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Loan Modification Outlet offers mortgage modification relief for homeowners that are struggling with an adjustable rate mortgage or an employment issue that caused a loss of income. LMO offer loss mitigation solutions with low rate loan modifications that stop foreclosure!

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June 2009
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Fitch Ratings published a report recently that examined the performance and effectiveness of foreclosure preventions with loan modification programs in terms of helping prevent a borrower from losing their home in foreclosure. Their report pointed out massive failure rates. Fitch’s foreclosure prevention reports that had come out earlier in year found that 50% of mortgage modifications done in the first half of 2008 had gone back into default by year-end. The recent loan modification study by Fitch estimates that between 65% and 75% of modified subprime mortgages will become 60-days or more delinquent again within a year of  that the loan is modified.

Loan modifications can combine lower interest rates, maturity date extensions, changing from adjustable to fixed interest rates, and the reduction of principle. Of the four, principle reductions are statistically the best way to ensure the long term success of a loan modification. According to LPS reports, loan work-outs that included principle reductions had a 25% lower re-fault rate than those without a reduction. Fitch’s numbers concurred with those numbers, indicating that loan modification plans that included principle reductions saw a 40% to 50% chance of a re-fault. Not surprisingly, Fitch found that loan modifications where loan principle was increased due to missed payments and penalties being added to the backend of the loan had a re-fault rate of 60% to 70%

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The state of California announced a new state law imposing a 90-day moratorium on home foreclosures that went into effect for local borrowers who were unable to get access to a loan modification program. Under the program lenders must prove they attempted to offer mortgage loan modifications with delinquent home loans before they begin the home foreclosure process. The moratorium is very similar to the federal mortgage relief program that started last December and ended April 1.

The goal is to ensure loan servicers make legitimate attempts to work with borrowers before foreclosing. Because of the Federal moratorium, most of the big mortgage lenders already have a loan modification program in place. Those companies don’t have to comply with the new state law and can apply for an expemption.

That process however, can take up to a month to complete. During that time mortgage loan servicers can carry on with business as usual, including foreclosing on delinquent accounts. The State announce the California moratorium would go into effect immediately, but will the major mortgage lenders fall into line with it?

California Foreclosure Moratorium Guidelines:

ü The moratorium applies to first mortgages made from 2003 through 2007.

ü The mortgage loan must be for your principal residence.

ü The homeowner must have received a notice of default.

ü The home loan servicer does not have a California loan modification program in place.

ü Because many homeowners are upside down on their mortgages

There is a concern that the 90-day negotiating period will only postpone the inevitable because so far the banks are not reducing the principal. California doesn’t know how many people will actually have their foreclosures put off, nor what banks already have loan modification programs in place. The Department of Corporations does plan to post which institutions apply to be exempt from the moratorium.

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Frank Continues to Make Promises about Housing Rescue & Foreclosure Prevention Act:  Watch Barney Babble about Home Values and Loan Modifications

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