Prior to the spring of 2009, there was no regular set of rules for loan modifications in the United States or in Phoenix, Az. Each lender in Phoenix, Arizona had its own rules as to how they sought to handle loan modifications. In many positions, the loss mitigation through loan modification process seriously favored the lenders.  Their major worry was to find a way to regain the money that a house owner was behind in payments.  Generally, the lenders would either increase the monthly payment or expand the term of the payments so that those late payments would just be paid off at the end of a loan.  Frequently, when the loss mitigation through loan modification practice called for amplified payments, the foreclosure of a property was only delayed by a couple months, because there was no way that they could make a higher payment.

A new plan, announced in the spring of 2009 by the Obama administration has evolved the loss mitigation through loan modification process.  The rules for loss mitigation through loan modification have evolved.  This agenda mandated that mortgage payments be reduced to just thirty one percent of the house owner’s income.  For lots of Americans, this meant that they may possibly once again afford to pay their mortgage payments.  The loss mitigation through loan modification procedure, appeared to be a big helping hand. 

Yet, the agenda only covers mortgages through Fannie Mae, Freddie Mac and the FHA, but it is widely thought that the majority of other lenders will decide to follow the guidelines for loss mitigation through loan modification as laid out by the Obama Presidency.  The Making home Affordable Modification program has positioned the attention right on loss mitigation through loan modification. Many people in danger of losing their houses to foreclosure did not even identify what loan modification was. 

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There was a five percent increase in the number of foreclosure homes during the third quarter of 2009 when compared to the second quarter of the same year.  The Making Home Affordable program of the federal government was unable to stop the rise in foreclosure filings in spite of its attempts to decrease the monthly payments of the homeowners who are experiencing financial hardships by making it easier for them to qualify for a loan modification.  It appears that the government program has been overwhelmed by the large number of layoffs.

Approximately 48,000 homes were added to the number of foreclosure homes listed as of June 2009, thereby pushing up the number of foreclosed properties to 938,000 during the third quarter of 2009.  At this rate, the number of foreclosure filings is expected to reach approximately 3.5 million for the whole year of 2009, which is much higher than the 2.3 million filings in 2008.

The primary reason for the rise in the foreclosure rate, in the spite of many economists claiming that the recession is over, has been the unemployment rate, which has attained a record level of 9.8 percent for last the 26 years.  Moreover, experts have predicted that the unemployment rate will keep on rising until it will attain its highest level in the middle of 2010.  Mortgage lenders are trying to help by permitting the homeowners to be delayed by three to six months in their payments as they look for work.  However, with the record unemployment rate, it is very difficult for those who have lost their jobs to find work.

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A foreclosure is a process in which all of the rights of the homeowner that have been specified in a mortgage are terminated.  Thus, a foreclosure is a procedure in which the bank or lender gains absolute control of the mortgaged property, which is usually a home.  The foreclosure process is often started by the lender after the borrower had been delayed for a number of months in coming up with the monthly payments.  The actual length of time that the lender allows the homeowner to be delayed in the payments before initiating the foreclosure proceedings may not be the same for the various lenders.

There are various possible reasons why the borrower was incapable of paying what was due at the proper time.  These include the loss of a job, a serious illness in the family, a divorce, death in the family, and the terms of the loan agreement.  It is possible that the terms of the loan could be the cause because some are adjustable-rate mortgages and the interest rate could have reached a level that has made the monthly payments too expensive for the borrower.  However, with the recession, the primary cause of default is the loss of a job as the unemployment rate climbs to levels that have not been reached in a long time.  

Both lender and borrower are not in favor of a foreclosure.  It is obvious that the homeowner would not want to leave his home while the lender prefers to have the steady stream of monthly mortgage payments instead of selling the property.  The foreclosure process is also expensive and requires a lot of time for the lender.  It is possible for the lender and borrower to cooperate with each other in looking for a solution to the problem that would be acceptable to both parties.  Thus, it is advisable for the borrower to contact the lender if he has begun to experience problems in making the monthly payments.  There is still a possibility that a solution could be worked out that would be satisfactory to both parties.

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