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. 

Countrywide Loan Modification Information

Corporate owner: Bank of America
Department:  Home Retention Division.

Call (800) 669-6607
Web site: www.homebycountrywide.com
Call the customer service telephone number on your loan statement.

Important loan modification qualifications: Proven financial hardship and target debt-to-income (DTI) ratio: 34%

Mortgage Relief Options:

ü  Temporary Forbearance

ü  Repayment Plan for Delinquent Loan Payments

ü  Mortgage Rate Reduction

ü  Extended Mortgage Terms

ü  Re-Amortization of Outstanding Mortgage

ü  Foreclosure Stay

ü  Home Refinancing

ü  Short Sale
Deed in Lieu of Foreclosure

Hardship letters are being sent to borrowers who are sixty days delinquent or who are deemed likely to become delinquent based on a computer model that crunches the borrower’s credit score, payment history, debt-to-income ratio, home value, interest rate reset and other factors. If you don’t get a loss mitigation letter, that doesn’t necessarily mean you won’t qualify. Countrywide and Bank of America reserve the right to approve or deny loan modification plans.  Income documentation and signed financial statements are required.

Noted IndyMac Loan Modification Qualifications:

Government agency:  Federal Deposit Insurance Corp., or FDIC.
Call (877) 908-HELP (4357)
Web site: www.imb.com

ü  Inability to afford your current mortgage payments.

ü  Missed home loan payments.

ü  Ability to make modified payments.

ü  May need to prove financial hardship.

Target debt-to-income (DTI) ratio: 38%.

Mortgage Relief Options:

-      Repayment plan

-      Interest-rate reduction

-      Extension of loan term

-      Conditional forbearance

-      Foreclosure stay

-      Principal deferral

-      Short sale

-      Deed in lieu of foreclosure

Hardship Letters: IndyMac sends out “invitations to apply” for a mortgage modification and ready to sign preliminary loan modification offers based on information that’s on file.  IndyMac loan workouts require verification of income and expenses and financial statements must be signed. Borrowers who have missed two payments are more likely to receive a letter.

Chase/ WAMU Contact Info for Loan Modification Programs

Corporate owner:   J.P. Morgan Chase
Contact:  Call the telephone number on your mortgage statement.
Call (800) 848-9136
Call (866) 550-5705
Visit a Chase regional counseling center.
Web site: www.chase.com

Hardship letter may be required.  Loan modification plans are offered only to owner-occupied residence.  Mortgage owned by Chase, WaMu or EMC or with investor approval.

Target debt-to-income, or DTI, ratio: 31 % to 40 %, capped at 50 % for borrowers who’ve demonstrated they can pay more.

Loan Relief Options:

Ø  Repayment plan

Ø   Principal forbearance

Ø  Mortgage modification in hardship situations

Ø  Extension of loan term

Ø  Deferral of principal

Ø  Interest rate reduction

Ø  Foreclosure moratorium

Ø  Interest-Only Payments limited to ten years

Ø  Hope for Homeowners Program

Ø  Refinancing with lender-paid closing costs

Ø  Pre-foreclosure short sale

Ø  Deed in lieu of foreclosure

Hardship Letters:  Chase will send letters to borrowers who have subprime adjustable-rate mortgage loans or payment-option ARMs. Borrowers are more likely to receive a letter if they’ve racked up the maximum amount of negative amortization and their interest rate is scheduled to reset. Chase and WAMU reserve the right to approve or deny loan modification plans.  Income documentation and signed financial statements are required.

Citi Mortgage Contact Info for Loan Modification Programs

Departments:  Office of Homeowner Preservation, Borrower Relief Centers.
Citi Contact: Call the telephone number on your loan statement.
Call (800) MORTGAGE, or (800) 667-8424
Fax (480) 753-7832.

E-mail mortgagehelp@citi.com
Web site:  www.mortgagehelp.citi.com

Required qualifications for loan modifications:

Ø  Principal residence   Ø  Sufficient reliable income to afford modified mortgage payments.

Ø  Mortgage must be owned by Citigroup Inc.   Ø  Target debt-to-income (DTI) ratio: 38%

Mortgage Relief Options:

Ø  Mortgage Rate Reduction.

Ø  Extension of loan term.

Ø  Forgiveness of principal.

Ø  Foreclosure moratorium.

Ø  Financial education services.

Hardship Letters:  Citi is “reaching out to customers through calls, written correspondence, e-mail, toll-free assistance lines, online social networks and external counselors,” according to a company statement. Homeowners in Arizona, California, Florida, Indiana, Michigan, Nevada and Ohio are most likely to receive a letter because of declining home prices, high unemployment and economic distress in those states.

Loss Mitigation Tip: Citi also conducts local outreach programs with nonprofit counseling organizations.  Citi Mortgage reserves the right to approve or deny loan modification plans.  Income documentation and signed financial statements are required.