trying to fix the situation
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WTH?! The woman is an accountant and she believes payments get lowered almost 400.00 a month— she thinks this is going to go for 30 years?!!
What, she thought they reduced her loan?
THEN, she stays home to make the calls and take care of it when she has an unemployed husband sitting at home.
That woman is daft...dreamworld!
No pity from me.
Not saying she’s bright... But she did get screwed like all the rest of us. The dem government bungling the economy cheated many out of half the value of their homes while giving the stimulus money to the lenders.
Well yes. A loan modification is typically permanent. It is when the bank changes the terms of the loan. Which is perfectly legal. A mortgage is a contract between the homeowner and the bank. And it can be changed if both parties agree.
Why would a bank do it? It depends on the sitaution. If someone is laid off but now has a new stable job but lost $400 a month in income, the bank may be willing to do a loan modification. They may wipe off interest or write off negative equity to lower the payments to something the homeowner can afford. It may be in the bank’s best interest to do this because if a house is very far underwater, they could end up out hundreds of thousands of dollars if the homeowner walks away.
The stimulus money was supposed to go to the banks to help remodify some of these really bad loans. The problem is, the banks took the money and kept it. And they really havnt done much modifying nor are they making very many new loans. The banks are sitting on the cash. And that’s one reason the stimulus has failed miserably.
Sure the homeowners that took out these loans share blame for this housing crisis. But the banks and the government are just as much to blame for it.
Many mortgage modifications do permanently reduce payments, and they certainly should when the value of the home has significantly declined due to market conditions which are expected to be long-term. The lender’s only collateral is the home, and a rational lender would prefer to keep the existing home”owner” in the home paying on a reduced mortgage amount, than to have to go through foreclosure, get no payments at all for many months, and end up selling the home into a lousy market. If the lender will end up making more money by permanently reducing the interest rate and/or principal amount of the mortgage, than by foreclosing, then it obviously makes sense to do this.
if she got shafted on an ARM with interest that skyrocketed, then reducing her to a low fixed rate *could* account for most of that change. also, if her property taxes happened to get lowered at the same time, that could make a huge difference.