According to the latest government data, only 1,072 permanent loan modifications have been made to  homeowners in the Denver area (and throughout Colorado) facing foreclosure.  When you consider that so many more families are struggling in our state, that is barely making any impact at all. 

Put into perspective, the latest report from the federal government shows that as of the end of December, there were 11,170 homeowners in “active trials,”  for loan modifications. These trial modifications are required before the loan can be made permanent.  In the nation, Colorado ranked 19th for the number of active trials and permanent loan modifications, and our 1,072 permanent loan modifications represents 8.8% of the trials.  The goal is to provide 3 to 4 million homeowners across the nation with lower mortgage payments through 2012.  Nationwide, at the end of 2009 there were 787,221 trial modifications and 66,465 permanent modifications.

Unfortunately, banks do not have much incentive to participate in the program.  Consider this example: if a bank writes down a loan so the borrower saves $700 a month for two years, the bank needs to write off $16,800 – 24 times $700.  Arguably, the bank is not taking a loss – but it is making less interest on the loan.  Typically, over the long run, it actually hurts a bank less to let the home go into foreclosure, and become an REO property (Real Estate Owned).  Although foreclosures are expensive, most banks would rather put off the cost to the future, than to take an immediate hit to the bottom line.  And that is just what many are doing.

In addition, those banks that are willing to modify loans permanently have been swamped with a huge volume of requests.  The wave of temporary modifications began last summer, and many of them only became permanent in the past two months.  The good news is that analysts predict a big surge in permanent modifications in the next few months, as banks are streamlining the process and homeowners are taking more initiative to follow all of the bank’s procedures accurately and on time.

If you’re a Denver homeowner facing foreclosure and could benefit from a loan modification, be sure to communicate clearly with your bank and follow all of their guidelines within the prescribed time frames.  Also, contact us at the Bandy Team to find out how we can help.  We are your local real estate experts, and are ready to assist you with all of your Denver area real estate needs.

Marianne Bandy
Avoid Foreclosure in Denver