Many of our clients have found themselves struggling in the housing market in recent years and have even been forced to short sale or worse yet lose their homes to foreclosure.  We have seen many try to attempt the supposed "fix" for the situation by applying for a loan modification just to be rejected.  Unfortunately, to even apply for the loan mod one of the requirements is that they be delinquent on payments.  So they are forced to put themselves behind on payments even to be considered for a loan modification and then are turned down.  Now all that has been accomplished is that they are in a position where they will never catch up on payments and are essentially forced into a short sale or foreclosure...something is wrong with this picture.

I ran into the article below and thought that I would share it with you just to give you something to think about and a bit of discussion content.



According to a new report from the Congressional Budget Office (CBO), Fannie Mae and Freddie Mac are responsible for “nearly 13 percent” of underwater borrowers in the country. This does not mean that they caused the underwater situation, but that they hold the loans that are presently in negative equity. The CBO report directly addresses controversial suggestions that Fannie and Freddie modify loans by reducing principal, something that acting Federal Housing Finance Agency (FHFA) director Edward DeMarco has steadfastly refused to entertain. According to the CBO report, reducing principal on underwater GSE loans via the Home Affordable Modification Program (HAMP) would not only result in “small savings to the government” and “slightly reduce mortgage foreclosures and delinquency rates,” but it would also “slightly boost overall economic growth”[1]. The report also suggests offering principal forgiveness only to borrowers who are already behind on payments when the principal forgiveness program goes into effect, thereby eliminating strategic defaulters who might stop paying their mortgages later in order to get a better rate[2].

The CBO estimates that about 610,000 borrowers qualify for HAMP assistance at this point in time, but also suggests modifications to the program to bring in an additional 550,000 borrowers. The report also suggests that principal forgiveness might be balanced out by borrowers agreeing to grant the lender the right to future increases in home value. The CBO report provided some congressional representatives for grounds for some strong words for the GSEs’ slow implementation of the HAMP program, saying that “rather than implement these programs years ago when their benefits were obvious, ideologues ignored…evidence and harmed our nation as a result.”

(Source...Bryan Ellis Investing Letter)