The Other Problem With Mortgage Mods: They’re A Nightmare


The New York Times explains some of the problems with Obama’s new mortgage-modification plans:

  • Mortgage mod doesn’t work unless the homeowner’s payments and principal are cut significantly…and then, unless the bank gets a property appreciation right, it’s just a giveaway
  • They’re a bureaucratic nightmare
  • People who are deeply underwater will walk away anyway
  • Renters, responsible homeowners, and folks who are underwater but CAN make payments get the shaft.

Maybe it will help a bit?

VIKAS BAJAJ and JOHN LELAND, The New York Times: MIAMI GARDENS, Fla. — When her brother could no longer help support her, Luzetta Reeves asked her small mortgage company to cut her monthly payments. It did — by 11 per cent — making it possible for her to afford her house here on her modest fixed income.

In Miami, Jeffrey Mitchell saw his family income drop just as real estate taxes and insurance premiums increased, making his monthly mortgage payments crushing. He got a lower interest rate, too. But with the added fees and penalties, his monthly payment remained the same. He is now back in foreclosure.

As the Obama administration steps up efforts to help troubled homeowners modify their mortgages, it might consider the experiences of these two South Florida borrowers and their mortgage companies, one small, one large.

National statistics on mortgage modifications suggest that what happened to Ms. Reeves, a disabled 54-year-old, and Mr. Mitchell, a 42-year-old union representative, is fairly typical.

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