WHY MODIFICATIONS ARE NOT WORKING: INVESTORS KEPT IN THE DARK

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INVESTORS ARE KEPT OUT OF THE LOOP

There is an underlying theme in the main stream media as to why modifications are not working. They cite the fact that so many of the modifications end up in defaults anyway, as though it was the borrowers’ fault that the modifications didn’t work. The opinion, unexpressed, is why bother — they are going to default again later and most of them don’t qualify. ALL OF THAT IS WRONG, WRONG, WRONG. It’s not the borrower that is bad, it is the deal. This is the same thing as when they originated these absurd mortgages in the first place. They couldn’t work. And they didn’t. Somehow, the pundits think that if you offer the same deal again it will somehow work now with the economy in the tank? Hello?

1. The main reasons that most loans don’t get modified is that the modifications are processed through servicers whose incentive is strictly in foreclosure. If there was any real incentive for them you can bet they wouldn’t lose the paperwork 15 times. Servicers have no interest in modifications and they are under intense pressure from the mega banks NOT to modify because that would reduce the value of the mortgage bonds, which in turn would reduce the assets on the balance sheets of the mega banks. Make no mistake about it. The servicers are working for the banks and not the borrowers, nor do they pay any attention to government policies intended to shore up the modification programs.
2. The main reason modifications are turned down is that servicers are ignoring the math for the above reasons. In actual calculations by experts running algorithms developed by the U.S. Treasury department, 80% of the loan modifications would benefit the investors far more than foreclosure. But the servicers would make less — far less, because they end up eating up the entire equity in the property with their ridiculous fees.
3. The main reason that loan modifications can’t work in today’s climate is that the investors are being kept out of the loop. In order to really work, there must be an incentive for homeowners to stay in the home and pay the debt that is being offered to them. There must also be an incentive for investors — to see that they will recover more of their money with a principal correction than if they foreclose.
4. Loan modifications are currently a farce. The values used on the appraisals when the loans were originated were far too high to be sustained in any real market conditions. With foreclosures still piling up and the inventory of homes to be dumped on the market without any real limit, prices are continuing to drop to historically low levels with no end in site. Foreclosing is therefore the problem, not the solution. The reality is that the homes are worth perhaps half, at best, of what was used as value when the loan was originated. Pretending that the debt is worth the old false value used to originate the loan is not going to make it true.
5. If you really want to save the day for homeowners and investors, then you need to some REAL transparent calculations that the investors are allowed to see, where the comparison is made between foreclosure proceeds and the proceeds of modifying the loan with a principal correction to reflect current value. Why would any homeowner agree AGAIN to use a figure that is so high that he knows that he will not repay it in his lifetime and the value of the home will not reach those meteoric heights in his lifetime?
6. If investors were allowed to see the modification proposals and apply their own calculations to the deal, there would an enormous jump in the number of successful modifications. That won’t happen unless the investors demand it.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, modifications, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND
Posted in bubble, Corruption, Eviction, securities fraud |