I just read this article on www.Housingwire.com and noticed some really awful changes to the HAMP (Home Affordable Modification Program) plan. I'd like to try and make some sense of what needs to happen in order to get things moving in the right direction.
1. We all need to get over this Principal Reduction Fairy that is floating in the sky telling everyone that they can get that type of modification. I've heard as little as 2% to as high as 15% actually get principal reduction and when I dig deeper and actually ask specifics they get even more vague. Some count deferred principal payment or even waiving late fees as principal reduction (both of which are not principal reduction last time I checked). This is the last thing in the world the investors want to happen and they will fight tooth and nail to make sure you don't get it. They would rather lose money on your monthly modified payment than take a discount on the principal owed them.
2. The banks either need to beef up their modification departments or loosen their modification guidelines so they can approve the mods quicker. Most every modification now is requiring a payment plan to make sure the owners can afford the new modified payment and rightfully so. Each one that I've ever heard of says 3 months of payments and they can modify it, but what's really happening is people are making 5,6,7 payments before the bank asks for all of their information again to see if they qualify. Doesn't the fact that they've made that many payments mean they can afford it?!?!? AAAGGGHHH!!! Anyway, I just think a little more common sense should be used for this part of the modification process. It either works or it doesn't.
3. The numbers do not reflect the actual amount of mods that are helping people. This has to do more with #2 above, but by saying that there are only 230k permanent mods out there because of this program is like saying the rental property down the street from me only has 1 family living in it, when based on the amount of noise coming from that house there are at least 3 families if not more (sorry... had to compare it to something in my life and that was the first thing that came to mind). If the banks just sped things up a little bit, I dare say we'd be in the 50% approval rate of permanent modifications.
