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Loan Mods Fail, More Sacramento Foreclosures

by admin on December 15, 2009

When the government’s Home Affordable Modification Program was announced back in March, the goal was to save four million homeowners from foreclosure by getting their mortgage payments permanently reduced. The Treasury Department recently reported that 728,000 trial modifications are underway, but only 31,382 homeowners have received permanent loan modifications.

The trial modification period lasts for three months, during which homeowners are required to make all payments on time and provide documents regarding proof of income and owner occupancy. Lenders report that almost half of the homeowners fail to provide required documents during the trial period, and about a quarter of them default again before the trial period is over. After reviewing the income documents, many homeowners are found to be ineligible for permanent modification due to insufficient income.

What does this mean for real estate investors? It means that the majority of foreclosures are only being postponed by the loan modification program (less than 1% of the four million foreclosures have been converted to permanent loan modifications), so there will be millions of additional foreclosed properties for sale in the next year or two. This should make it easier to find (and negotiate) huge discounts through short sales and REOs. Be sure to add some of these wholesale deals to your Sacramento investment property!

{ 3 comments… read them below or add one }

1 Ralph Bredahl January 8, 2010 at 4:49 PM

As a Realtor in Arizona I always appreciate seeing stats from other areas that are written by a local expert in the field. A more honest report than the media gives us.

2 Mortgage Rate Shopper April 11, 2010 at 9:03 AM

You can’t expect to see any honest stats on the program from the government – this program allows the government to say they are doing something to help out homeowners in the wake of bank bailouts. These stats show that the government needs to come up with a solution with a better solution.

3 AV Homes July 17, 2010 at 1:14 PM

To think of the amount of people who could possibly get a loan modification and then subtract every reason they don’t get it in the end is sad. I can sort of understand how home owners get behind and can’t keep up the payments during the 3 month period. However, if they really wanted their loan modification, they should turn in their paperwork. The success statistics for loan mods would be twice as high if everyone turned it in.

Even with all that said, unfortunately most modification aren’t modified good enough so the home owners can or want to continue making payments. Part of the reason is because the total amount of the loan is not lower and they still feel like all their neighbors are all new and paying half the payments as they are. The banks aren’t often going to reduce the loan because they are already taking a big financial hit themselves. It’s all a mess.

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