Loan Modification - A Solution to the US Mortgage Crisis


With foreclosure rates reaching nearly a million last 2008, the US government is desperately looking at every crevice of budget sheets for funds to be allocated as bailouts. In this scenario, economists and loan experts see loan modification as a viable solution to stop foreclosure and the mortgage crisis hitting the country to the hilt. In fact, the government is already using its authority to influence mortgage companies.

Recently, the Democrats have been urging giant mortgage companies to freeze foreclosure proceedings to give leeway to borrowers sinking even deeper into the abyss of the economic crisis. The US senate is clamoring to put a stop to the moratorium on foreclosure. In addition, they would like to halt all foreclosure activities for 90 days. Coupled with this move is the government's aim to convince lenders and borrowers about considering the option of doing a loan modification.

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Loan modification is a compromise between a lender and a mortgagor to alter terms and conditions of an existing loan. Aside from preserving home ownership, modifying loans favors borrowers with lower interest rates, reduced monthly payments and extended loan periods. Although the option entails that borrowers will take years to complete mortgage payments, it still stands as a better option than having to give up the property. Mortgagors are given more time to make the payment with lesser amount and interest. The chances of legally owning the house is higher through loan modification.

Lenders are slowly having a paradigm shift about foreclosures and loan modifications. In the past, mortgagees aren't adamant at filing foreclosure cases against delinquent borrowers. However, mortgage companies came to realize that foreclosure proceedings take a huge chunk of time and money from their resources thus produced more losses than gains on their profits. This is the reason why they would rather negotiate with the delinquent borrower and settle for a loan modification.

The solution to the mortgage crisis is becoming everyone's business as home ownership continues to dwindle and foreclosure proceedings pile up. This situation is already critical, but analyzing and looking at the bits and pieces that lead to this gargantuan point of concern will show us that everything started when borrowers started to become burdened with rising mortgage payments. It was found that Hispanic minorities in the US allot 38% of their monthly budget on mortgage alone. This statistics is not far from the condition faced by the rest of the population. Compounding this difficulty are unemployment rates, rising prices of basic commodities and the zero-credit issue about the Social Security Trust Fund. Until no permanent solution is unearthed to cease the mortgage crises from brewing even more, the economy is counting on loan modification to put a stop to it.


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