In the last 3 months last year in 2008, many struggling homeowners were offered loan modifications that are more like breathers on payment followed by a recommencement of the original mortgage terms with (sometimes) even higher payments. In the end many of the refinanced mortgages fell back into default.
This was reported by federal bank regulators to give an idea how tough the challenges were for the Obama administration with their bail-out plan. The report said, “When loan contracts were actually changed, just 37% of the loan modifications reduced monthly payments by more than 10%.” Apparently many banks and loan companies have provided relief to their borrowers only temporarily.
Last year in 2008, 42% of modified loans resulted in reduced monthly payments. 27% resulted in the same unchanged monthly payment and 32% resulted in increased payments! However, in the last 3 months of 2008, the percentage that reduced monthly payments reached 50% of all loan modifications.
This report vividly illustrated the huge challenges that Obama’s administration is now facing.
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