Home Loans

Question: Should lenders be required to modify home loans before allowing foreclosure?

(Posted by: K on 2010-02-26 11:18:33)

With over $4 million applications pending, Lenders have only modified 66, 000 home loans. Lenders come up with every excuse in the book and have no intention or desire to modify your loan without a fight. Why would they rather foreclose and force future value of their assets down when home prices fall? Should our Government pass legislation requiring Lenders to modify all loans in default by reducing the principal to market value and fixing the rate at 2- 3 % while reseting the term? Instead, banks will foreclose, spend $30, 000 including lost revenue while the house sits on the market for 9 months before they resell it for market or to an investor for 30 % below market. Fixing the housing market involves saving people from losing their homes and preventing values from free falling again.

Posted by: Landlord on 2010-02-26, 13:15:33

No, there is no way our economy could take a hit like that. You seem to be forgetting that the principle is cash money that the borrowed was given. Aside from the huge financial hit there is the ethical issues, you are essentially stating that anyone refusing to repay a loan should be allowed to just walk with the money. That kind of attitude would stop all commerce, as no one is going to be lending any money anymore.

Posted by: HEATHER on 2010-02-26, 11:25:25

The government is not going to lower the principal to "market value " or lower the rate to 2-3% because it would be hugely unfair to everyone who is NOT having foreclosure issues. That would cause a bigger problem than we have now. The only modifications that are getting done are those that realistically can be repaid under the modified terms. Why prolong the inevitable? If the house is too far upside down, the income isn't coming into the household, etc. then foreclosure will happen eventually - banks would prefer it happen sooner rather than later.

Posted by: spalmer on 2010-02-26, 12:19:24

No, the government shouldn't pass that legislation. What about all of us homeowners who continue to pay our mortgage based on the terms we agreed to? When you purchase a home, you agree to the interest rate and the amount of the loan. The lender shouldn't be required to bail you out.

Posted by: real estate guy on 2010-02-26, 14:29:38

NO!!!!!!!!!!!! Why should they. There was a legal binding agreement. The bank loaned you money and you agreed to pay it back. It doesn't matter if the value has decreased; the same as it doesn't matter if the value had increased. In fact, I wish the government would go the other way. If a buyer walks away, they will owe taxes on the amount the lender lost. It is called personal responsibility. Fixing the market involves making it hard to just walk away. THis will prevent values from continuing to fall.