June 2nd, 2011 4:02 PM by Uletas Greene Carter
With the latest news over the weekend on gloomy housing values here in Southern California, you can assume that all the government acronyms -- HAMP, HARP, HASP, NSP, FHFA, HAFA -- are all brought to you by the letter "F", as in failure.
Before you're led over the cliff, stop for a minute and look objectively at the truth: Loan modification programs were not meant to save distressed homeowners, but to keep the banks from inheriting a flood of foreclosures. After all, who benefits from foreclosures? Certainly not the banks.
It appears the truth about HAMP is that it was meant to help banks stem foreclosures. The whole struggle for homeowners to actually get permanent modifications makes sense. All the pressure on lenders by the government to approve more modifications has been done to slow foreclosures and the number of properties banks take back, not keep homeowners in their homes.
Imagine what would happen to our economy if distressed homeowners were to walk away from homes that are upside down in value.
Why short sale? It is without a doubt the easiest thing to do for the homeowner and quickest to recover from. If distressed homeowners work hard, save money and maintain their credit, they could purchase again in as little as two years.
Consider this: Per quarter, the average number of home loans and refinances a major bank will do is between 300,000 to 350,000, while the average number of loan modifications done is 70,000 to 80,000.
The sad truth about this is that all the major lenders tell us they are not equipped to handle the volume of loan modification requests.
As an incentive for the lenders to make an attempt to approve a loan modification, our government uses your money to pay the lenders.
During the trial modification period, the lender typically collects a modified monthly payment from homeowners who are encouraged to not miss a payment because doing so could cause them to be denied the modification. After the 90-day trial period is up, the lender typically breaks disappointing news to homeowners that they don't qualify for a modification for various reasons.
The truth is that the system that was set up to help homeowners keep their homes has without a doubt failed. The best position for distressed homeowners struggling to make the mortgage payment is a short sale.
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