Comments on: Why is it so hard to modify a mortgage?

By: Missy Blog

Missy Blog — Tue, 30 Jun 2009 02:15:03 +0000

Well, we certainly can’t rule out incompetence or greed by bank management. Maybe those toxic assets wouldn’t be so toxic, if the underwriting guidelines were realistic to begin with. But selling a rotten loan to an unsuspecting investor was such easy money at the tine. Now it’s still easier money for the banks to do what they know, ignore risk, and then foreclose (hopefully stripping some equity in the process), raise fees on other products and services, and come hell or high-water, make those big bonuses (or salaries, these days) for that oh-so-rare, hard-to-come-by “Talent” in bank management. Banks have no problem imposing forced liquidation on their clients. Why doesn’t the FED do the same. So, management doesn’t want to take losses, and would rather let these assets (with their pie-in-the-sky, imaginary valuations) sit, while they hope to find a buyer willing to pay the price the greedy bank presidents still want for their crap. Why not force banks to liquidate and put these mortgages in the hands of people who can then modify the loans and maybe actually help, instead of victimize borrowers. Those CEO’s may know how to read a balance sheet, but they still need to sign up for Ethics and Morals 101.

By: AJL

AJL — Tue, 30 Jun 2009 01:28:06 +0000

It’s 1, 2 and 3, but also 4: the risk of redefault. The worst case scenario for a servicer is a loan mod that redefaults. That costs the servicer real money. Better simply to foreclose and stick the loss on the investors than modify and chance the redefault.

By: R.Keeley

R.Keeley — Mon, 29 Jun 2009 23:02:53 +0000

Banks get massive tax credits for selling a home at a loss. I couldn’t figure out why a bank would rather sell a home for 100K when they could work with a borrower, get them more favorable terms, and keep a loan in place for $250K. Plain and simple, they lose less money if they foreclose on you.

By: Griff

Griff — Mon, 29 Jun 2009 22:14:06 +0000

OR, maybe some mortgages are just rotten to begin with and have no business getting modified at all. And it isn’t just the banks at fault, here; someone on the other side may have signed for a free lunch that never existed. Perish that thought, for a moment.