Recent studies in California show that mortgage modifications are hard to get for most, even homeowners who stand to benefit from the Obama Administration’s Home Affordable Mortgage Program, popularly known as HAMP. According to the report, of 568,630 borrowers who have requested mortgage loan modifications, 46 percent were denied immediately, 23 percent received a permanent mortgage modification, and a third of applicants were stuck in trial modifications or had their modifications cancelled.
Who has the biggest problems?
Even worse, the problems seem to be bigger for homeowners of more modest houses. The report found that while common sense says that homeowners of large houses who are way over their heads in mortgage debt would end up in foreclosure, this is turning out not to be the case. Since banks lose out more on bigger loans (as well as those who have first and second mortgages out), they tend to close faster on homeowners who have a smaller payment-to-debt ratio.
“The truth is that the larger the loan balance you have, the more upside down you are in the home, and the bigger the loss for the lender, the better your chances are of not being foreclosed on for a very long time,” writes O’Toole, who was one of the purveyors of the study. The difficulties go on for homeowners around the world, but if nothing else, should you find yourself in severe mortgage debt in California, it might be better for you in the end than if you are in debt within your means!