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Lenders do have programs that are designed for homeowners who need to change their loans in case the monthly payments get too high. But some say these programs are too much of a temptation.
Some mortgage analysts like Al Bingham say many people in foreclosure right now are there because either they knew, or their loan officer knew, they were buying a home they couldn't afford. He says there are programs that help homeowners who have fallen behind in their payments modify their loans.
"A lot of people are asking how they can get their loan modified. The problem that happens is now we're teaching people to be irresponsible," Bingham said.
These programs bring up another concern, where people will deliberately miss payments even though they still can afford them. It's happening right here in Utah.
"I've seen people that have actually decided not to make their house payments just to get their loan modified," Bingham said.
Even with these bailout programs, rates of re-default increase with every payment missed by the homeowner. "If Congress continues to go in and modify these loans or force lenders to modify, we're never going to recover from this," Bingham said.
Zion's Bank economist Jeff Thredgold said, "We're at a point right now where about one out of every six homeowners in this country is under water in their mortgage, meaning they owe more on the mortgage than the home is worth."
Intentionally missing payments can be extremely risky. Thredgold says lenders can go over your assets and your pay stubs with a fine-toothed comb to determine if you're holding out on them.
"If they make a determination that somebody is doing this intentionally and they in fact have the ability to repay, then they won't qualify for these changes," Thredgold said.
Plus, Thredgold says people may not be thinking about what this does to their credit. "When you do something to disrupt your credit history, [or] when you do something that really impairs your ability to later borrow, later to refinance, that's serious stuff," he said.
Thredgold says the intentions behind these programs are good, but they're not going to solve the problems in the housing market by themselves.
E-mail: pnelson@ksl.com
