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

Interesting.

Will Loan Mofications Be The Solution For Negative Equity?

The Hope for Homeowners initiative passed by Congress in July and officially launched a month-and-a-half ago to much acclaim, is a potentially positive FHA insurance package aiming to insure $300B of new mortgages for borrowers in a “negative equity” position.

Negative equity refers to loans that are worth more than the home.

If the home owners have a DTI of 31% or less and made at least 6 payments on time, they can qualify for a Loan Modification.

What do they get if they meet those magic criteria? (Oh, by the way, if I had to hazard a guess at the average DTI for loans originated in 2007, it would probably be 40-45%, and most of these loans are non performing mortgages).

Who Will Acutally Get Approved For Loan Modifications?

Not that many at all.

In the first 2 weeks of the program, exactly 49 people applied, and… none 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.

In California around the same time, a Notice of Default was filed on about 1,300 homes.

So what’s the big deal here? Can’t we just give the H4H program some time?

Yes.

Remember that H4H, along with the lenders participating in these loan modifications will be looking for federal backing on these 90% principal reduction plans.

Sure you can wait for the news on H4H along with everyone else, or you can make an offer on the 49 notes that weren’t approved.

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