Tuesday, November 02, 2010

Mortgage Mods: A View from the Trenches

I've written a bit here and there about the possibility of "mortgage relief."  Here's a bit from a lawyer in the trenches who says her clients want more than relief:
The real problem is the "entitlement" mentality - that everyone is entitled to a modification, including a monthly payment of $1,500 and a principal reduction to today's fair market value.  Much as I would love for my bank to do that for me, it's just not realistic.  I try to explain the situation to my clients as follows: your contract protected you when the market rose and made it so the bank couldn't raise your payments just because there was equity there.  In the same way, it protects the bank when there isn't equity.  I really like the idea of treating some of the principal as a balloon, and hopefully that'll continue to be an option available for debtors and creditors to keep the money changing hands. 
Comment:  Balloons, really?  I know I've given them more than a passing thought, but the more I consider it, the more I realize that a debtor who can't deal with the full balance now will not be to do so any better three years (e.g.) from now.

Update: My source advises me that she is talking about thirty year balloons.  My stars, I never thought of that.  Are we moving closer to the British system where you don't own your real estate but just hold it on a 99-year lease from the Duke of Bilgewater?

1 comment:

ktporter said...

This entitlement mentality could perhaps, just perhaps, be the result of being in California?? Although to be fair I did get a great plea for free legal help from someone who owns 12 properties and was upset because the lenders were only willing to modify 10 of them. In general though, I think the problem today is a "lack of entitlement" mentality, in which people are so used to government programs struggling to deliver that the Administration has been able to continue to rely on HAMP as providing meaningful relief to Main Street--an incredible assertion.