Dean Graziosi

Since August, the number of owners offered loan modification programs has doubled, reaching 919,965 in October. This makes up around 29 percent of the eligible programs as per the Treasury Department on its monthly report. This benefit is extended to those who are able to pay three months of repayments without delay or default on the trial phase of 3 months. Since April, the government has extended this benefit to around 650,000 borrowers. California leads the pack with highest trial modification program numbers, followed by Florida.

It is believed, however, that almost 80 percent of those who need help haven’t received it yet. This help would eventually stop these borrowers from turning delinquent and prevent foreclosure. Lenders are trying their best to get more into the trial mortgage modification program. In the year 2009, lenders other than the government machinery have extended the mortgage assistance program to nearly 2.3 million owners according to Hope Now. These programs would include different options like modifying loans, repayment plans, reducing principal amounts, forbearance.

There are many assistance plans working outside the government’s requirement mandates. Bank of America, for instance, has covered 14 percent of the eligible population with default payment terms of 60 or more days under the government’s modification plan. This number has reached 136,994. Under its own program, Bank of America has offered modification programs to close to 450,000 customers since 2008. This year the bank has completed the loan modification for around 220,000 homeowners. What this essentially tells us that the system is working for many homeowners that might otherwise be facing foreclosure.

As per the Home Affordable modification program guidelines of March 2009, the lenders have to reduce the mortgage payments to a 38 percent debt to income ratio at the front end. The treasury will match this offer by a 31 percent reduction for the borrower. There are preconditions to avail the program, which include that the occupancy should be a single family, that it should be primary residence and that the unpaid balance on the principal is $729,750 or below for a single unit. The borrowers who are bankrupt or are in litigation are not disqualified from this program.

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Government backed loan modification programs appear to be taking hold.  In efforts to turn back the wave of foreclosures, Treasury Secretary Timothy Geithner unveiled new incentives for borrowers and lenders who successfully negotiated modifications of Freddie Mac and Ginnie Mae mortgages. 

At a recent loan modification informational event sponsored by Neighborhood Assistance of America in Los Angeles, more than 50,000 attendees met to learn about mortgage-reduction opportunities.  California has been especially hard hit by unemployment and tumbling real estate values.

Before the recession, Riverside, California, was a thriving business community and served as home to many growing businesses.  Now the area has the look of a ghost town with “For Sale” and “For Lease” signs on almost every commercial building. 

Riverside had been one of California’s foremost entry points for construction materials arriving from Asia.  The housing boom was so strong that warehouses were stockpiled with inventory and jobs were plentiful.  The local economy could only be described as robust.  Now, all that has changed.

Real unemployment in California is estimated to exceed 18% and many employed workers have endured cutbacks in pay and hours.  Nabil Boctor, a 65-year old business and property owner in Riverside, has seen his coffee shop steadily lose customers and has lost his home to foreclosure.  Once contemplating retirement, Boctor has put those plans on hold.

At one time the coffee shop had three delivery persons, three waitresses and a chef.  Now Boctor and his wife are struggling to keep the odors open.  They are in default of their $440,000 mortgage.  Unlike many homeowners, the Boctors put $100,000 down on their dream home.  Despite the down payment, the home is not expected to sell for the amount of the existing loan.

Sadly, almost 43% of U.S. homeowners who negotiated loan modifications earlier in the year are already in default of their new loans.  This statistic is prompting the Obama Administration to consider extending unemployment benefits.

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