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Extreme loan modifications are possible in some situations. Money magazine wrote an article about a homeowner Rodney Wynn who managed to negotiate a 4.7% loan with his lender. Rodney Wynn was drowning under his $1,800-per-month, 13.4% interest rate mortgage. He did find relief: with a 4.7% modified loan with a $970 monthly payment.
Wynn, a program director for a youth home in North Carolina, is just one of a growing number of homeowners getting dream workouts on their mortgages. Some are even getting sweet 2% deals.
Nearly 80% of all loan modifications resulted in lower payments in the second quarter (the latest figures available), according to the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision. That is up from just over 50% three months earlier. Still, just a paltry 4% of all homeowners in need of workouts are receiving them.
When loans are made affordable, borrowers are less likely to default. A year after modifications, according to the OCC report, just 34% of borrowers whose loan payments had been reduced 20% or more had redefaulted compared with 63% of borrowers whose payments had been left unchanged.
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