Nonetheless you are generally correct. And THAT is because the average time anyone lives in a house is 5-7 years, during which an interest reduction would not equate to much of a principal reduction even with inflation factored in. Unsophisticated borrowers get caught in exactly that trap when they do a modification where the monthly payments decline. But when they want to refinance or sell the home they find themselves in a new bind — having to come to the table with cash to sell their home because the mortgage is upside down.
So the question that must be answered is what are the intentions of the homeowner. The only heuristic guide (rule of thumb) that seems to hold true is that if the house has been in the family for generations, it is indeed likely that they will continue to own the property. In that event calculations of interest and inflation, present value etc. make a big difference. But for most people, the only thing that cures their position of being upside down (ignoring the fact that they probably don’t owe the full amount demanded anyway) is by a direct principal reduction.
Filed under: AMGAR, CORRUPTION, discovery, evidence, expert witness, foreclosure, foreclosure mill, GARFIELD KELLEY AND WHITE, GTC | Honor, inflation, interest rates, MODIFICATION, Mortgage, Motions, Servicer Tagged: | credit default swaps, guarantees, inflation, insurance, interest reduction, loss sharing, lowering your payments, PRINCIPAL REDUCTIONS, term of loan