Will the Massive Effort to Modify loans help Phoenix AZ Real Estate?
November 5, 2008
Last week, under intense pressure from the Federal Government, JP Morgan announced they would work with struggling homeowners to keep them in their home by modifying terms on existing loans (Loan Modification). 
A loan modification is a loan re-structure that provides for lower interest rates and terms and often penalties, fees, interest and principal in arrears tacked onto the back of the loan.
According to a report by Catherine Reagor, Bank of America has suspended foreclosures against nearly 2,000 home in greater Phoenix AZ.
Banks across the country, including Wells Fargo which has borrowed more then $25 Billion are setting up loan modification (loss mitigation) departments and loan modification pools to work with borrowers(primarily) whose adjustable rate mortgage (ARMS) whose interest rate adjustment has made their monthly mortgage payment unaffordable.
As John Taylor, chief executive of the National Community Reinvestment Coalition, said it is “a gutsy move on their part,” adding : “They are bending over backward to try to reach out to these people.
Why we need loan modification!!.
Nationwide, 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010, about triple the usual rate, according to Moody’s Economy.com, a research firm. Some 4.3 million of those are expected to lose their home
The question on everyone’s mind is “will it help prevent foreclosures and thus prevent further sharp declines in Phoenix AZ real estate prices ??
The short answer is ‘maybe’ ! I know this doesn’t help. However, there are many reasons to be optimistic. There are also a few reasons that this is delaying the inevitable. Here’s why!
Most people who bought homes truly want to stay in their homes. Due to a variety of reasons ranging from higher food and energy prices, rising unemployment, decline Phoenix AZ real estate prices, impaired health and adjusting ARM mortgages, borrowers are having increasing difficulty paying their monthly mortgages.
As a result foreclosures are at all time highs. Eventually , these homes are foreclosed upon and become bank-owned real estate (REO).
The one upside to banks owning real estate and selling REO on the market is the concern for profit or loss mitigation. Banks have shareholders to report to. As a result, they do not just sell everything, at any price, as quickly as possible.
What will the Treasury do with GEO (Government owned real estate)?
Since, the FED does not have shareholders or the investing public to report to, they will dump these lender owned homes on the market at steeply discounted prices, further driving down home values and more net worth.
Thus, driving down Phoenix AZ real estate prices. Further causing a drag on the economy and longer delay in moving out of a deep recession.
Loss mitigation options like loan modification may take time time to work as this is new ground for the banking industry. Ultimately, I am cautiously optimistic, that it will work to keep struggling homeowners in their homes and prevent foreclosures from driving down Phoenix AZ real estate. In fact, to prevent a deep economic recession, it has to work.
The important thing to know is that you have options prior to facing foreclosure. Foremost, contact your lender as soon as you know that you may have some trouble making ongoing loan payments. The more time you have before foreclosure, the better.
Don’t avoid what may inevitable. Don’t be ashamed. You are not alone.
Contact your bank and/or your real estate professional to help you through a difficult , but manageable process.
Make sure you work with a Phoenix Realtor or Scottsdale Real Estate agent who is experienced with short sales and bank owned transactions.
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Copyright © James Wexler *Will the Massive Effort to Modify loans help Phoenix AZ Real Estate?*
If you are listing your home as a short sale in Phoenix Arizona or Scottsdale Arizona make sure you hire an agent who knows how to do short sales and has the experience to get the job done.
Call 480.221.8080 to find out more about Phoenix AZ Short Sales and Scottsdale AZ short Sales
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The banks are going to be the ones who benefit the most because it will give them more funds to loan out for “good loans” and make money on payments people can acctually afford. This will probably trickle down to the indavidual homeowner in the form of the market stabalizing and growing at a more steady pace than we saw during the boom. Some homeowners may benefit from the bail out but it will be a rare occasion for someone to qualify for the program. I hope I’m wrong but this is the way it seems to me.