With the collapse of the housing market, we all relearned a concept usually associated with kids, summers at the pool, and vacations at the beach: underwater. The term now stirs feelings of unease, if not panic, as we feel ourselves pulled down by an undertow of debt payments and rising interest rates – especially as they pertain to our houses.
A first response for many has been to get a mortgage modification. A common strategy was to renegotiate variable APRs into fixed-rate mortgages before interest rates climbed still further. Certainly a common-sense approach to the problem (and one this blogger took a couple of years ago under different circumstances).
Nevertheless, a recent blog/report in the NY Times by Catherine Rampell demonstrates the hidden dangers of mortgage modification.
According to Rampell’s report, “The modification process usually allows lenders to tack onto the principal previously missed mortgage payments, as well as other fees incurred during the modification.” The upshot is that fees for modification and penalties for previously missed payments can make your loan ultimately much more expensive than you envisioned. She goes so far as to recommend avoiding modification, though the present monthly payment can be a terrible burden.
Watch this blog as MKCREATIVE continues to help you follow the housing & banking crises, and the strategies available to help nonprofits and the community-housing sectors keep their heads above water.