It is estimated that 60%-70% of homeowners who have modified a loan have or will go back into default within the first nine months and back on the road to foreclosure. This proves that many homeowners approach a loan modification with high hopes and realized only after completion, that it was not what they bargained for.
3 reasons why Loan Modifications Often Don’t Work…..
1. Modified loans often carry higher balances than the original loan…
Because many lenders add unpaid interest and fees to the loan balance, homeowners often walk away with more mortgage debt than they originally incurred.
2. … and higher monthly payments too.
It should come as little surprise that with few lenders reducing principal — and most tacking on fees to the loan balance — nearly half of loan modifications actually resulted in increasing a borrower’s monthly payment.
3. Homeowners accept unaffordable terms.
Desperate to keep their homes, many homeowners accept modification offers they can’t afford. If you are in a loan modification and getting nowhere or are being offered unrealistic terms, you must consider the future and prepare.