Loan Modification discussion.

[AME]

I wasn't sure if this was the right forum to discuss this but I would like to start a thread discussing loan modifications. I have been reading different forums across the internet about distressed homeowners getting modifications to their loans at very favorable terms. One story I read was a homeowner who was boasting that their payment now is $1000 less than what he was initially paying at the time the original ARM loan began.

What I don't understand is.. if a person bought to much house to begin with and now get their loans modified so they are more than affordable, how does this help our economy? I understand it helps the homeowner stay in their house but it doesn't seem quite right when someone gets to stay in the Mcmansion (that they couldn't afford to begin with) and while others who aren't finding themselves facing foreclosure still pay for the house they purchased that were within their means. And if you live here in the Seattle area and you are middle class.. with 20% down.. for many, that type of home was entry-level. So I just want to make sure I understand this. People like me don't get any modifications and get to live in a home that is valued way under a McMansion get to continue to make payments. While someone who couldn't afford the 600k house to begin with gets to get their loan modified to an "affordable" payment so they can continue to live there?

Seems like this would be a pandoras box for everyone to start becoming "distressed".

This is really not a rant.. but more of wanting to discuss this issue so I (and others) can understand what is happening.

[Ubersalad]

[Rhonda P]

I know of someone where her existing mortgage company offered to modify her ARM that was getting ready to adjust to a 30 year fixed rate MUCH lower than the going rate. She's not distressed...the bank's cherry picking....probably so they can boast to the media that they saved someone who wouldn't have needed it. It cost her just a couple hundred bucks.

[jon]

Have the banks started doing HOPE loan modifications? If so, your friend probably didn't understand that she is giving up 50% of the future appreciation on the house. It's probably still a good deal, but it is something to be aware of.

[Rhonda P]

jon, she didn't contact the bank and she's not part of the hope program.