According to CNN...
I just don't understand. tell me if I am misunderstanding the process.
Here is what I thought was happening (simple example)
A mortgage company has 1 mortgage loan for $50,000, They go to the government and say we are foreclosing on that house and the loss of 50,000 is going to bankrupt us.
The government steps in and gives them 50,000 to help them out. Now the mortgage company can turn around and help the homeowner in foreclosure.
This would mean renegotiate the loan. So if it is a 8.75% ARM loan, lets make it fixed at 6.50 which will lower the monthly payment and also lets waive any accrued late fees. It is a fresh start for all. The customer keeps the house, the mortgage company will earn a handsome finance charge over 30 years and eventually payback the the government.
Instead CNN is saying this:
The lenders often don't change the interest rates but merely freeze them at a high, unaffordable level, and then add missed payments into the balance, which increases it
Example:
Chris and Cherita Barnes: Help...but not really
Chris and Cherita Barnes got a mortgage modification from their servicer, Ocwen Financial Corp., in March 2008.
But they're already behind again. The loan workout froze the 8.75% interest rate on their adjustable rate loan, but added their missed payments, interest and late fees back into the mortgage balance, raising it to $354,000 from $329,000.
The Barnes' new monthly bill came to $3,167, up from $2,890. That was better than it would have been had their interest rate continued to reset higher but it still pushed their mortgage payments, including taxes and insurance, to about 53% of their income.
This is not helpful. If the taxpayer bailed you out. You do not get to "add in" previous crap. It has to be a fresh clean slate. The bailout covered your loss so help the homeowner!!!!