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Loan Modifications Don’t Reduce Payments

From a shocked and dismayed Associated Press:

Gloria Nieto describes how KB Home coerced her family into taking a bad mortgage, then refused to negotiate when the loan went into foreclosure when their Buckeye, Ariz., home became worth about half what they had paid, as building trades workers, homeowners who have lost their homes or felt cheated on their mortgages, and others protest outside the KB Home headquarters building in Los Angeles Thursday, April 2, 2009

Loan modifications rise; many don’t pare payments

By ALAN ZIBEL

WASHINGTON (AP) — Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers’ payments by more than 10 percent, data released Friday show.

The report, based on an analysis of nearly 35 million loans worth more than $6 trillion, was published by the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision. It provides the most detailed and broad analysis to date of efforts to stem the foreclosure crisis, which President Barack Obama is trying to combat with a $75 billion plan to promote loan modifications.

The report helps explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry aren’t very generous, despite more than a year of public prodding from regulators.

For instance, nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments. That situation can happen when lenders add fees or past-due interest to a loan and spread those payments out over the 30- or 40-year period.

Perhaps unsurprisingly, the report found that loans were far less likely to fall back into default if a borrower’s monthly payment is reduced by a healthy amount.

Nine months after modification, about 26 percent of loans in which payments had dropped by 10 percent or more had fallen back into default. That compares with about half of loans in which the payment was unchanged or increased.

"This new data shows that, in the current stressful environment, modification strategies that result in unchanged or increased mortgage payments run the risk of unacceptably high re-default rates," Comptroller of the Currency John Dugan said in a statement…

We’re not sure we believe this.

But on the odd chance that it is true – how hilarious. And how fitting.

But there is some kind of justice in the world after all.

This article was posted by Steve on Friday, April 3rd, 2009. Comments are currently closed.

26 Responses to “Loan Modifications Don’t Reduce Payments”

  1. Right of the People says:

    When you buy something that is way out of your league, reducing the cost by even 50% is still probably going to way too much for you to afford. My wife and I have owned 11 homes in the last 35 years and we never had a mortgage/property tax bill more than 30% of our gross income. Not that the realtors didn’t try to sell us houses sometimes three or four times more expensive. I have no pity for these fools, I’m just furious that their greed is causing problems for the other 80% of the public who have behaved responsibly. I wouldn’t be surprised to see the One tell the banks to just eat the bad loans and let these poor, deserving souls keep their houses. Makes me want to puke.

    10-7

  2. Howard Roark says:

    Two thoughts:

    1) I’ve had to pick myself up and start ALL over a few times in my short 41 years. Why shouldn’t these folks have to start all over (move into an apartment that you can afford instead of living distressed in a house you can’t afford anymore) also??? Why is it such a tragedy when people who haven’t delayed gratification as I have (I’ve never qualified for a home loan, and what’s more important, never lied on the loan application or to a mortgage broker that I made more money than do), finally have their poor decisions catch up with them?

    2) This overblown story will probably serve as yet another Cloward-Piven Strategy reason for Barry to nationalize all home loans and future ones.

    • proreason says:

      I’m on my 4th wipeout. Under the gun, I hit two triples and a home-run the first three times.

      But why bother to swing this time? Obamy gonna award me at least 2nd base, isn’t he?

    • Colonel1961 says:

      You think that’s bad (and it is) in our city, the Housing Authority has purchased a large block of ‘luxury apartments’ in the ‘nice’ part of town and is kicking out the law-abiding, working, rent-paying citizens, to make way for those who can’t afford to live there. I am not making this up and will try to add more in ‘Selected News’.

      They are putting poor people into $770.00 luxury apartments (pool, weight room, tennis courts, etc. – a fairly expensive apartment in our city) and helping them pay the rent so we can ‘deconcentrate’ (their word) poverty. This is about the most vile thing I have ever witnessed. No (substantive) public hearings, very little warning. Just kick out the evil working folks and go on…

    • DoctorRock says:

      And our ups and downs are the American Way. Given our system of education, who but a partisan moron would expect that we learn to succeed in any other way? But, as there is a God, and this used to be a free country, there’s still a fair quantity of us who’ve yet to fall beneath the wheels. AND we can still think for ourselves. So let me be the first to say that Cloward-Piven is too easy. We’ve been kicking this around as the watershed socialist strategy to subvert our fair country while the fascists have been counting their money. Can you say Oligarchy? I learned that word during the Clinton years, but it may well have begun with Bush I. Here’s the idea I haven’t been comfortable with – How exactly was our government able to coerce our financial community to make bad loans?
      Think about it. My common sense tells me that any politico trying to dictate a more politically correct albeit risky policy to any self-respecting banker is going to have a very hard time getting re-elected. I see the blue screen. Please tell me if I’m wrong here. But I’m thinking that the bailouts were understood from the jump. “You have nothing to lose, and when the stuff hits the fan, look at the power you’ll have!” Scary, right? WHO has been bailed out exactly? I rest my case.
      Ronnie must be spinning. TCO apologized to Europe for our arrogance. I just coughed up an astute observation, so pardon me while I rant, as it’s Friday night, and I’ve had a few. As this is about learning from our failures, I want to share. No, really. The single greatest shame I have to bear in this life is that my parents had to witness 9-11. I’m still sick over it. There are those who are presently comparing us to the Weimar Republic – they win. The generation before us was assaulted by the evil of fascism, and made every sacrifice to defeat that evil. And in their dotage they saw its return. We’ve failed. We’re punks. If it was my call, the stimulus package would be about building tanks and aircraft in anticipation of bringing regime change to the Arab world. But of course, then we wouldn’t have to – the Romans knew that, Dummy!
      Ahhhh – done. Enjoy the weekend kids. Next week, “Why the Russians hate us.”

    • Liberals Demise says:

      Hey Dr.Rock…….you make house calls?

    • Liberals Make Great Speedbumps says:

      “We’ve failed. We’re punks.

      Hey Doc,

      Unfortunately, I agree with you in an awful lot of cases. However there are an an awful lot of Americans who still do believe in doing the right thing. They are unfortunately overlooked because they are too busy serving on active duty or in the reserves, working for a living to support their families and trying to teach their kids something resembling values. These are the people that are going to have to say “enough of this BS”. It will happen eventually, I know it will, I just fear that the damage will be irreversible by that time. Good people have a very long fuse but there is a real b***h of a bang at the end of it.

  3. proreason says:

    Uuuuh, help me cipher this one.

    Deadbeat buys house and stops making payments.

    Banker, facing the muzzle of a gun, modifies the payments.

    Deadbeat continues to not make payments.

    I guess I’m too stupid to get why that is so surprising.

    • Liberals Demise says:

      (SL)easy answer PR……..
      Look at how many more pops at saying it’s Bushs’ fault.
      See……..razzle dazzle!
      Your eyes are watching the one hand while the other hand pats you down.
      Pickpockets know this routine and Obwana is teaching his new ACORN DEFENSE FORCE / SS YOUTH these tricks of the trade. (among others)

  4. U NO HOO says:

    Rush was discussing smart versus intelligent, and maybe more, today.

    One lady called in and said that smart people, when crossing a street, jump out of the way if a car is coming at them.

    Intelligent people look before starting to cross.

    We can argue about which word works best, but look before crossing (lending money is just cash crossing a desk).

    Stupid Banks!

  5. jobeth says:

    The sign says “KB Homes STOLE our homes!”

    Sorry, but it’s The BANK that wouldn’t stand still for YOU To STEAL THEIR houses, when you stopped paying the mortgage.

    I never forget that until I have that mortgage burning ceremony after the last payement is made, the bank still holds the title to my house…thus, THEY own the house! (Minus what principle I’ve paid in of course)

  6. canary says:

    The bailout was for the banks, not home owners, a small amount would be set to pay the banks when home owners were delinquent. Contracts are contracts. If people signed them. Loans are usually a risk.
    And Obama’s everyone can now buy a car. The auto dealers already had all these extras, like insurance if you lose your job, pay for extra warrantie packages. People, won’t get out of paying for these extra’s. Obama isn’t going to send money to people pay those perks. Wouldn’t even doubt if prices on the cars go up. Nothing said the dealers couldn’t go up on car prices. They’ll have to in order to go green to meet the green requirements in order to get the bailouts. Maybe even have to charge more for the older models sitting in the lots, instead of selling them cheaper as they decrease in value by the blue book. The labor will still have to bargain with the bosses, and this is wear Obama might screw the unions. But, I truthfully, think all the books are cooked, like a tangled giant ball of string, no way they could have handled this correctly. Then Ford get’s in on the action. What a snowball effect.

    • Liberals Make Great Speedbumps says:

      “Contracts are contracts.”

      I can think of a few folks at AIG who might disagree with your assertion Canary. You forget, we are now in Obamaworld.

  7. retire05 says:

    The article states that 9 months after refinancing, those loans are back in default. What the article doesn’t tell you, and is fact, is that after one year, that percentage is up to 50%.

    The banks can modify loans all day long, but there is that little part of a mortgage payment called the escrow account that pays the taxes and insurance on these houses. I doubt that Arizona is jumping through hoops to make property taxes any lower or if the dimwits who are losing these homes have contacted the mortgage company and told them to lower their value and shop for cheaper insurance. If your the principal and interest are $800/month and you get it lowered to $600/month (25%), it doesn’t do a damn thing to lower your insurance and taxes which are probably around $300/month.

    The article goes on to say that 12% of Americans are in default. Put simply, it means that the 88% of us who are not are going to have to pony up the money for the 12%.

    And while we are at it; what happend to the $300 billion that Congress passed for mortgage relief, or the $75 billion that followed after YoMama took office? Why does the AP not report on all those home owners who have had their mortgages saved courtesy of the American taxpayer? Ummmmm?

  8. pdsand says:

    The caption says Ms. Nieto is explaining how the company coerced her into taking a bad mortgage. I’d almost like to hear that explanation. And what clever device they used to get around the Truth In Lending disclosures.

    • jobeth says:

      First they held an evil pen to her hand….then they pushed an evil and dangerous key at them!

      Come on…how is the poor thing to resist THAT kind of pressure!

      “Read somethin?’ Ain’t got time….Gotta buy out da sto fo funitur fo my nu house!” She was heard to say as she burned rubber to get away….

    • pdsand says:

      It’s like she saw a line and stood in it, and ended up with the mortgage. She surely didn’t go out house shopping, then go to a few banks and apply for loans, then end up at this KB Homes place and put an offer down, go through the whole application rigamarole, close, have the whole contract read to her item by item, sign in 100 different places on three copies of the contract, etc., etc. Somehow or another this evil company was able to coerce her into a mortgage. Heck, she thought she was going to KB Toys for a barbie, then ended up in this bad situation!

    • Liberals Demise says:

      It’s late……I smell of gun powder, cigs and alcohol…….and I’ve wet me pants from the laughter. Thanks people….I REALLY needed it!!

    • Gila Monster says:

      Gloria Nieto describes how KB Home coerced her family into taking a bad mortgage, then refused to negotiate when the loan went into foreclosure when their Buckeye, Ariz., home became worth about half what they had paid,

      Coercion aside, this statement is just laughable. The loan went into foreclosure because the house value dropped by half? LOL..!! I needed a good laugh this morning.

  9. reefdiver says:

    Payments? Din’t nobody say nothin’ ’bout no stinking payments.
    Where my ACORN homie at?

  10. canary says:

    sorry meant to post youtube of Ronald Reagan’s inaugerational speech.

  11. yadayada says:

    monly motgae pyet? uual th a coers th p rncpe amet wis my lender would d t I ve my or in 8-1 0 yr.

  12. yadayada says:

    oops. try again

    let’s see… single mom of three, $30k income, I shop around in an inflated market in summer of 2005, find a $200k house, 4 bdrm so each child can have own room, and am barely getting by enough to buy 50 in. plasma tv, full service sat. tv packge , xbox, cell phone, etc . in august 2008 my adj. rate rmortgage jumps from $800/ month to $1250 (said so right there 12 times on 8 of the 23 pages I signed) and the lender won’t renegotiate for more than 10% decrease?

    “Damn mogeg compny dun ript me off!”

    10% decrease on your monthly mortgage payment? usually 10% is enough to covers the principle payment. I wish my lender would do that. I’d have my house paid for in 8-10 yrs.

  13. U NO HOO says:

    “she thought she was going to KB Toys for a barbie”

    Yeah, and with it being Barbie’s 50th birthday all the papers that had to be signed were just Happy Birthday cards…


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