Mortgage Modification “Principals”

January 17, 2012

home loans2012 marks the start of the housing crisis’ fifth year, and the problem still has not been solved. Although initial projections for the amount of progress have not been met, an increasing number of Americans are being kept in their homes, including Chicago real estate, according to a recent article by Mercury News.

Only $2.5 billion of the allotted $45.6 billion has been spent on housing support programs. A further sum of about $8 billion has been allocated to assisting homeowners in three-year trial modifications. The programs this money is spent on offers incentives to lenders who offer their support to homeowners who have trouble paying off their mortgages. Funds distributed by the Treasury Department from the Troubled Asset Relief Program have helped approximately 880,000 homeowners modify their mortgage payments.

Despite failing to meet the Obama administration’s initial projections on solving the crisis, lending entities who have received the funds argue that their work is making a difference to homeowners. Wells Fargo recently said that these programs have been able to offer streamlined solutions to homeowners, just not at the volume the administration had hoped.

However, the problem with modification lies in “writing down” the principal values of homes, recording them lower than they actually are. This will likely leave homeowners with huge payments if they decide to sell the house down the road. Furthermore, as Sean O’Toole of Foreclosure Radar said, “Once you offer principal balance reductions, all of those folks who are underwater and making their payments are going to want one.”

Will 2012 bring an end to the foreclosure crisis? Only time will tell what happens next.

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Stephanie is an Integrated Account Coordinator at Rountree Group Integrated Communications. She has public relations experience in public affairs, social media, blogging, healthcare, manufacturing, real estate, restauranting and retail.

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