Some lenders may be more willing to reduce the mortgage principal than
grant a short sale for borrowers under the Home Affordable Modification
Program (HAMP). The principal reduction can mean big savings for home
owners too — the average amount reduced on a principal reduction is more
than $65,000, or 31 percent of the unpaid balance on the mortgage,
according to new Treasury Department data.
Principal reductions under HAMP began in October 2010, serving as an
alternative to a short sale or deed-in-lieu of foreclosure for
cash-strapped home owners. Only loans not guaranteed by Fannie Mae and
Freddie Mac are eligible for a principal reduction.
“The median loan-to-value ratio on modifications that went through
principal reduction was 158 percent,” HousingWire reports in a recent
article. “After the workout was complete, the borrower held an LTV of
115 percent, meaning he or she owed 15 percent more on the mortgage than
the home was worth rather than being 58 percent underwater.”
Banks may find a principal reduction is better for them financially
too. Banks report an average loss rate of 60 percent whenever borrowers
complete a short sale, and an average 70 percent loss for homes in the
foreclosure or REO process, according to Moody’s Investors Service.
Source: “Principal Reduction Outpaces Short Sales Under HAMP,” HousingWire (Dec. 12, 2011)
I haven't seen this as much with Real Estate in Logan, UT but it may be the trend that is coming.
No comments:
Post a Comment