Mortgage Modification Only Appealing In Theory

April 27, 2009
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Mortgage Agreements

One of the solutions earmarked by the government to curb the rising number of foreclosures in the country is to encourage home mortgage modification. Notices of default or auction have been received for 800,000 homes during the first quarter alone which is a 9% increase compared to the same period last year. American CoreLogic Inc reported that one in every five mortgage is over the value of the property involved.

To lend a helping hand, legislators have established the Helping Families Save Their Homes Act of 2009 which aims to encourage lenders to go for mortgage modifications for troubled homes. The bill was passed by the House on March and is expected to be voted upon in the Senate soon.

While home mortgage modification is an appealing proposition, it is only such in theory. Under the home modification process the total delinquent amount is not really erased but just added into the mortgage resulting to higher mortgage amounts and resulting to default again in the future on the part of the homeowner.

The institutions would benefit from the bill more than the homeowners with $1,000 paid by the bill for every modification they do. It is also expected to benefit mortgage services more than the homeowners.