Loan Modification or Profit Modification?

290,631 - That's the number of foreclosure filings in February nationwide. Nevada, Arizona, California and Florida make up 53% of the nation's foreclosures right now. We look at these numbers and, unless you see the signs on your block, or you have a family member affected by it, it just doesn't sink in how real it is.

Recently, I have had 1 home in my circle (cul-de-sac) foreclosed on, and one neighbor who has been negotiating with the bank for some time now. Having 2 homes of the 7 in my circle potentially in foreclosure is unnerving. But that was nothing compared to having my parents going through it.

My parents were one of the millions of homeowners who were sold a bill of goods when the housing market was being artificially inflated due to bad loan after bad loan making anyone and everyone a homeowner. They had bought their home previously, but saw this boom as an opportunity to get ahead and take advantage of the low rates. They were talked into an adjustable rate mortgage (commonly known as an ARM). That was great before this huge bubble of paper wealth went POP!!! They watched as their rate climbed up and up, to a point where their house payment had nearly matched their income. They knew they had to do something. They were introduced to a company who "specialized" in "loan modifications". It was a pretty good proposal, pay this company what you would pay for a month's mortgage, they negotiate with your bank and reduce your payments and get you into a fixed rate loan. Only they never so much as talked to the bank. Last month, the FBI raided the California headquarters of this fine organization, hauling the leader off to jail. So, now what are they to do? A friend stepped in and began ACTUAL negotiations with the bank. At that time, we were 4 months into this process.

One of the MAJOR reasons for the Troubled Assests Relief Program (TARP) was banks and other creditors had frozen lending, making it difficult for homeowners to escape some of these merciless loans they had been sold. So banks like Bank of America and Wells Fargo cashed in on some TARP money in exchange for freeing up credit lines and working to modify mortgages so homeowners would not continue on the path to foreclosure. The outrage over how the first 350 billion of TARP money was handled prompted the current Administration to look at how we could be sure these institutions would survive, with or without bailout assistance. These tests were referred to as "Stress Tests" for the financial institutions. The New York Times today reported that "Regulators say all 19 banks undergoing the exams will pass them." This essentially means that as long as we are willing to prop them up if necessary, all 19 banks will rebound from this disaster.
Also in today's financial news, Wells Fargo estimated that it's first quarter profits may exceed 3 billion dollars, making investors on Wall Street giddy. 3 BILLION DOLLARS PROFIT FOR 3 MONTHS.

Back to my parents now. Their friend began working with the bank to modify their loan about a month ago. Yesterday, they made their proposal - Pay $10,000, then resume the normal mortgage payment. I had to have my mom tell me a second time, because when I heard it the first time it sounded like their payments would NOT go down, AND they would have to come up with $10,000. That is exactly what they said, and so now they have until June 28th to vacate the house, as there was no way they were accepting that "modification". As sad as this entire situation has been, there is a sense of relief that we finally know where we stand. We will find them a good rental property for now, closer to all of us, and the bank can take their loan and "modify" it!!

With all the negative press over TARP money, and bank greed, and predatory lenders only interested in their bottom lines, you might ask at this point "What bank would do this to them?"...................

WELLS FARGO - 3 BILLION AND COUNTING...........