More San Jose Foreclosure Homes for Sale, Modification Failure

The number of San Jose foreclosure homes for sale in California has been one of the highest. Just like other cities across the state and the country, the first wave of foreclosure problem in the area was attributed to bad loans taken out by borrowers who could not afford to own a house.

But this year, more foreclosures were reported involving borrowers of prime rate loans. Many of these borrowers are creditworthy and were forced only to default on their mortgage payments because of mitigating circumstances such as unemployment, medical emergency or divorce.

Distressed borrowers found a relief from their foreclosure problems when the Obama Administration launched its loan modification program. However, six months after the implementation, the program has yet to show some of results toward helping distressed homeowners avoid San Jose foreclosure homes for sale.

According to a market report on the national loan modification program, 24 percent of loan monthly payments that were reduced by almost 20 percent were 2 months behind versus 54 percent of loans with monthly payments that have not been modified.

Furthermore, the number of homeowners who are in some stage of foreclosures rose during the second quarter by almost 2.5 percent to 844,389. The increase is attributed in part to the expiration of foreclosure moratoriums in the first three months of this year. The figures represented a 22 percent increase compared with the first quarter of 2009 and also a rise of 73 percent in the same period of 2008.

Industry experts said that nationwide, one in four troubled borrowers defaulted within 60 days of modification. Similarly, the number of foreclosures rose by 73 percent compared with last year.

Experts explained that human nature has something to do with the rising rate of loan modification failure. They said that San Jose homeowners who have a mortgage of about $500,000 in their houses that are now worth $400,000 would not bother paying their modified loan payments.

They said that many loan modification programs only alter the interest and not the principal. Experts said that modifying the principals would not work either because doing so would mean penalizing over 90 percent of homeowners across the country who have paid their loans on time and borrowed within their means.

It would not be fair for responsible borrowers to see their neighbors who made irresponsible loan decisions get lower principals on their mortgage, experts said.