Loan Modification and the President Bailout Plan

The country is beset be foreclosures left and right. Billions and billions of dollars are lost in the process. This is why loan modification is so popular. This is one of the best solutions to foreclosure. Who benefits in a foreclosure anyway? In good economic times, a bank can afford a foreclosure because it serves as a deterrent for delinquent clients (in the same way the death penalty serves as a deterrent to criminals). But really, who benefits from that?

As we all know, the mortgaged house will be taken by the bank once it is foreclosed. Then the bank will have to sell that house. This process takes time and money. In all likelihood the bank will not be able to sell the house at an optimum rate, if it is able to sell it at all. It may take years in an economically stable world to do that. Unfortunately, we all know that is not the case. But even when the house gets sold, the property rates are so low right now that the house will surely be bought super cheap. The bank will be able to cover it’s money if it would just negotiate with the debtor and find a satisfactory middle ground.

The bank losses money when it forecloses a house. According to President Barack Obama himself, foreclosure should be seen as a form of surrender that should only be the last thing a bank should do. It should only be done when there are no more options left. This is why the President’s bailout plan was put in effect. Its aim is to give more incentive to creditors so that they will put in more effort in trying to create a successful loan modification for everyone. After all, with so many foreclosures popping everywhere, the banks are going to sink deeper into bad debt.

The president’s housing bail out plan is a hallmark of these economically troubled times. Seventy five billion U.S. dollars have been allocated for this cause. It will serve as compensation for the banks that need it. It will also cover the counseling fees of home owners who are involved in loan modification. NGO’s are going to handle these counseling as opposed to the highly costly private ones. Also, a thousand dollar cash incentive will also be given to those who successfully negotiate their loan instead of opting for a foreclosure or even a short hand sale.