Banks Accepting NACA Program
Banks have learned that they can help homeowners and themselves by aggressively addressing loan modifications. Even though only 4% of trial modification programs have been extended to long-term solutions, the modification game is changing. Initially resistant to change, the banks have taken a harder look at the numbers.
What bankers see is a rising unemployment rate, more defaulted mortgages and increasing foreclosure activity. These are all negative signs for the financial industry, which is finally coming to realize that something is better than nothing. Banks do not like owning and managing real estate and in today’s market they are holding more property for longer periods.
Banks, like Wells Fargo, are now attending and working with the Neighborhood Assistance Corporation of America (NACA) and its Save The Dream program. Most lenders in the program have agreed to reduce interest rates for qualified modification programs to 2%. Interest reductions of this magnitude are leading to a higher rate of conversion to long-term loans.
Even though just 4% of American homeowners received long-term modifications, more aggressive modification programs began to up the curve in the second quarter of 2009 when 80% of all loan modifications resulted in lower payments.
Wells Fargo community relations executive, Jason Ferebee, explained, “We’re getting a lot of borrowers looking for a better interest rate.” Wells Fargo now analyzes each modification application. If an applicant does not qualify for government programs, the bank now applies its own innovative programs designed to keep the homeowner in the home.
Some programs actually apply the 2% interest rate for the entire length of the mortgage while others offer a 0% interest rate for three years. The rate then escalates gradually with a cap at 5%. The new position is leading to fewer foreclosures and more long-term conversions. The good news for homeowners is that banks are now seeing the merits of modifications.