Obama's Loan Modification Plan: 7 Things You Need to Know - US News and World Report

Obama's Loan Modification Plan: 7 Things You Need to Know - US News and World Report

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Loan modification makes financial sense to the lenders when the borrower of a modified loan meets these two tests:

1. Can not bring the loan current without the modification 
2. Has the financial ability to keep the loan current with the modification

If the modification only delays the inevitable or the person can bring the loan current without the modification, the lenders are not likely to assist the borrower today.  Apparently the government's criteria of 2 months behind will make you eligible to be considered. But the lenders have added the criteria that you wipe out your savings and liquidate assets to receive the modification.

This is interesting. The tax incentive to purchase implies that the real estate economy will get better in time. The incentive  is sold as a bridge to keep housing selling in a down economy with the hope that the market will be strong again in the near future. The Loan Modification is suggested as a bridge to help people ride out the sluggish economy in their home until things get better again. The banks are participating in making the new loans fueled by the tax incentive, but they are not gung ho on the loan modifications. Do the bankers see, or do they not see, a better economy on the horizon?