What about Main Street?
Most mortgage “modification” is just a scam to hold out false hope while punitive forbearance agreements only forestall the inevitable.
All this talk about mortgage modifications is a bunch of hooey. Nobody has any real incentive to make this work because the alternative is way too profitable.
Most subprime loans are subprime loans because the borrower cannot show sufficient income to qualify. Now, remember all of those small business owners? The people who, by Washington’s own admission, are the back bone of the economy and the leading creators of new jobs? Well that’s us. We don’t have pay stubs and a company health care plan; we provide them.
Nobody talks about this, but most subprime loans are in the control of “Mortgage Servicing Companies.” Somebody has to collect the payments and forward the funds to the holders of the mortgage pools. For this, they get chump change. However, collecting late fees, penalties, and coercing borrowers into onerous forbearance agreements is where the real money is, and it is all theirs to keep.
The servicing companies make more money by forcing people into default and collecting unlimited fees. They specifically targeted subprime borrowers loan pools because they do have a higher rate of delinquency due to the often fluctuating income of the borrower. But, these borrowers can frequently get access to larger amounts of cash than a wage worker so they tend to be able to pay huge amounts to avoid foreclosure. Why would the mortgage servicer want to modify a usurious loan?
Let’s not forget that subprime lending is a very profitable business.