Why Loan Modifications Do Not Work in Florida?

A loan modification is an agreement that helps reduce debtor’s mortgage interest rates to a level that enables their timely mortgage payments. Although different lenders have different criteria for offering loan modifications, some basic factors include the debtor’s payment capacity, debt to income ratio, credit, mortgage payment history and property value.

Reasons for the Failure of Loan Modifications in Florida

  • Many loan modification plans do not work favorably because these are normally unaffordable on a long-term basis; which means they only help delay foreclosure. Hence, homeowners invariably find themselves dragged into default and mounting debt over a period of time. Here are some other reasons for loan modifications fail in Florida:
  • Increased balances: Since most lenders add fees and unpaid interests to the balance loan amount. The renewed mortgage debt amount is now greater than the original amount. In fact, most lenders do not reduce the principal loan amount. A
  • Increased Payments: Adding fees to the total loan balance results in increased total monthly payments. Thus, a loan modification plan that increases the loan balance enhances the chances of re-default (almost 45% of all loan modifications resulted in increased monthly payments).
  • Underwater mortgage: Several borrowers who opt for loan modifications find that the market value of their property is lesser than the debt amount they owe. Thus, it makes sense short sell the property than keep paying the enhanced debt amount.
  • Accepting unaffordable terms: Homeowners accept unaffordable modification terms in a bid to save their homes from foreclosure. Experts suggest that unfavorable terms must be countered and only fair and just terms be accepted.
  • Know the System: Most people fail to obtain a favorable deal because of their lack of awareness of the system. For instance, borrowers may find themselves stuck at the customer service department or with a loan modification broker, when they should actually be dealing with the loss mitigation department. Hence, getting in touch with the right people is the first step to obtaining loan modifications.

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