Miami Mortgage Modification: Principal Reduction Most Likely to be Successful

A principal reduction is the most effective type of home loan modification in Miami and elsewhere, DSNews is reporting.

Among three modification options — principal reduction, rate reduction or capitalization — a reduction in principal was the least likely to lead to re-default within 12 months, according to a report released by Amherst Securities. A Miami foreclosure defense attorney is best suited to assist you in a review of your case and a determination regarding the best course of action for your particular financial situation. As we’ve seen in far too many cases, banks cannot be trusted to deal fairly with the homeowner. And a principal reduction is the least-favored option of lending institutions. iStock_000019631104Large.jpg

And, of course, the unethical actions of banks across the board and throughout the downturn means you often cannot trust your lending institution to honor a deal even after an agreement is struck. In fact, there have been numerous documented cases in which a bank used the resulting arrears to launch a foreclosure action — despite the fact that the homeowner was making lesser payments as agreed.

The report noted the earlier a HAMP mod is completed, the more compensation a loan servicer stands to receive from the treasury. The Home Affordable Modification Program is among the government-backed answers to the foreclosure process and seeks to induce banks into working with struggling homeowners.

Thus some banks are starting to come around — particularly in cases where homeowners have retained experienced legal help. The report found principal modifications now account for 40 percent of all modifications — up from just 11 percent in 2010.

Only 12 percent of those granted principal modification re-defaulted within 12 months, compared to 23 percent for rate modification and 30 percent for capitalization.

The report found buyers are very apt to take a 30 percent reduction upon becoming delinquent and to see it as a “good deal.” Unfortunately, that same deal looks less attractive after nonpayment for 15 months or more. Homeowners offered such a break on the front end defaulted within 12 months in less than 20 percent of cases. Nearly one-third defaulted after being given modification on a loan that had been in arrears by a year or more.

The $25 billion robo-signing settlement signed by Bank of America Corp, J.P. Morgan Chase, Wells Fargo, Citicorp and Ally Financial — makes $10 billion available for principal reduction for underwater borrowers.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991.