Loan Modification Program: Success Depends on Rate of Redefault on Mortgages

The loan modification program and the number of homeowners redefaulting are the contrasts as to the success of the program. Many homeowners who have been hit by the recession have benefited from the loan modification program, which is lowering their mortgage payments to 31% of their monthly income, and this program has helped half-a-million homeowners so far with the goal being four million homeowners who are given a loan modification.

However, the problem stemming from last year was the homeowners who redefaulted on their loan. Some homeowners were given adjustments to their mortgage to help stop foreclosures but when the economy went from bad to worse there were great numbers of homeowners redefaulting on their mortgage. Redefaulting is bad for all involved because there is money lost on the lender’s side and the credit of the homeowner is scarred, not to mention the loss of their home.

Redefaults also sink the housing market because essentially the mortgage is not being paid to its full and the property is sitting idle as homeowners fight to stay afloat, which earlier this year, sadly, many homeowners sank. If the new loan modification program works and the job market turns around allowing people to earn again then redefaulting wouldn’t be an issue. However, if recovery is slow then we could see these homeowners who are receiving loan modifications default or redefault on their mortgage and the housing market recovery could go in reverse.

However, the program has an excellent chance of working seeing as how it’s based on income. So, redefaulting will be the test of the program’s success in months to come but at the present anyone who is looking at possible mortgage trouble should check with their mortgage lender to see if they qualify for loan modifications. Even if there are redefaults the program will still help those in need and any positive from the housing crisis would be greatly appreciated.

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