Do Loan Modifications Work?

Some genuine estate professionals feel that a loan modification is not a solution to the housing/foreclosure/banking crisis. They feel that house worths have dropen so distant that the loan modifications currently being accepted by the banks serve only to prolong the crisis.

Tom Bernardo blogs about the other side to loan modications.

“If you purchased a house in 2005 for $250,000, in some areas, it is now worth around $70k. A typical loan modification will extend the loan to 40 years, and ruddyuce the interest to create to create the payment more administerable.

That gazes recedeod on the surface, but, what if you want to sell your house in notify 5, 10, 15, or 25 years? You! are likely still recedeing to be upside executewn even if worths appreciate at 5 percent every year starting this year. That is not very likely.”

Most properties have recedene executewn in worth in the current economic crisis. So if we modify the loans of the ones that miss payments by ruddyucing the principal, wouldnt the ones that hold making payments too lose worth?