The Mortgage Bankers Association (MBA) claims that its members have modified five million loans in America to help stanch the bleeding on our foreclosure crisis. But Michael Olenick, who has amassed a gigantic database of Florida foreclosure public records, says that nothing could be further from the truth.
Remember, the reason for advocating mods is that, properly structured, they are a win-win: investors take a lower loss than they would in a foreclosure, the borrower stays in his house, and another real-estate-price-depressing sale is averted.
But thiseveryone comes out aheadis not what I’ve seen. I’ve been able to check modifications, since they are recorded in public records. It quickly became apparent that while theses modifications are, at best, worthless, and more often than not border on an extension of the same predatory practices that resulted in the original mortgages.
So is anyone finding real relief in this housing market? Are the banks really willing to do a deal? Well, yes. One deal. One person. One loan involving a principal reduction. Michael explains further:
In summary, I reviewed about two dozen residential modifications, finding only one with a principal reduction. The overwhelming majority were either cosmetic or detrimental to the borrower. Cosmetic modifications include extending the maturity date of the loan by a few years or a small reduction in the interest rates. Detrimental modifications include capitalizing outstanding interest payments, fees, and other costs, increasing the outstanding principal and monthly payment, sometimes substantially.
Yeah, so no one’s seeing any real relief out there. The loan mods they claim to be offering? They’re a lie: either “cosmetic” or actually harmful to borrowers.
That one principal reduction? It was a private lender. So if your loan is with Countrywide, Bank of America, Deutsche Bank, or any of the other big boys, don’t hold your breath. Instead, fight back.