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More mortgage modifications may help Florida economy

Mortgage modification is an action frequently initiated by homeowners to lower the cost of monthly payments on their homes by taking advantage of reduced interest rates. According to one calculation, a reduction from three to five percent interest on a $150,000 mortgage can save homeowners $145 a month. Mortgage modifications are seen as a win for both the borrower and the economy by some economists. They claim that homeowner savings translate into increased spending, and this is what fuels job growth.

Mortgage holders haven't missed out on the lesson of personal savings. Whether they have been steered into modification by the threat of foreclosure or simply need more cash to make improvements on the home, an increasing number of Florida residents appear to be taking advantage of the opportunity.

In the fourth quarter of 2011, 11,922 Floridians received a modification on their home mortgage. The U.S. Office of the Comptroller of the Currency found that the same period of the following year saw 25 percent more modifications, which totaled 14,962. Of the latter total, payments were reduced by at least 20 percent in 10,164 modifications.

Even a single interest point reduction can have significant effects for homeowners trying to add to retirement savings or head off a foreclosure. Depending on the rate at the time of financing, a homeowner may now be eligible to reduce their rate by several points. This is almost always a better option than running the risk of foreclosure, and more money in the bank can make it easier to receive other types of loans. A bankruptcy attorney may be able to assist homeowners in weighing the advantages of loan modification versus other courses of action.

Source: Orlando Business Journal, "Florida records 14,962 mortgage modifications," Bill Orben, March 29, 2013

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