Loan Modifications vs. Unemployment

November 04th, 2009 | Category: Foreclosure

Some homeowners who’ve had mortgage loans modified have ended up in foreclosure anyway. In many of those cases, public who got modifications experienced a drop in income due to a job loss and were unable to keep up with mortgage payments anyway, according to an exposition in the Record.

Economists now say unemployment is contributing to more citizens becoming delinquent on mortgage loans than sub-prime mortgages. Unemployment in the U.S. is currently at 9.8%, and more public are expected to lose jobs. Just that week, Johnson & Johnson announced it would cut up to 7% of its workforce, or about 8,000 jobs.

Although mortgage loan

modifications have helped some homeowners, a new study from the Federal Reserve Bank of Boston says many mortgage lenders believe that they will recover more from foreclosures than from modified loans. That’s because about 30% of homeowners who are behind on mortgage payments are able to start paying again without help from a mortgage lender.

The Fed study additionally says about 30% to 45% of folks who have mortgages modified are likely to end up lost payments again. Loan modifications simply postpone foreclosure for some public, the study says, and mortgage lenders end up recovering less money when those homes eventually end up in foreclosure.

Orginal post by Francine

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