Are Mortgage Loan Modifications Enough?

Many homeowners these days are finding themselves in financial trouble which is preventing them from paying their mortgage payments each month. In fact, there are hundreds of thousands of homeowners in that situation. For many of them, a loan modification plan has been the answer. But for many others, there is more that needs to be done.

Roz Dalebout in Salt Lake City is one of those homeowners. In the last several years, she has encountered many financial problems. Last June, she contacted her mortgage lender to notify them that she would be having problems making her monthly payments. She was given a loan modification in which the company lowers the interest rate, defers some of the amount owed, extends the life of the loan or does something similar so the homeowner’s monthly payments are lowered. However, she is still waiting to hear if she qualifies for a loan modification and it’s been nine months since she first applied!

Housing advocates are concerned that stories like this one are all too common and unfortunately, thousands of these people lose their homes even after modifying their loans. Also, selling their home is not an option because of the economy’s problems. These homeowners will not get enough out of their home to pay it off and they are still stuck with a sizable portion of the mortgage with no place to live.

One of the problems with the mortgage system is that the company that the homeowner makes mortgage payments to is only servicing the loan. Investors actually own the mortgages in a complicated web of pension funds, hedge funds and other types of investments which make the mortgage industry so complicated. The investors in turn must decide if offering a loan modification is a good idea or if it will result in more losses or an increase in foreclosures. The number of applications for loan modifications only serves to slow down the entire process.

As part of the solution, some banks are taking the loan modification process into their own hands. Some are selling the loans on the secondary market. Zions Bank in Utah and Idaho is one of the banks that have broken away from the Obama administration’s plan to offer lower mortgage rates and other modifications to help struggling homeowners stay afloat.

If you need help with your mortgage burden, Ryan Carver with the AAA Fair Credit Foundation in Salt Lake City has two suggestions: Be sure to stay in contact with your lender so they know what is going on with your budget and also look for help from reliable sources, such as HUD or other organizations designed to help struggling homeowners. The quicker you alert the mortgage lenders about your situation and do something about it, the more options you will have.