Sunday, February 28, 2010

San Diego Loan Modifications? Scarce as Unicorns

San Diego Loan Modifications? Scarce as Unicorns!  (Almost.)

Lots of San Diego homeowners are hopeful they are going to get a loan modification.  Most shouldn't be. It's a wonderful idea, and our well-meaning politicians have made some funding available.  There's even talk now about legislation that would REQUIRE lenders to reduce principal.  More about that below.  And yet, a very, VERY small percentage of loans which "qualify" for modification - say, under Obama's H.A.M.P. program - are actually being modified.  Why?  For one thing, the processes are convoluted and time consuming.  For another, the most conscientious borrowers are staying current, and as a result, lenders won't even talk to them about modification. I know how to do these things, and could charge money to do them, if they actually succeed. I stopped even offering the service in San Diego, because I have ZERO faith in the probability of a decent outcome, my own considerable skills notwithstanding.  The people who see me have enough trouble as it is.  I'm not going to add months of stress and anxiety waiting for what is a pipe dream for most in San Diego.

Many (most, actually) big banks have repaid their bailout money, and so aren't required to play be the same rules on "loan mods" anymore.  And as for laws making banks write down principal balances, well, expect those proposals to die in committee or in litigation where lenders and scholars will argue that such a law would amount to an unconstitutional government "taking" without "just compensation."  Remember the saying, There's no such thing as a free lunch?"  Someone has to pay for it. Banks aren't about to volunteer.  The taxpayers won't either.  Who does that leave? Anybody?