Mortgage Refinance vs. Modification: Which Will Save Housing?

125% REFINANCE

The government took over Fannie and Freddie almost a year ago. And in that time, they offered the qualified overwhelmed homeowner first a 105% refinance and currently a 125% refinance. Result, if you have enough income and good enough credit to qualify, you can refinance a first mortgage up to 125% of your appraised value.

MODIFICATION BY YOUR LOAN SERVICER

If for some reason you cannot take advantage of the current mortgage rates by refinancing, you may have no choice but to contact your mortgage loan servicer and request a modification. The current statistics on loan modification show they do not often work. Over seventy-five percent of loans modified have re-defaulted, mostly because "modification" often means just adding the arrearages to the balance and perhaps stretching out the repayment term. Modifications under Home Affordable Modification Plan guidelines have a better track record, and government presses ahead with this as the main option to avert more foreclosures.

CURRENT MORTGAGE NEWS: ARE LOAN SERVICERS MOTIVATED TO HELP?

• On July 30, 2009 Peter Goodman wrote an article for the New York Times titled "Lucrative Fees May Deter Efforts to Alter Loans." Goodman quotes previous employees of big names like Bank of American (Countrywide) and OCWEN Financial. The article has sparked a fire storm of debate on the fairness of the sharp accusations that loan servicers will forgo the few thousand offered by the government to modify loans in order to rake in a fortune in fees from prolonging delinquent loans and eventually letting them go into foreclosure.
• In a same day response, Diana Olick's blog for CNBC.com quotes Faith Schwartz of the Hope Now Coalition, "the majority of (loan servicer) fees are passed through third party fees--some do go to the bottom line, but many will go to the third party..."
• Days before, Joseph Mason testified before the Joint Economic Committee. He outlined the seven key reasons why loan servicers are failing. He also points out that servicers are not currently obligated to report adequately to the investors who own the bad mortgages.

REFINANCE HELP

More opportunities are available. If you are frustrated by your loan servicer, or you think a 125% refinance might help you, please contact one of the trained mortgage lenders through this site.