Monday, February 15, 2010

Well, today's news is good in a sort of relative way. For everyone out there who's contemplating a loan modification, loanmod in real estate lender parlance, a study has just been released reviewing the practice. Released by the Leavey School of Business at University of Santa Clara, the study reviewed over a quarter million recent loan mods for their success and ability to keep the homeowner out of danger of renewed default on the modified loan. His study indicates that the most likely loan mods to succeed are those that combine a reduction in principal with a reduced loan term. In some cases, the lenders are creating modified loans where the lender shares in the long term appreciation in value of the home as a quid pro quo for the principal reduction.

Of course, forgiveness of debt may subject the homeowner to an increased income tax liability, so he/she must discuss the potential mod with their tax advisor. But, as noted above, it may be a relatively good bit of news.


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