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St Louis Home Loan Report Says Foreclosures
More Profitable Than Loan Modifications
St Louis Mortgage and Real Estate News –
St Louis Loan Reduction and In-House Financing News: Higher
Profits From Mortgage Foreclosures Threaten The Use Of HAFA
Loan Modification Programs
Customer Financing | St Louis Home Mortgage and
Commercial Loans | 877-334-0210 or 314-334-0210 | Floyd
Tapia, St Louis Commercial Mortgage and Consumer Lending
The latest news regarding the national bailout effort is that as of
April 2010, the U.S. Treasury Department is paying companies that
collect mortgage payments and examine pleas for assistance a
$1,500 stipend for approving the sale of homes for amounts less
than the loan balance. This is known as a short sale.
These same servicers would also get $1,000 for each loan
modification completion under the government’s modification
program and additional stipends over a period of three years if
borrowers stay current on their new mortgage payments.
The problem that most St Louis mortgage experts are concerned
with is there’s not enough incentives or time to save the majority
of the 4.6 million U.S. homes that have loan payments more than
90 days overdue. This is why more homeowners are turning to St.
Louis loan modifications and various other means to raise their
c r e d i t s c o r e s s u c h a s in-h o u s e f i n a n c i n g b y S t . L o u i s
businesses.
The payouts provided by the Obama administration’s bailout
programs don’t come close to what servicers will earn by choosing
to foreclose instead.
“The incentives being offered by the government are small
compared to the counter-incentive of foreclosure,” says Diane
Swonk, chief economist of Chicago-based Mesirow Financial.
She goes on to say: “The service industry has its own set of
incentives, and you can’t tell people to do what’s not in their
financial best interest, especially in an economy that is still
struggling.”
Now it seems, according to Swonk, that free enterprise even in a
downturn economy such as ours can rightfully advocate greed
over doing what is morally right and in the best interest of the
homeowner.
However, it would be fair to state that at the end of last year, 48
percent of mortgages modified in the second quarter of 2009 had
missed at least one loan payment, according to a March 2010
report by the Office of the Comptroller of the Currency and the
Office of Thrift Supervision.
The statistics go on to show that a total of twenty-four percent of
loans modified in that same period were 90 days or more overdue.
Thus, millions of consumers wonder if loan modifications are really
working or have we given them a fair amount of time to actually
prove themselves doable.
Either way, here’s the interesting part of this whole scenario.
These servicers may not lose money in a re-default after-all, said
Marie McDonnell, owner of Truth in Lending Auditing & Recovery
Services in Orleans, Massachusetts.
If the homeowner fails to meet the terms of their new loan
modification and the property isn’t approved for a short sale under
the HAFA program, then servicers can proceed with a foreclosure
and recoup all their money when the property is sold.
The truth be told, the majority of servicers prefer loans that are in
default since most of them turn into cash cows. So, why are
foreclosures more profitable than loan modifications?
Once a loan is 90 days or more overdue, servicers can charge
processing and foreclosure fees along with markups for attorneys,
appraisers and other associated services.
Keep in mind this does not include any and all monthly late fees
that can run as high as 5 percent of the mortgage payment.
For example, on a local level, a St Louis foreclosure o n a
$200,000 mortgage may result in $10,000 or more of income for
servicers who surprisingly get paid before mortgage investors.
Rumors have it that on the average, servicers can easily make 10
times the amount more than any of the government stipends being
offered by simply foreclosing on the house.
The sad thing is mortgage investors will take a loss from a
foreclosure or a short sale, but not the servicers. As mentioned
earlier, they get paid regardless because they are first in line to be
paid from the proceeds of the home sale.
The only time companies are enticed to do a modification in the
first place is when they want to retain a particular St Louis home
loan and the income they earn for administering them as long as
they are confident the mortgage will stay current.
In a more shocking turn-of-events, Washington D.C. politicians
rejected new legislation several months ago that would have given
bankruptcy judges the power to reduce mortgage balances and
interest rates.
This ‘cram-down’ provision or what would have been known as
‘judicially modified mortgages’ would have given borrowers better
terms and allowed them to avoid foreclosure which is what they
wanted in the first place.
In essence, the HAFA bailout program fell victim to congressional
greed and red tape sabotage.
By killing this bill, servicers have been given the free reign to legally
decide which avenue is more financially advantageous to
themselves thus in a capacity to choose which bailout program
to offer to the down and out homeowner. Thank you Capitol Hill.
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362 Responses to “St Louis Home Loan Report Says
Foreclosures More Profitable Than Loan Modifications”
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