Banks Eat Loan Principal To Help Borrowers In Trouble
HOME LOANS, INDUSTRY NEWS, TIPS FOR SELLERS
October 13th, 2009
Borrowers seeking loan modifications are more likely to get a bank to agree to reducing the outstanding loan balance today than earlier this year. The rate of reducing the principal as part of a loan modification has more than tripled from 3.1% to 10% from the first to second quarters of 2009.
According to a new report from two government agencies responsible for overseeing financial institutions, banks found reducing interest rates or extending loan terms only temporarily helped borrowers in trouble. In fact, more than a quarter of borrowers that were granted a loan modification redefaulted within three months because they still could not afford the revised monthly payment.
According to the news release from the California Association of Realtors, one reason banks have started reducing the amount owed on mortgages is due to prodding from the Obama administration. The president has included financial incentives in his housing plan to encourage lenders to work with borrowers underwater on their home loans. Another fact cited is banks are shoring up their finances which gives them more latitude to help borrowers wishing to keep their homes.
In my opinion, 10% is still too low to really stem the tide of foreclosures. More than 20% of the mortgages in these United States are upside down so this is a step in the right direction but we still have a long, rough road ahead.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
