The Issue of Loan Modifications

July 31, 2012
A small article in the Wall Street Journal this morning caught my attention. The headline read: "Forgiveness of Dept Could Yield Savings." The article referenced the decision that the regulator for Fannie Mae and Freddie Mac may soon be making a decision as to whether to approve forgiveness for troubled borrowers. The Federal Housing Finance Agency has not been willing to make the decision to reduce mortgage balances and/or interest rates for underwater borrowers. A new analysis suggests that loan modifications could save the government money.
In California, with the Department of Justice ruling on borrower loan modifications, some lenders have already begun the process of accepting applications from underwater borrowers for loan modifications. Thus far there has been more talk than action although the local office of the Bank of America claims to have done many loan modifications in this past year.
It is always a difficult decision to reduce indebtedness for some and not for all. Many analists do say that loan modifications for folks who wish to stay in their homes may help stabilize the real estate market. Talking about what to do and  taking no action seemingly has prolonged the housing recession.