Fitch Ratings published a report recently that examined the performance and effectiveness of foreclosure preventions with loan modification programs in terms of helping prevent a borrower from losing their home in foreclosure. Their report pointed out massive failure rates. Fitch’s foreclosure prevention reports that had come out earlier in year found that 50% of mortgage modifications done in the first half of 2008 had gone back into default by year-end. The recent loan modification study by Fitch estimates that between 65% and 75% of modified subprime mortgages will become 60-days or more delinquent again within a year of  that the loan is modified.

Loan modifications can combine lower interest rates, maturity date extensions, changing from adjustable to fixed interest rates, and the reduction of principle. Of the four, principle reductions are statistically the best way to ensure the long term success of a loan modification. According to LPS reports, loan work-outs that included principle reductions had a 25% lower re-fault rate than those without a reduction. Fitch’s numbers concurred with those numbers, indicating that loan modification plans that included principle reductions saw a 40% to 50% chance of a re-fault. Not surprisingly, Fitch found that loan modifications where loan principle was increased due to missed payments and penalties being added to the backend of the loan had a re-fault rate of 60% to 70%

The state of California announced a new state law imposing a 90-day moratorium on home foreclosures that went into effect for local borrowers who were unable to get access to a loan modification program. Under the program lenders must prove they attempted to offer mortgage loan modifications with delinquent home loans before they begin the home foreclosure process.  The moratorium is very similar to the federal mortgage relief program that started last December and ended April 1.

The goal is to ensure loan servicers make legitimate attempts to work with borrowers before foreclosing. Because of the Federal moratorium, most of the big mortgage lenders already have a loan modification program in place. Those companies don’t have to comply with the new state law and can apply for an expemption.

That process however, can take up to a month to complete. During that time mortgage loan servicers can carry on with business as usual, including foreclosing on delinquent accounts. The State announce the California moratorium would go into effect immediately, but will the major mortgage lenders fall into line with it?

California Foreclosure Moratorium Guidelines:

ü  The moratorium applies to first mortgages made from 2003 through 2007.

ü  The mortgage loan must be for your principal residence.

ü  The homeowner must have received a notice of default.

ü  The home loan servicer does not have a California loan modification program in place.

ü  Because many homeowners are upside down on their mortgages

There is a concern that the 90-day negotiating period will only postpone the inevitable because so far the banks are not reducing the principal.  California doesn’t know how many people will actually have their foreclosures put off, nor what banks already have loan modification programs in place. The Department of Corporations does plan to post which institutions apply to be exempt from the moratorium.

Frank Continues to Make Promises about Housing Rescue & Foreclosure Prevention Act:  Watch Barney Babble about Home Values and Loan Modifications

Loan modification activity continues to rise as delinquent homeowner look for help.  Mortgage loan modification agreements have helped many homeowners salvage their homeownership with lower mortgage payments, but not everyone qualifies.  Mortgage modifications and loan workouts are successfully negotiated when the borrower has a job and has the ability to afford the revised loan payment.

A new cycle of mortgage bills arising from the high number of home foreclosures in the Inland area and around California is moving through the Legislature, following major initiatives at the state and federal levels in the past year.

The bulk of the new state proposals expand protection for renters living in foreclosed properties, create new rules for reverse mortgages, and impose standards on loan-modification consulting companies, such as banning them from taking advance payments from troubled homeowners.

Some industry groups and lawmakers question the need for more state legislation so soon after Congress and the Legislature approved measures to address the foreclosure problem.  Some of the laws have been on the books for only a relatively short while. 

A 90-day foreclosure moratorium approved as part of the February budget package takes effect Monday.  “It’s premature to add new legislation on top of what we have before we see what the results are,” Dustin Hobbs, of the California Mortgage Bankers Association, said. “We’re not saying more action can’t be taken down the road. But let’s see what happens first.”  But supporters say much remains to be done to address the state’s foreclosure problem, and to prevent it from happening again.

Paul Stein, associate director of the California Reinvestment Coalition, which advocates for low-income residents in the financial sector, said Congress is taking the lead in crafting foreclosure-related fixes. Those include possibly making it easier for bankruptcy judges to modify mortgage payments for struggling borrowers.

There is still a large role for the state to play, he said.  “It’s still the case that … financial institutions are not accountable for the impacts of foreclosures on borrowers and communities. They’re really not obligated to help anybody,” Stein said.

Home Loan Defaults Rise

Foreclosures have been a major burden on the Inland economy. In April, there were almost 5,000 notices of default filed in Riverside County, according to ForeclosureRadar, a tracking service. The notices are the first step in the foreclosure process. The county had the fourth-highest rate of foreclosure sales last month.

San Bernardino County had about 4,000 notices of default and the seventh-highest rate of foreclosure sales in April.  The main state foreclosure law to emerge last year was SB 1137. It requires lenders and loan servicers to talk with borrowers before starting foreclosure proceedings. The aim is to get more loan modifications.  This year, lawmakers introduced more than 30 foreclosure- and mortgage loan modificationj related bills. Nearly all of the authors are members of the Legislature’s Democratic majority.  About 24 measures are still pending, with most facing a Friday deadline to clear the Legislature’s appropriations panels.

Some of the foreclosure prevention bills would put the state in compliance with the federal Secure and Fair Enforcement of Mortgage Licensing Act approved in July 2008.  The law requires mortgage loan originators to be licensed and complete 20 hours of pre-licensing legislation, along with other requirements.  It wasn’t clear whether mortgage lenders and banks would be exempt from this new licensing requirement.

The Treasury Department has expanded its loan modification program and is now offering incentives for short sales and insurance to “partially offset” price declines on loan modifications during the first two years. The “Home Price Declines Protection incentives are designed to address investor concerns that recent home price declines may persist,” according to a Treasury fact sheet. And it provides cash payments based on average local price declines. The incentives accumulate each month the modified loan is current and payments are made at the end of the 1^st and 2nd year. “It’s just an additional incentive to participate in the program,” Treasury secretary Timothy Geithner told reporters. For distressed homeowners that are eligible for a Home Affordable Modification but can’t keep up with the payments, Treasury is providing incentives for servicers, investors and homeowners to try a short sale or deed-in-lieu if the property is not sold in 90 days. Secretary Geithner noted 14 servicers have signed up for the modification program and they have made modification offers to 55,000 borrowers so far. “This is just the beginning,” the secretary said. Treasury is prepared to expand and improve the program to “reach as many Americans as we can,” he added. Treasury also reported that Fannie Mae has purchased 2,150 Home Affordable Refinance loans so far. The mortgage giant has received over 51,000 eligible mortgage refinance applications where the loan-to-value ratios are between 80% and 105%. Freddie Mac has purchased 1,500 of these refinanced loans that do not require new mortgage insurance.

Loan modification lead buyers can select from internet, live transfer, click to call, press 1 campaigns, direct mail marketing and TV infomercial leads.

 

Loan Modification Lead Opportunities Online

 

Loan modification leads are in high demand. Take a moment and talk to an account executive who manages marketing for loan modification companies in your area. To speak with a loan representative now visit go online or Buy Loan Modification Leads and help some Americans keep their home.

Homeowners continued to fall behind on their monthly mortgage payments in the last quarter of 2008, boosting delinquency rates and adding to the already bulging portfolio of foreclosures nationally, the Mortgage Bankers Association said yesterday.  The number of home loans at least 30 days past due stood at 3.6 million, or 7.88 % of the country’s 45.4 million home loans.

 

The data were announced one day after the Obama administration released details of its Making Home Affordable Program, designed to stem foreclosures by allowing as many as nine million borrowers to either refinance or modify their mortgages.

 

Mississippi had the fourth quarter’s highest %age of past-due mortgages, 13.11 %, or 33,120 loans out of a total 252,638. It was followed by Nevada (11.12%, 63,027 loans out of 566,795 total) and Florida (11.09 %, 396,903 of 3,578,000 total).

 

Pennsylvania’s delinquency rate was 8.32 % of all home loans, about 130,000 of the state’s 1.561 million mortgages. Of New Jersey’s 1.275 million mortgages, 7.68 %, or 97,920 loans, were behind on payments.

 

The delinquency rate excludes loans already in foreclosure. At the 4th quarter’s end, that figure stood at 1.5 million home mortgages, or about 3.30 % of all home loans.  “Foreclosure inventory jumped sharply in the fourth quarter, even though the rate at which loans were entering foreclosure remained unchanged,” said the association’s chief economist, Jay Brinkmann.  He attributed that primarily to state and local moratoriums on foreclosure sales, as well as the November decision by Fannie Mae and Freddie Mac to halt such sales, loan servicers’ reluctance to proceed with evictions over the December holidays, and overburdened legal processes in some areas.

 

A flat foreclosure rate does not necessarily mean housing’s downturn has hit bottom. The survey showed that the percentage of loans 90 days past due increased in the fourth quarter, but that foreclosure actions on a large number did not occur as servicers tried to modify loans and deal with investors who own securities of which these mortgage loans are a part.   Because loan servicers have been unwilling to talk with homeowners who are not behind in their payments, Brinkmann said, some “borrowers are running their accounts 90 days delinquent in order to qualify for certain modifications.”

 

A provision of the Obama administration’s plan to help cut the delinquency rate allows borrowers who are current on their mortgages to negotiate with servicers about loan modification options.  Gibran Nicholas, chairman of the CMPS Institute, which certifies mortgage bankers and brokers, complained that the plan’s guidelines lack a maximum total-debt ratio.  For example, modification might reduce a borrower’s mortgage payment to the plan’s target 31% of monthly income, but his or her total overall debt load, including car loans and credit cards, could be 75%.  “If the borrower defaults on the loan modification, taxpayers are on the hook for more money,” Nicholas said.

 

Farah Jiminez, executive director of Mt. Airy USA, which counsels home buyers as well as borrowers in financial trouble, said she was still seeing first-time home buyers walk in with prequalified mortgage loans that require payments equivalent to 44% to 56% of the buyer’s income.  “To really halt foreclosures, we need to stop those entering the revolving door, not just catch those that come out the other end,” she said.  “The bailout plan is focused on the latter, but who is focused on the former?”  Article was written By Alan J. Heavens.

The Obama administration kicked off the “Making Home Affordable” initiative, a $75 billion loan modification program, which runs through 2012. To qualify for this mortgage loan relief program, borrowers will have to provide their most recent tax return and two pay stubs, as well as an “affidavit of financial hardship”.

 

Homeowners are only allowed to have their home loans modified once, and the program only applies for loans made on Jan. 1 2009 or earlier. Up to 4 million borrowers are expected to qualify. Separately, up to 5 million borrowers who have mortgages held by government controlled mortgage finance giants Fannie Mae and Freddie Mac should be eligible to refinance through June 2010.

 

The legislation that gives bankruptcy judges the power to force lenders to lower mortgage rates or principal balances has been narrowed. Now, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before seeking help in bankruptcy court. Borrowers also would have a responsibility to prove that they tried to modify their home mortgage loans. The compromise in legislation is expected to come to a vote in the House as early as Thursday.

I received another inquiry about a mortgage relief through a law firm.  A loan workout is a negotiation with your attorney and lender with the goal of modifying your mortgage terms to something you can afford.  The process is very strategic and requires a significant amount of legal maneuvering to achieve the best results for you.  The attorney that represents you means “everything” to your case.  That is why you should feel comfortable working with a law firm to negotiate a reduced payment achieved through a loan modification.

Loan Modification Tips from Jeff Morris on Negotiating with Mortgage Lenders

 

There are 4 primary reasons why most people like working with an attorney-backed loan modification company versus a mortgage broker or individual. 

 

1.    First, make sure the law firm is an AV rated law firm which means it’s ranked the highest in the nation – sort of like a Johnny Cochrane style law firm. 

 

2.    Secondly, the lead attorney should be ranked in the top 1% in the state of California – which puts him ahead of 99% of the rest of the attorneys statewide. 

 

3.    Thirdly, choose a law firm that will allows you to break up your payments into 3 or 4 low payments.  This helps significantly when a person is in a financial bind. 

 

4.    Lastly, 95% of your calls are coming from pop up loan modification companies.  You should contract work from one of the most well respected law firms in all of California that was doing business prior to the turn of the century.

 

Harry Smith spoke with Ray Martin about how President Obama’s new mortgage plan will help homeowners in various states of foreclosure. 

 

Watch Federal Foreclosure Options for Struggling Homeowners

 

Ray Martin considers the two main foreclosure prevention options:

1. Loan Modification

2. Mortgage Refinance

CoreLogic’s executive Scott Hess sat down with Loan Modification Buzz recently and discussed the mortgage relief movement by lenders who simply do not want to take over more properties from foreclosure.  Most home financing experts like Jason Cardiff believe that “we have not hit the bottom of the market and lending companies have lost so much that they can’t afford to repossess more homes in this foreclosure crisis.   Hess said, “Many properties in California owe significantly more than their home could be sold for.”

Watch Video of Loan Modification Buzz Interview with Scott Hess

More than 12% of homeowners in one Solano County ZIP code are more than 90 days late making their mortgage payments, according to an online data base. 

According to the First American CoreLogic database, as of November, the 94589 ZIP code - the part of Vallejo north of Redwood Street and West of Interstate 80 - had the area’s highest rate of late payments, at 12.48%. That’s about three times the previous year’s rate.  Homeowners in this region of California have been targeted for loan modification plans by many of the mortgage lenders that funded most of the mortgage loans between 2005 and 2006.

 

First American CoreLogic is a firm that collects national, state and local real estate sales-related data.   Homeowners in the 94533 ZIP code had the second-highest late payment rate at 9.56%. In that area - which covers most of Fairfield proper - only just over 4% of homeowners were in that position in November 2007.   Vallejo’s 94590 ZIP code, which incorporates most of central Vallejo, is right behind at 9.32% of homeowners more than 90 days late. 

  

Foreclosure rates in Vallejo-Fairfield increased during December over the same period last year, as well, CoreLogic found. According to its most recent data, the foreclosure rate for the area was 2.20% for December, an increase of 0.40 %age points over last year’s 1.90% rate. That’s higher than the national foreclosure rate of 1.7% for December.   The home loan delinquency rate in the Vallejo-Fairfield area increased to nearly 9% in December from 5.50% in the same period in 2007, CoreLogic reports.

 

In the 94558 ZIP code, Napa’s Spanish Flat area at the tip of Solano County, only 2.42% of the homeowners are behind 90 days or more on their mortgage payments, according to CoreLogic.   But though that is the area’s lowest late rate, it is a significant jump from .73% from last year.

 

Homes in Vallejo’s 94591 ZIP code, the area east of I-80 and includes Hiddenbrooke, seem to be selling best, Collins said. A high percentage of homeowners at least 90 days late paying their mortgage would ordinarily mean a correspondingly high percentage of new foreclosure proceedings, said Alan Schwartzman of Benicia’s Advance Mortgage. But these aren’t ordinary times.   Some mortgage lenders are in the middle of a foreclosure moratorium and distressed home owners may get some mortgage relief from the national stimulus package, he said.   Read the complete article online written by Rachel Raskin-Zrihen of the Herald Times.

 

You can visit them online at Loan Modification Leads or Live Transfer Leads online.  LMB provides premium mortgage modification leads for many of the most respected law offices and top producing loss mitigation companies nationally. 

Treasury Secretary Henry Paulson, trying to deal with a worsening housing slump, discussed a new initiative aimed at helping homeowners who risk losing their homes.  Struggling homeowners are seeking loan modification programs from their lenders, but the process is taking 4-6 months in many cases.  Mortgage lenders simply have not invested in their loss mitigation departments. Maybe the banks thought this foreclosure crisis would just go away on its own.

 

Watch Paulson Discuss Loan Modifications, Liquidity and the Mortgage Rescue Plan

Some delinquent homeowners are reporting that they can’t get through by phone to their mortgage company’s loss mitigation center.   Many mortgage companies and bank institutions laid off thousands of employees last year, leaving most lenders unprepared for a significant increase rise in mortgage relief requests. That has led to a bottle-neck in processing loan modification applications. Some borrowers are having a hard time getting their lenders on the phone.  

Reuters recently reported that U.S. mortgage companies increased their use of loan modifications in foreclosure prevention efforts to a record level in December, an industry group said on Thursday. 

Mortgage loan modifications, or permanent mortgage changes to lower payments, reached 122,000 in December, compared with the previous high set in October, said Hope Now, a coalition of mortgage service companies, home loan lenders and credit counselors.  Total “workouts,” including negotiated payment plans, increased to a record 239,000 in the month.  Regulators and lawmakers have criticized the industry’s foreclosure prevention efforts as too slow, or not effective, given reports that more than half of the modifications were failing after six months. The Federal Reserve said this week it would make additional measures to limit foreclosures by encouraging servicers to provide loan modification plans for at least $74 billion loans it owns, or has stakes in.

Mortgage Foreclosures Spiked 81% in 2008

More than 2.3 million American homeowners faced foreclosure proceedings last year, an 81% increase from the previous year.  Recent foreclosure reports suggest that one in five of those households in California are presently delinquent on the home mortgage.

 

Hope Now, an industry group that includes major mortgage lenders such as Wells Fargo & Co (WFC.N: Quote, Profile, Research) and subprime loan servicers, said members will likely turn more to re-underwriting new mortgage loans with lower interest rates or principal, over the less draconian practice of setting new payment plans to stretch out costs.  “Hope Now expects that the increasing reliance on loan modifications rather than payment plans will continue as economic conditions warrant,” the group said in a statement.  Data showing more prime borrowers than subprime borrowers were facing foreclosures in December underscored the urgency of foreclosure prevention. Total foreclosure starts rose by 34,000 in December from November, 75 % of which were prime loans, it said.  

In an attempt to boost the weak economy, the Federal Reserve cut interest rates to a record low of less than .25 percent. This is good news for loan modification agreements because lenders are offering lower mortgage rates with more affordable loan workouts.  Federal Reserve cut its key interest rate to below 0.25%.

RealtyTrac reported that 850,000 foreclosed homes are already on the market and real estate experts anticipate that this number will increase by another 1 million homes in 2009, with 2 million more homes entering the foreclosure process during the same period.