Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Happy Monday!

We are always surprised that companies spend thousands of dollars to determine things that seem obvious. Take for example a recent report presented by Amherst Securities Group that said when principal reductions brought mortgages near the home’s market value, borrowers were substantially less likely to fall behind on payments again and lose their homes.

In other words, homeowners who receive principle reduction of their mortgage continues to prove to be a more effective way to prevent  foreclosures, as opposed to loan modification,  forbearance or reducing interest rates.

The HUD counselors who we work with have been saying that banks need to offer principle reductions few years now.

The numbers form the report show that only 12% of borrowers who received principal reductions re-defaulted in 2011. Compare that with 23% of borrowers who received mortgage modifications with interest rate reductions (but no principal reduction) and 30% who received forbearance.

So far this year, principal reductions have accounted for 40% of the modifications done by the banks, up dramatically from 25% in 2011 and 11% in 2010.

Unfortunately for homeowners in the Bay Area, the typical amount of debt forgiven in a principal reduction modification sits at about $60,000, according to the Treasury Department which won’t make a big difference unless you happen to live in Solano county or one of the outlying cities.

Let’s see if any of the principle reduction talk actually makes a difference in the coming months.

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

es To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

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2 Comments

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2 responses to “Principle Reduction On Mortgage Proves To Be More Effective Way To Prevent Foreclosures

  1. Pingback: Why Do Loan Modifcations Fail? | Resource Blog

  2. Pingback: Mortgage Forgiveness Debt Relief Act May Be Extended Through 2013 | Resource Blog

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