Like a lot of observers, our Brea loan modification attorneys have concluded that the government's Home Affordable Modification Program won't stop the new wave of unemployment-related foreclosures. These are foreclosures on borrowers who could afford to make their mortgage payments until they suffered extended unemployment. Loan modifications require the borrower to have at least some income, which means unemployed people are not likely to qualify. In part to address this issue, the Obama administration has come out with more details about a new program announced in November -- focusing on short sales, not loan modifications. As the New York Times reported March 7, the program offers cash payments to mortgage holders and homeowners as incentives to complete the sales.
In a short sale, the borrowers sell the home for less than they owe on their mortgage, but avoid an outright foreclosure. This is advantageous for the borrowers because it won't damage their credit, and for the lender because it avoids the expense and potential property damage of a foreclosure. Under the government's program, the short-sale price would have to be the value of the home -- as calculated by independent real estate agents -- or higher. The first and second mortgage holders would each get $1,000 to do the deal, and the borrower would get $1,500 in "relocation expenses." And lenders would be required to forgive the difference between the sale price and what the borrower owed.
Our Moreno Valley loan modification lawyers would like this program to work, but we are skeptical at the moment. As the article notes, one big problem with short sales is getting the agreement of second and third lien holders, who are often left with nothing when the sale goes through. Nothing in this report addresses that concern. Nor does the plan seem to address the basic problem it shares with HAMP -- that it's sometimes cheaper to foreclose than allow a short sale or loan modification. In those cases, lenders have every financial incentive not to let these deals go through, which may explain the months-long delays some short-sellers have experienced. As an executive in the article noted, investors in securitized mortgages have the right to stop short sales. And if the bank doesn't like the size of the "market value" offer, a real estate agent noted, it may choose not to participate at all.
At Howard Law PC, we have worked with clients facing these and other problems throughout the housing downturn. We understand the problems our clients face because we've been hearing the same stories from clients, and from banks, for months. We believe lenders think loan modifications and short sales represent a threat to their profits, so they don't like granting them -- but they also won't admit this in public. Instead, they "lose" paperwork, reroute phone calls endlessly, send mixed messages and find other ways to delay action. Our Escondido loan modification attorneys cut through this red tape with aggressive negotiation or legal action, helping our clients get straight answers. We're proud of our record of results for loan workout clients, which include lower interest rates, longer repayment periods and changes to basic loan structure.
Howard Law offers free, confidential consultations to all potential clients. To set one up, please send us a message online or call 1-800-872-5925 today.