In the world of bankruptcy news, mortgage modifications might seem like a great way to avoid filing for bankruptcy. The idea seemed like a genius one: offer struggling homeowners the chance to take advantage of lower monthly mortgage payments in order to keep their homes and avoid bankruptcy. With foreclosures on the rise more than ever before, these government programs stepped in to make a real change by nipping the housing crisis right in the bud.
Yet with the housing market still continuing to drop at drastic rates (in fact, some financial experts speculate that we're on our way to another recession), people are starting to question whether these mortgage modification programs have actually worked - and whether our time is better spent looking for other options, like declaring bankruptcy.
Consumer reports have shown that despite these mortgage modification programs, overwhelmed homeowners are still choosing to give up their homes despite the prospect of lower monthly mortgage payments. While many people may point the blame at the modification programs themselves, it's important to remember that these programs have been pitched against a severe crisis. With many subprime homes already twelve months overdue with mortgage payments (Wall Street Journal estimates this number to be between 65% to 75%), for many distressed homeowners, this new wave of crisis legislature comes just a little too late. After all, what good are lower monthly mortgage payments if you simply can't catch up with the past year's bills?
Additionally, many homeowners just don't see the point in owning their homes anymore. This is especially true for subprime homeowners, who may have taken out mortgages for up to 150% of the value of their homes. Although these mortgage modification programs might offer temporary relief, subprime homeowners realize that they're never going to recoup what they've sunk into the home - and many would just rather walk away from a money-draining liability rather than stick it out with the government modification program. In other words, a homeowner might have a roof over his head - but it will do major damage to his net worth altogether.
Of course, it's important to remember that there are thousands of homeowners who'd love to take advantage of the monthly modification programs - but with job losses and salary cuts at an all-time high, many people simply can't afford to pay for any mortgage...period.
Even if many homeowners are desperate to look for ways to stay in their homes, many of them are starting to realize that it's best to cut their losses and walk away before they invest any more money into a sinking ship.
There's also a complicated issue that's been raised by mortgage lenders across the country - and the government is still trying to figure out how to sidestep this problem. While the mortgage modification program is geared mainly towards subprime mortgage holders, many banks are unwilling to cut down on the principal of the loan. This means that modifications to monthly mortgage payments might not make all that much of a financial difference to a distressed homeowner.
While a mortgage modification program might seem like a great way to keep your home, your best bet may still be declaring bankruptcy. Talk to a local bankruptcy attorney today to see what your options are. And don't wait - your home depends on it.