In an article written by Sean O’Toole of Foreclosure Radar, he states that the Home Affordable Modification Program currently being pushed by the administration is the new exotic mortgage that will drive the homeowners who are experiencing harship into digging another hole. The modification put the homeowners into a trial modification and convert them to a permanent modification by temporarily lowering their mortgage payments for five years.
This is the same scenario when the homeowners took ARM loans despite the fact that they knew that they will not be able to afford the payments when their loan skyrockets in five years. They were just banking on the fact that their equity will increase as property values improve within five years and never considered what it would be like should values decline. Nowadays, the risk of a job loss is greater now than it used to be, not to mention the need to relocate due to job transfers, illness in the family or other unexpected situation. O’Toole states that these new loan modification programs are much worst than the mortgage programs they are replacing.
There is always that possiblity that the market will not improve in five years. These homeowners will be in exactly the same situation they were in when they took the toxic loans they are replacing. We are falling into another trap and we fail to see it. When will we ever learn?
Bank of America recently announced their principal reduction program as their new loan modification program. While it may sound good to everybody now, IF they will really approve it, the most important issue of negative equity is being overlooked.
Elizabeth M. Eugenio, Certified Distressed Property Expert, Certified Residential Specialist, Short Sale and Foreclosure Resource
(909) 376-8615 | Elizabeth@HomesByLiz.com | www.HomesByLiz.com
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