Permanent Loan Modifications California: Too costly for homeowners

Up to 75% of permanent loan modifications CA are estimated to redefault within the first 12 months of being approved, so say the Fitch Rating Agency. The agency rates the performance of banks, reports that between 65% to 75% of all approved permanent loan modifications California will re-default. The reason given for such a huge redefault ratio is because the payments levels are too high for the homeowners.  Loan modifications California may work for the bank, but don't appear to be sustainable for the homeowner as the loan modification rate leaves little money for food, clothing, utilities and other important family expenditures.

Fitch indicated that the results for the federal Homelloan Affordable Modification Program (HAMP) are expected to be similar. Treasury Department officials are trying to put a positive spin on these results, indicating that the program is helping at least some homeowners keep their homes.

However, the truth is that loan modifications California appear to be creating more harm than good.  Only a fraction of applicants receive permanent approval for the loan modification California program. Even if accepted into the loan modification program, homeowners are expected to make burdensome monthly payments to the lenders, making other options such as short-sale vs loan modification far more acceptable.

Part of the problem with loan modification lies with the lengthy approval process. Some homeowners are waiting for over 12 months for loan modification approval, only to discover they are ineligible for loan modification in California or worse still, denied for technical reasons. 

Given most homeowners are already in distress BEFORE applying for loan modification, having to wait up to and beyond 12 months (while still being expected to make the mortgage payment) is creating even more stress and problems for the homeowner. To make matters worse, the loan modification payment required by banks for most loan modifications California also appear to be unrealistic and far above what most homeowners can reasonably afford.  According to Fitch, the average monthly loan modification payment is 64% of the homeowner's pre-tax income.

This is causing many families to deplete the little financial savings they have, including the families who never received permanent loan modification approval.