Why Your Lender Might Consider Reducing How Much You Owe On Your Mortgage.

Because of easy credit over the last few years, more and more home owners have been

lured into excessive debt. Most of them got numerous credit cards, ran up their limits and

then used their home as an ATM, by means of refinancing to pay off their credit card

debt. In those times lenders were not willing or motivated to work out any type of

payment plan or solution to get home owners back on track and they actually preferred

foreclosure, as they could foreclosure on a property and recover all the money they lent to

the home owner including what ever junk fees they decided to tack on and then turn

around and sell the property for even more profit as the values of homes were increasing

on what seemed like a daily basis. If lenders did incur a lost, they could simply write it

off as a bad debt and then they also get a tax break on whatever loss they incurred.

However, with the collapse of the housing market and the current economic times,

lenders have to make some changes. As today they are experiencing soaring foreclosure

rates, as unemployment rises to levels not seen in decades and they are finding

themselves in the home owning business versus the lending business as these homes are

sitting on the market and cannot be sold. A few reasons for this are there is less money

out there to lend and tougher requirements to qualify for a mortgage today.

According to the American Bankruptcy Institute, there were 100,000 more bankruptcy

filings in 2008 when compared to bankruptcy filings in 2007.

There were over 2 million more foreclosure filings in 2008 compared to 2007 and more

than 2.5 million home owners were more than 2 months late on their mortgage payments

by the end of 2008 compared to 2007.

These statistics imply that foreclosures are causing a significant loss to lenders and this is

why these lenders are trying to find ways to keep home owners in their homes and to

keep them paying, even if that may require them reducing the balance owed on the

mortgage. This was the goal of the Hope For Home Owners Program, which was created

as part of the Economic and Housing Recovery Act of 2008. This program is off to a

rough start as it is completely voluntary for lenders to participate and most lenders

initially were reluctant to the idea of reducing the amount of the mortgage, however as

time goes by and foreclosure rates increase, these lenders will realize that this will

become a necessity if they want o minimize their losses. As home owners that have good

credit, make good money and have never been late are now walking away from their

homes because they owe more than their home is worth and in some areas in Florida we

are seeing property values drop in excess of $100,000.

Until lenders get more proactive and address the issue of negative equity, they will

continue to see high rates of foreclosures as home owners feel trapped in a mortgage that

cannot be refinanced and a home that cannot be sold through a normal sale process and

they may have to consider a short sale that will impact their credit negatively, lenders

could come after the home owner for a deficiency judgment and to make matter worst

they could have significant tax liabilities.