The Neighborhood Assistance Corporation of America (NACA), the brainchild of Bruce Marks, has been reaching out to troubled homeowners with its Save The Dream presentations. Based on the theory that bad things happen to good people, Save The Dream conferences provide homeowners the opportunity to meet with many of the nation’s lenders to attempt on-the-spot modification programs instead of foreclosure.
NACA has already hosted more than 400,000 homeowners at a dozen conferences. The organization has entered into agreements with many of the country’s lenders whereby the lenders would offer 2% mortgages over the life of the modified loan.
At its most recent conference in New York City, NACA posted its best results yet. Steve and Elena Servi of California received a 2% loan modification from Wells Fargo. Their previous loan was at 6.75%. Approval was issued the same day.
In a similar case, Rodney Wynn of North Carolinas received another on-the-spot modification. Wynn had a 13.4% mortgage that he can no longer afford. His previous monthly payment was $1800 per month. His new 2% mortgage payment is $970 per month. Wynn avoided foreclosure and the bank avoided repossessing the home.
Banks have come to realize this is an extraordinary market. In the past, banks would foreclose based on the market conditions. In today’s flooded market, banks are finding that they must hold properties longer than usual. As a result these lenders are leaning toward attempting more and more modifications.
When loans are made affordable, homeowners are less likely to re-default. Reports from RealtyTrac suggest that after one year, only 34% of modified loans whose payments had been reduced by 20% or more actually ended in foreclosure. This is a significant improvement. Loans with modifications that created payments with less than 20% reductions failed at a 63% rate. Perhaps banks are finally coming to understand that giving up a little can save them a lot.