Image by TheTruthAbout via FlickrThere appear to be some negative press regarding mortgage modifications. The government sponsored program, HAMP, has accounted for a little over 500,000 modifications. Considering the total number of homeowners in trouble, this is a drop in the bucket.
Missing in the fray are the other loan modifications that were made by the financial institutions outside of HAMP. According to Hope Now, the figure stands at a respectable 3.2 million. Hope Now is a private sector coalition of major loan servicers and non-profit counseling organizations.
HAMP has pushed the banks to be more aggressive with their proprietary modification programs. One of the major criticisms of the banks is that they are unlikely to defer the principal on a mortgage. Under HAMP the homeowner gets some of the principal deferred to be paid back at a later date. This could be when the house is sold or when the mortgage is paid off in full.
The banks generally lower the interest rate or extend the term to 40 years. Prior to 2010 even this type of transaction was unheard of at the banks. Their solution to modification was to add the fees and late payments to the outstanding balance, and let you keep the house. This often resulted in higher monthly payments.
So while the figure from Hope Now look impressive we have to examine the whole picture. I wouldn't consider a higher monthly payment a "successful loan modification".
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