The best one I’ve seen is one that brought the interest rate down 1%, completely wiped out the delinquent balance (as I recall it was a couple of payments) and reset the loan to 30 years. The borrower took it and guess what? It’s now about 3 months later he’s got another one at slightly lower interest rate.
One loan “modification” actually increased their monthly payment because the penalty was amoratized into the loan. Upon acceptance, they had to pay 100% of their back payments and penalties immediately. I was able to cut their penalties in half. Ironically, this was the mod from the lender on the first; the lender on the second wouldn’t do anything so the property foreclosed on.
As I said in my first post, a bank wouldn’t even forgive the pre-pay penalty. I don’t know what happens when the property goes into foreclosure with a pre-pay. Who has to pay who?
I’m sure there are many meetings among various departments about whether or not it’s better to do loan modifications, do short sales or deal with foreclosures. I think one problem in the loan modification effort is that some of the borrowers couldn’t afford the homes to begin with. I wish I knew the statistic for the percentage of homeowner who made less than 1 year of payments prior to going into default.
There is such a mixture of fraud (cash back deals and inflated appraisals), genuine job loss, adjustable loans, equity lines of credit maxed out, hardships like medical problems, etc. that one solution does not fit all but I think loan mods are a good place to start.
