Irvine Housing Blog

Actually, the lenders are modifying loans.  The lenders are modifying quite a few loans.  Actually, the lenders are modifying a huge number of loans; about 1.3 million so far, including the remodifications.

You say the lenders don’t want to modify loans and they make it difficult, and close to impossible, to modify a loan.  They do make it difficult, but if the lenders did not want to modify loans, why are they modifying loans?

The lenders are modifying loans because they can not afford to foreclose.  If they foreclose, they must adjust their income statement to account for the receivable, (unpaid), monthly payments, and they must adjust their balance sheet to account for their losses.  And they can not afford to do either.  Insolvency would be immediately apparent.

BTW, almost all the loan modifications are resulting in either short sales or redefaults which lead to foreclosure or more modifications.

The chest-burster photo from Alien”, zombies and negative amortization loans. Shear brilliance.
If only Ridley Scott and George Romero would have teamed up around 2000-2001 to perform a public service announcement about appropriate home financing methods, maybe we could have avoided this mess.

The Schmalzes should have probably squatted and fought the case in Cook County Court, which by the way is overrun with foreclosures.

I should know.  Unfortunately I walked away and squatted 20 months ago after I was denied a modification.

I have many regrets.  Most involve why did I not think of defaulting sooner, or the 100K equity I left on the table only to have it evaporate via falling home prices.

Just kicking the can down the road. My guess is that the banks are modifying loans in the hopes that maybe 5-10% of those loan-holders actually make their payments and don’t go into default. From their perspective, even a paltry number like that is better than 100% default rate on underwater loans. I think of it as a slow motion, reverse ponzi scheme ... the last bank standing will be the one to unwind the slowest in the race to the bottom.

Anyone else notice that the “drowning assistance” graphic actually says “LOL”? Double entendre?  Touche!

Slightly off topic, but can someone tell me if the street “Midnight Sky” in Woodbury is paved with gold?  Two properties are listed for $426 and $430 a square foot. Those are the WTF prices of the day….

Don’t confuse the mortgage owner/investor with the Loan Servicer. It’s the Loan Servicer as a separate company that makes a commission to collect incoming payments, provide required statements and tax documents to borrowers, and forward loan proceeds to the Loan Owner/Investor.

The Loan Servicer companies are who borrowers talk to, and they don’t necessarily have an incentive to work for a reasonable loan modification. In fact, they have a perverse incentive to deny a loan modification. If they deny a loan modification then the Loan Servicer gets to charge the Mortgage Owner/Investor fees for the late notices, court proceedings, etc.

The Loan Servicer makes money whether the borrower pays or not, and since they don’t actually have any ownership stake in the mortgage they have no potential loses.

I wonder if there are any statistics out there showing WHICH companies are modifying loans the most? Would it be the big banks or the smaller independent loan servicing companies. I suspect we would see a wide gap in the percentages of late/defaulted loans that get modified. Based on how well the modifications are thought out, I think you’d also see a difference in the re-default rate.

On one hand I wonder why Fannie/Freddie/The Fed/The Gov’t who all have an ownership stake don’t take more active participation in the loans that get late. They just leave that in the hands of the loan service companies who don’t have a stake in the loan losses.

On the other hand I can certainly see the point by ChicagoWalkAway above. If the loan service companies won’t work with you, just how much effort can you make to work with them?