Welcome to San Diego Blog | January 24, 2010
Loan Modification Approvals are Failure
With all of the people that are upside down on their downtown San Diego condos due to bad loans and unwise buying decisions, there must be a plan to help these people. Well, the Obama administration has come up with their answer and has committed $50 billion of Federal tax dollars towards the Home Affordable Modification Program (HAMP).
As of December of 2009, more than 650,000 homeowners across the nation, including Downtown San Diego Condo owners, have applied for and been placed in trail modifications. And out of these 650,000 applicants, only 2,073 have been approved for permanent Loan Modifications. If I do the math correctly, that is less than one percent…this is failure!
In late December, President Obama issued a warning to the major banks urging them to increase their rate of processing and approvals of these loan modifications. Recent studies have shown that high rate of denied loan modifications are the result of three main issues.
1. Most of the trial homeowners were unable to make the payments offered during the 3 month trial period, for high unemployment continues to erode the economy.
2. Even with a loan modification, many San Diego homeowners are still going to owe substantially more than their home is worth. In San Diego County, reports have shown that 1 in 4 homeowners are upside down on their mortgage.
3. In many cases, banks have reported that they have received less than half of the required documentation from homeowners in order to make a financial loan modification decision.
On account of the terrible success rates with loan modifications, the federal government recently rolled out its new & improved HAFA program late last year. The HAFA program was created to provide incentives to banks to accept short sales or a deed-in-lieu of foreclosure. A homeowner must be declined for a HAMP loan modification before they can be considered for the HAFA short sale or deed-in-lieu of foreclosure program. With only a 1% success rate, your chances for being declined are 99% so you can pretty much count on qualifying for this program.
For owners of downtown condos, this means short-sales will be a popular option in 2010 and 2011. Many homeowners that bought condos downtown San Diego at the peak of the market like Alta San Diego, La Vita San Diego and Aria San Diego would be good candidates for a short sale. If you are considering a short-sale and would like to learn more, please contact us today.