It's a Catch-22 these Affordable Loan Modification Plans - more Foreclosures to come

Submitted by synthetic_idea on Mon, 2009-10-05 16:16.

Like many we waited in anticipation of the outcome of the Trial Payment Period of the loan modification workout package. We were hopeful as they gave us an affordable trial monthly mortgage amount and said that our new payment may be just as close to this amount after the trial payment period had been completed and approved.

Well, low and behold we were approved for the Loan Modification. But that was short lived as we looked thru the approved package. The actual loan modification is really a Catch-22 in disguise.
Here is what they did to get that AFFORDABLE target amount that they thought we needed to be in:

1) They Reduced our APR to 2% (for first 5 years, then goes up 1% each year thereafter until it reaches 5.5%, stays fixed after that)
2) They extended our loan term to 40 year adjustable.
3) Our new monthly payment is higher than the Trail Payment by 250.
3) They added all missed payments in arears to the end of the loan.
4) The total loan amount is now higher, no principal reduction here.
5) Even though the county reasessed the property value to the market, the bank did not adjust the principal loan amount to reflect this. They are still keeping the original loan amount when first purchased and not current market value.

This modification experience is like buying a new car, they only ask you what your target monthly payment needs to be and they make some interesting financial juggling to make that happen. They don't actually reduce the price of the car, they simply extend the terms, try to get you a lower rate, and possibly have you increase your down payment. It's a well proven system and scam that works well and has done so for decades.

So now we are wondering if we should still seek a short sale and take the loss. Because if our loan balance was never reduced to the current market, the we will continue to pay a mortgage that builds no equity, no value, and no incentive other than to keep the roof over our heads. We are still in a home that is worth only a 1/4 of what we paid for. Even with this loan modification the loan amount vs the home value are still way upside down. Perhaps our lender is using smoke and mirrors and is not playing by the government0s plan. Right now my wife an I feel empty inside. Let down once again by these
corrupt banking & financial institutions. Hopefully our administration is keeping check & balances on these loan modification programs and takes a look at these practices. If anyone else has any new info they can share regarding what is happening with their modification I'd love to hear it. Good luck
on your end.

Mr. Upside Down

synthetic_idea's blog

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