Foreclosures Being Modified By Lenders

The Mortgage Bankers Association has conveyed a unique survey on modification of loans. Already 235,000 are being given a new look during the third quarter of 2007. Most of these loans – approximately half (103,000) are sub-prime ARM’s. Of these 54,000 have been successfully modified.

In addition to the sub-prime loans the lenders are also giving attention to the rate of prime fixed rate loans. The focus is on keeping the borrowers in their homes and seeing to it that they do not succumb to foreclosures. This is the view of Dough Duncan, the chief economist of Mortgage Bankers Association.

During the third quarter of 2007 foreclosures increased in speed adding to its numbers. The mortgage industry initiated foreclosures against 384,000 loans – more than half coming from the sub-prime category. Side by side the mortgage industry took important measures during this third quarter to help those borrowers who ‘could be helped’, said Jay Brinkman, the vice president of the mortgage association.

However all the borrowers could not avail of the help. About 63% of the foreclosures were against those borrowers who did not reside in their houses. Thus they could not be contacted and consequently they could not benefit from the latest move of loan modification. The rate of interest for non-owner occupied houses is higher than owner occupied loans. In the former case the borrower took the loan for investment purposes and like any businessman will abandon it if the market value drops. They will just walk away without wasting further time or money. These are the dictates of business principles. It will not have a severe impact on credit ratings as the individual who is getting foreclosed on his or her first time home. If there is a difference between the address to which bills are sent and address of the property mortgaged then it points to the fact that the house is an investment and not a home. At the most it will be a second home. This of course leaves open the question of those that are second homes and those that are pure and simple investments. Thus retirement homes, vacation units and investment estates were all lumped together.

According to National Association of Realtors that the number of vacant houses for sale has reached all time records. In all likelihood speculators investing for sharp quick profits had bought these.

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