Loan modifications, specifically principal write-downs will be the answer to many people’s mortgage needs.

Very Interesting.

Will Loan Mofications Be The Solution For Negative Equity?

In July, Congress passed the Hope for Homeowners initiative. It is a FHA insurance package which will insure $300B of new mortgages for home owners in a “negative equity” position.

Negative equity, meaning that most of these properties are worth less than the balance of the loans.

Well, the borrower has to qualify for the loan modification with a 31% or lower DTI ratio, at least 6 payments made and none of them late.

So if they qualify, what do these applicants get? (And on a side note, if I had to guess what the average DTI for mortgages approved in 2007, I would say around 40-45%. Not to mentions that most of these loans are non performing mortgages as well.

Who’s Going To Qualify For Loan Modifications?

A small number of people.

When the program became available, out of 49 people applying, zero applications were approved.

FHA Secure Program Provides Help to Home Owners With Non Performing Mortgages

The FHA Secure program had a total of 203 applicants. Out of that number on 49 applications were approved.

During this same period, California had about 1,300 properties that had a Notice of Default filing.

If the H4H program needs more time, can’t we just wait?

Sure.

Just keep in mind that if lenders are going to participate in these 90% principle reduction loan modifications, they will be looking for federal backing. H4H included.

So, while everyone’s waiting for the good news on H4H to come out, why not get your wallets out and make an offer on those 49 notes that were just turned down?

And most likely, there will be more non-performing mortgages (to buy) where they came from.