I ran across an article on Motley Fool last week titled, "The Biggest Failure of the Year." It discusses the 500,000 mortgages that are now in "trial modification plans" and how successful (or not) this approach may be. What the article points out is that "within three months of modification, more than 40% of borrowers found themselves back in delinquency" of 30 days plus. AND a year after the modifications, about 50% of borrowers were delinquent 90 days or more! Yeesh!
The reason (according to the article) is that "modifications aren't targeting the right issue." In most cases, the average LTV (loan to value) actually increased as a result of the modifications because, generally, late payments and fees, are just "capitalized onto the existing balance." As a result, many borrowers end up feeling an even stronger incentive to walk away from the debt.
The article also pointed out that, by and large, banks aren't doing that many modifications anyway, (only 3% or so at U.S. Bank) so it's not likely to have a significant impact.
I think the article is worth a read and, if you're like me (and I know you're glad you're not) it may leave you with an even stronger sense that homeowners who are underwater are just gonna have to figure out how to swim on their own. As Dr. Phil says: "No matter how thin the pancake is, there's always two sides to it." In this case, this article only looks at one side of the story . . .
In other news . . .
Due to the crummy "I just want to be at home and read a book in front of the fireplace" weather today AND the genuine concern both Duck and Beaver fans should have about beating their opponents this weekend, the stock market fell a bit today . . .
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