Tampa, FL (PRWEB) April 26, 2010
The most current housing statistics indicate loan modification could not be adequate a principal reduction could be the only answer to address anticipated increase in foreclosures. Addvent Funding publishes present housing market statistics, hoping to educate current property owners on what actions they can take to reclaim lost equity.

The most current statistics released about loan modification and unfavorable equity indicate lenders may possibly want to speedily re-consider their refusal to provide mortgage principal reductions if they want to avoid monumental and systemic foreclosure prices.

According to the OCC and OTS Mortgage Metrics Report for Q4 2009, here are the sobering details about the relative ineffectiveness of loan modification hence far:

The report covers practically 34 million loans totaling almost $ six trillion in principal balances and gives data on their functionality via the finish of the fourth quarter of 2009 (December 31, 2009).
All round mortgage efficiency declined for the seventh consecutive quarter, with the percentage of current and performing mortgages falling to 86.four % at the end of the fourth quarter of 2009.
This decline is attributable to the 21.1 percent improve in mortgages 90 or much more days past due to 4.7 % of all mortgages in the portfolio at the end of 2009. The increase in seriously delinquent mortgages was most pronounced among prime borrowers, where the quantity of seriously delinquent mortgages improved by 16.five % throughout the fourth quarter.
all round re-default prices remained high with more than half of all modifications falling 60 or much more days past due by 9 months right after modification, and more than half of all modifications have been 90 or much more days past due by 12 months following modification. Nearly 40 percent of modifications that had lowered month-to-month principal and interest payments by much more than 20 percent have been 60 or much more days previous due 12 months soon after modification.
Even though loan modification is the hot subject among members of the federal government and the common media, statistics show the most substantial aspect contributing to the depressed housing marketplace is the overwhelming presence of negative equity. Adverse equity is a term that describes the situation when a homeowner owes a lot more in debt on their house than the present market value of the house. The difference in between what is owed and the worth of the home is referred to as negative equity.

Negative equity impacts 1 in four homeowners with a mortgage in our country according to information compiled by 1st American Core Logic and published on February 23rd 2010. Right here are some far more statistics from the 1st American Core Logic report that speak to the depth and severity of adverse equity:

Initial American CoreLogic reported nowadays that more than 11.3 million, or 24 %, of all residential properties with mortgages, were in unfavorable equity at the end of the fourth quarter of 2009, up from ten.7 million and 23 % at the end of the third quarter of 2009.
An added 2.three million mortgages had been approaching negative equity at the finish of last year, which means they had much less than 5 percent equity. With each other, unfavorable equity and near-damaging equity mortgages accounted for almost 29 % of all residential properties with a mortgage nationwide.
The net enhance in the number of unfavorable equity borrowers in Q4 2009 was 620,000
The rise in negative equity is closely tied to increases in pre-foreclosure activity and is a main issue in altering homeowners default behavior. Once unfavorable equity exceeds 25 %, or the mortgage balance is $ 70,000 higher than the present home values, owners begin to default with the same propensity as investors.
The aggregate dollar value of unfavorable equity was $ 801 billion, up $ 55 billion from $ 746 billion in Q3 2009. The average negative equity for an underwater borrower in Q4 was $ 70,700, up from $ 69,700 in Q3 2009. The segment of borrowers that are 25 percent or more in negative equity account for over $ 660 billion in aggregate adverse equity.
And this quote from Mark Fleming, chief economist with FA Core Logic, sums up what to anticipate for the close to future:

“Negative equity is a significant drag on both the housing market and on financial growth. It is driving foreclosures and decreasing mobility for millions of homeowners. Since we anticipate property costs to slightly improve in the course of 2010, unfavorable equity will stay the dominant issue in the housing and mortgage markets for some time to come.

So what is the answer to dealing with the escalating crisis of adverse equity and the relative ineffectiveness of loan modification? It would appear the only plausible conclusion is for lenders to consider principal reduction in an effort to bring mortgage loans more in line with property values.

There are a number of businesses starting to leverage this details in a manner that makes it possible for them to negotiate principal reductions and lessen mortgage amounts for qualified home owners. Whilst numerous of the information of this procedure are proprietary in nature, the idea is equivalent to a private investor approaching a lender with a large inventory of REOs (True Estate Owned properties) and negotiating the purchase of a portfolio of these loans at much less than face worth of the debt owned on them, a practice that is commonplace in todays volatile actual estate market place.

Addvent Funding is a Tampa, FL primarily based firm that engages in this kind of portfolio quick-refinance strategy. As a business primarily based in Florida, Addvent Funding is strategically located at ground-zero of the adverse equity crisis, as Florida is amongst the prime 5 states in virtually each and every statistical category relating to the impact of adverse equity. Addvent Funding and its affiliates identify homeowners that could qualify for a mortgage principal reduction, then go via the essential processing steps to prepare certified clients to have their mortgages incorporated in a portfolio for negotiation with a lender.

The result of this negotiation is normally a principal reduction of the borrowers mortgage principal balance down to the existing market worth of the property. In turn, the lender receives a much needed infusion of capital and is capable to off-load a severely beneath-performing asset, and the elevated capital in turn assists the lender to resume normal lending practices.

Sources:
Workplace of the Comptroller of the Currency
Office of Thrift Supervision
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