Private modifications has been used by homeowners as an alternative to the federal mortgage payment assistance initiative, which was originally begun as a way to help homeowners who were having trouble with mortgages, specifically adjustable rate home loans, as a way to help move these homeowners into a more affordable fixed-rate mortgage payment plan in order to avoid foreclosure. Yet, this trend does still continue as some homeowners may benefit from a simple modification to their mortgage from an adjustable rate to a fixed rate, as home loan rates right now are quite low and may offer the affordability that some struggling homeowners need.
Yet, we have seen improvements not only in the federal modification program but these private options as well, as homeowners whose modification was classified as a fixed rate modification increased in August, which is the most recent data we have here in October, as modifications from private programs have improved as well. However, homeowners who may have a fixed rate are also in a position where they can benefit from these types of modifications, as the number of proprietary fixed rate modifications reported for the month of August was well over 46,000, and was an increase from July’s data as well.
Due to the fact that homeowners with a variety of mortgage options began suffering setbacks in their financial life, many servicers had to adjust their modification efforts to help homeowners with not only adjustable mortgages but fixed rate home loans as well, but there are still some hindrances that homeowners face when it comes to taking advantage of proprietary modifications, as the default rates for homeowners who are offered private modification plans are much higher, in terms of homeowners who slip back into an area where they are missing payments, than have been tracked in the federal program as well.
These default rates could be the result of homeowners simply not getting a mortgage payment that is as affordable as they need due to the fact that improper paperwork may have been filed, a miscalculation on the part of the homeowner’s income has occurred, or a homeowner did not provide proof of financial distress to the point where affordability through one of these private modification plans was offered at such a level to be helpful. However, homeowners do still have these proprietary modifications and federal plans at their disposal, but again there are no guarantees for those who are struggling with foreclosure and need to modify their mortgage payment.
Homeowners are being urged to either talk with counselors or simply look at what their needs may be, in terms of their home loan payment modification requests, as some homeowners will simply benefit from a modification that brings about a rate reduction, while others need term extensions, an adjustable rate modified to a fixed rate, or some other aspect of their mortgage addressed in order for foreclosure to be avoidable. As an example, a proprietary or federal modification may be of no help to a homeowner facing unemployment, as even a reduced payment will not be affordable, so this may cause homeowners to need help from extension programs like forbearance plans, but again homeowners must look at their specific situation before pursuing certain types of home loan assistance plans so that they may stand a better chance at success in the long run.