Why Creditors Aren't Telling Homeowners Why Their Loan Modifications Were Denied.
Article submitted by: 911 Foreclosure – Loan Modification Advice
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With the increased pressure from the media to help the millions in or close to foreclosure, it would make common sense that the lenders would be more apt to modify their outstanding borrowers
You would think.
On July 28th, the U.S Treasury Department held a meeting with the heads of the top 25 mortgage servicing companies. This meeting was accompanied by ACORN – the Association of Community Organizations for Reform Now, Neighborworks – the Neighborhood Assistance Corporation of America and the National Fair Housing Alliance to try and fix the unstable rate in which loan modification are being approved.
Earlier this year, the Obama administration disclosed their foreclosure prevention plan for troubled homeowners. It was estimated that 4 million homeowners could be assisted through this program.
With only 200,000 home being modified since February, and millions currently in foreclosure; one can barely call this progress ratio a success.
With all the hype in the media, one of the main things that they aren’t telling the public is why the loans aren’t getting modified. Since the lenders are keeping the reasons behind closed doors, no one “officially” knows the details. What can be seen from all the complaints and cries for help is that more homes are being refused loan modification than approved. This is not based on hard fact, but rather on an educated guess.
Why are loan modifications so hard to come by?
The answer lies in a little computation called Net Present Value.
The Mortgage Bankers association held a regulatory compliance conference last September 15 to discuss Net Present Value. A presentation was made to the members of the MBA at this conference discussing:
Net Present Value analysis and Loan Modifications. The focus of NPV and Loan Modifications was on how mortgage servicers and banks should utilize the Net Present value to assess what’s best for the investor.
Did you catch that? What is in the best interest of the investors. They did not say Whats in the best interest of the borrowers..
Without going too deep, Net Present Value or NPV balances the difference between the value of a dollar today to the value of the same dollar in the distant future. The decision on whether investors would be better off modifying your current mortgage or foreclosing on your mortgage is calculated from NPV figures.
Truth be told, while all the paperwork you need to file with your lender when requesting a modification may be perfectly filled out and you may look ?on paper? like a perfect candidate for a modification, you can still be denied because of an NPV calculation your lender performs. Fair? Probably not. But it is the reality of the game. And unfortunately, there is not all that much you can do about it except for this?
If you are speaking to an attorney or other loan modification expert and they say something like We have handled thousands of loan modifications and we’ll be able to get one for you, run like hell.
The fact is, no company or attorney has gotten thousands of loan modifications for anyone! If you are seeking expert advise or assistance with your modification, simply ask them if Net Present Value calculations will come into play with your modification request. 9 out of 10 experts won’t be able to answer you. And you will immediately know that you are not dealing with an expert.
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