Bankruptcy

Mortgage Crisis: Will Loan Mods Bring Relief?

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I recently came across a very interesting article regarding relief for homeowners through loan modifications (or as I like to call it, renegotiation of your mortgage terms) on Business Week Online. 

The growing urgency to implement an effective fix for the deepening U.S. financial crisis is pushing policymakers to consider measures that were roundly rejected as too risky not very long ago. The limited success of the first $350 billion in TARP funds and the government’s wavering on how best to dispose of the toxic assets that are clogging banks’ balance sheets — and preventing a rebound in the credit markets — has added to the sense of urgency.

Former Treasury Secretary Henry Paulson favored using the financial rescue funds to recapitalize banks and other institutions seen as most critical to the health of the global financial system. But persisting doubts about the quality of assets on banks’ books amid further deterioration in home prices has stymied the government’s efforts to make inroads toward reviving the financial industry. Now that the estimated number of U.S. home foreclosures may be as much as four times the 2 million projected in late 2007, more serious attention is being given to the idea of using taxpayer money to get at the meat of the problem: the underwater mortgages that precipitated the whole mess. There are efforts afoot to improve the success rate of home loan modifications [popularly known as “mods”], which basically change the terms of the mortgage in question to improve the odds that the homeowner will be able to keep up with monthly payments. Fewer busted mortgages, the thinking goes, will lead to fewer foreclosures, which could potentially slow the rate of decline in home prices… 

Read more about New Proposals For Modifying Mortgages

Full post as published by Bankruptcy Articles & Blog on April 01, 2009 (boomark / email).