The U.S. government has been working frantically to pass mortgage reform that would require loan modification licensing.  The U.S. Department of Housing and Urban Development, which oversees compliance with the SAFE Act, has proposed that employees handling loan modifications for struggling homeowners also meet the licensing requirements, a policy opposed by banks.  John Courson, CEO of the Mortgage Bankers Association said that mandating licenses for mortgage loan modification advisors could slow hiring and hinder efforts to cut home foreclosures.” Courson continued, “We say this is not originating a new home loan, because the loan terms are being reduced on their home mortgage to increase the affordability and reduce the likelihood of a foreclosure.”

The housing department hasn’t set a deadline for a decision, said Lemar Wooley, a spokesman.  According to Anthony Hsieh, CEO of LoanDepot.com, an online mortgage originator based in Irvine, California, the process costs $3,000 to $6,000 to train and pay the fees for each new employee to comply with the mortgage-licensing system. “The mortgage reform law is supposed to make sure we kick the bad ones out,” said Hsieh. “It could be the opposite, keeping the good loan officers out.”

Like California and Arizona, Nevada has been hit by the worst home foreclosure crisis of the last century.  Mortgage relief and Nevada loan modification agreements have been a big topic amongst the mortgage industry, banks and politicians.  The state of Nevada recently passed a law called the mortgage loan modification law.  A loan modification plan gives homeowners a fresh start with an opportunity to pay less than their existing mortgage payment.  Many National mortgage lenders, like BofA, Chase, CitiMortgage and Wells Fargo have agreed to extend mortgage relief and foreclosure prevention assistance in an effort to minimize loan defaults and appease the Obama Administration.  Mortgage loan modification plans have received mixed results so far.  There have been many homeowners who successfully fought off foreclosure, but many banks are reporting re-defaults on the loan modification agreements just 6 months after getting the home loan relief.

The Nevada Supreme Court recently said that the mortgage loan modification law is governed for the lawmakers’ intent. Nevada Supreme Court officials said that the administrative rules are adjusted to make a solution if any problems arise between the homeowner and the lender.  The State further noted that there have already been three changes in rules for administering the mortgage loan modification law from the previous year.  In addition, Ron Titus, director of the Administrative Office of the Courts said, “We have 270 mediators, and the vast majority operate very comfortably within the rules of the program and work very hard to help the parties find common ground and reach a resolution.” Titus further states that the mediators can assure a reliable process and there will be unprejudiced treatment between the lender and the homeowner. 

The mortgage loan modification law only has one sanction and it can only be applied to the lenders. If a particular lender won’t show up for the mediation meeting, he will be given a sanction. This has only occurred once when Clark County District Judge Donald M. Mosley ordered a $50,000 sanction against Flagstar Bank FSB. The lender failed to appear in a hearing and was not able to pass any legal documentations of foreclosure in a particular mediation meeting. This loan modification article was written by Jason Blackmore.

Borrowers across the nation continue to fall behind on their home loan payments. Many have contacted their mortgage lenders in an effort to renegotiate mortgage rates.  Many borrowers have been offered loan modification agreements and forbearances. Clearly the process of modifying their mortgage has made most homeowners become weary.

What else could you call it when almost 1 in 7 of South and Central Floridians who jumped into the Obama administration’s Making Home Affordable Program in January in hopes of getting a loan modification had dropped out by May?  The borrowers who have dropped out have joined an exodus of more than 215,000 borrowers nationwide in the past five months. They went through the trouble of applying, only to leave with nothing to show for it.

The answer, according to representatives of Chase and Wells Fargo/Wachovia among the largest banks operating in Florida is: Those borrowers did not meet the loan modification qualifications. Many of the mortgage relief prospects were not able to send in the documentation or their loan modification application was not completed correctly.

Using the May report from the Treasury Department, it’s clear that Miami-Fort Lauderdale and Orlando-Kissimmee are the largest metro markets in the nation for loan modifications. The two regions account for 6.8% of all Making Home Affordable loans nationwide, topping Los Angeles 6.4% and New York 6.1%.  Here, even those borrowers who do get a loan modification say the process is too vexing. Even if they comply with all the lender’s rules, borrowers say they get the runaround and often, contradictory answers from one day to the next.  Read the original article online Thousands giving up on home loan modification hopes.

The latest Home Affordable Modification Program statistics were announced Monday in a report used to measure the success of federal loan modification programs. The HAMP report indicated that slightly more than 10% of eligible borrowers received a loan modification that became permanent. Yet only one in three homeowners who started in the trial program has been kicked out.  The number of homeowners who have received a permanent federal loan modification rose to 340,459 in May from 295,348 reported in April.  That’s about 11% of 3.2 million HAMP eligible loans.  At the same time, the number of trial loan modification plans continued to fall as borrowers must now provide proof of income prior to any new payment plan. Active trial modifications fell to 467,672 from 637,353 in April. And borrowers who received a mortgage modification under the old rules are now required to prove their income before getting a permanent modification.  An additional 150,000 borrowers who could not prove their income or keep up with the new payments had their modifications canceled in May, bringing the total number of cancellations to 429,696. That’s about 35% of the 1.24 million trial modifications started.

Mortgage relief was extended from Bank of America, Freddie Mac and Wells Fargo.  These banks agreed to grant borrowers in the Gulf Coast region mortgage relief on their home loan payments because of the gulf crisis. Freddie Mac forbearance policies allow its servicers to suspend a borrower’s loan payments for up to three months or reduce payments for up to six months. Based on the individual circumstances, borrowers can receive a forbearance for up to 12 months.  Senior vice president of default asset management at Freddie Mac said, “We are instructing our servicers to work with borrowers with Freddie Mac-owned mortgages to extend forbearance of mortgage loan payments where appropriate to help them stay in their homes as they navigate through this financial hardship,” said Ingrid Beckles.

BofA is working to develop assistance plans and programs to help its borrowers through the crisis, a spokesperson for BofA said. The bank developed similar loan programs following the hurricanes in 2005 and in other disaster situations in the US. Usually, disasters call for an initial 90-day forbearance of payments for BofA borrowers, and, like Freddie Mac, individuals needing more time will be handled on a case-by-case basis.  BofA is currently analyzing its portfolio of mortgages and loan modifications in the region and assessing the situation to determine what other specific needs may need to be addressed in a disaster assistance program for victims of the Gulf of Mexico oil spill.

According to a statement from Wells Fargo, the bank extended its borrowers affected by the Gulf Coast oil spill a 90-day foreclosure moratorium.  “We encourage customers affected by the Gulf events (loss of job or income) to reach out to us to discuss loan workout possibilities.  They suggest working with their with our home loan consultants on to determine available home refinance and loan modification options for their homeownership and financial needs.”

Is the mortgage loan modification system helping or hindering the real estate recovery?  A recent article in the New York Times sheds light on the theory that by encouraging homeowners to stay in homes that they cannot really afford, Obama’s Making Home Affordable program is actually increasing the agony of homeowners, who pour money down the trap of their home loan rather than recognizing the loss and starting over.  In the meantime, the mortgage refinance and mortgage modification programs disguise the true state of bank balance sheets because modified mortgage loans are not yet non-performing home loans, and slow down the process of recovery.

But I think that the so far lackluster results from MHA do point to something important, which is that we don’t have the kind of mortgage crisis we thought we had when we passed the modification.  This represents not only a shift in our thinking about how to fix the housing markets, but a major shift in our national narrative about the housing bubble.  Six to nine months ago, the major story we told in connection with the financial crisis was the homeowner suckered–by either fraud or greed–into a teaser loan with an artificially low interest rate that was going to turn disastrous when it reset.

We have seen some of that, to be sure, particularly with the “Option ARM” or “negative amortization” loans on which homeowners weren’t even making the full interest payment.  But that hasn’t turned out to be our biggest problem, largely because we are in a very low interest rate environment right now, so many people saw their rates reset downward rather than up.  Instead, we are plagued by negative home equity.  Most mortgage lenders have begun shutting down access to home equity credit lines because of depreciating home values and unemployment.  Look for a proven loan modification program designed to make your bad credit home loan payment more affordable.

To most distressed homeowners, loan modifications and mortgage relief opportunities seem to be fading.  HOPE NOW recently announced the launch of a new Web portal that will allow the Department of Housing and Urban Development (HUD)-approved housing counseling agencies the ability to submit completed Home Affordable Modification (HAMP) applications for borrowers at-risk of foreclosure. 

According to California loan relief guru, Jeff Morris, “Homeowners need to take a deep breath and reevaluate their mortgage relief options, even if they were recently denied by a loan modification company or mortgage lender, because new opportunities have arisen.”  For borrowers with no equity looking to refinance, they should consider the Home Affordable Refinance Program that enables the refinancing of Fannie Mae and Freddie Mac mortgage liens up to 125%.

CNN reported that 360,165 delinquent homeowners received mortgage relief with a loan modification and the US Treasury wants loan servicers extend more options that prevent foreclosures.  The Treasury Department said Wednesday mortgage service companies placed 12% of eligible borrowers into trial period to receive loan modifications under President Obama’s foreclosure prevention plan.

 

The progress report, the second issued by the government, says that 360,165 homeowners who were at least two months behind in payments received relief through August. A month ago, just 9%, or 235,247 homeowners, were in the process of receiving a loan modification. The Obama administration has come under fire for the program’s rocky start. Officials, who met with servicers in Washington in late July, said they are on track to hit their goal of 500,000 loan modifications under way by November 1. “Our progress in implementing these programs to date has been substantial, but we recognize that much more has to be done to help homeowners,” said Michael Barr, an assistant Treasury secretary.

 

The $75 billion initiative was announced in February and the first institutions to join began accepting applications in April. The plan, which is projected to help up to 4 million homeowners, calls for servicers to lower the mortgage payments of eligible homeowners to no more than 31% of their pre-tax income.  Some 47 servicers are participating in the Obama program, up from 38 servicers a month ago. Financial institutions, borrowers and home loan investors all receive incentives for participating in the program. By releasing the servicers’ progress reports each month, the administration is hoping to hold institutions responsible for their performance. The updates will allow the public to see which institutions are lagging in implementing the plan.

 

After the August report came out, servicers acknowledged they needed to improve their performance and promised to do better in the future. Homeowners continue to complain that loan service companies are not responding to their calls for mortgage refinancing and loan modifications applications applications, losing their paperwork or not making decisions. The financial institutions said they are ramping up their staffing and computer systems to handle the crush of applications. Moving quickly is important. The number of people falling behind on their payments continues to mount, especially as unemployment rises.

 

A record number of foreclosure filings were posted in July, according to RealtyTrac. There were more than 360,000 properties with foreclosure filings — including default notices, scheduled auctions and bank repossessions — an increase of 7% from June and 32% from July 2008

The California Assembly passed a new bill that claims to protect homeowners from mortgage modification scams who charge fees in advance to satisfying the homeowner with mortgage relief.  But the reality is that the Senate Bill 94 could end up having the unintended consequence of eliminating a homeowner’s ability to retain a loan modification lawyer, or a mortgage relief attorney to help them save their home from foreclosure.  So the bill completely ignores the fact the THOUSANDS of homeowners have had great results from loan modification companies that successfully lowered their mortgage payment while preventing them from losing their home to foreclosure.

The bill, which has an “urgency clause” attached to it, now must pass the State Senate, and if passed, could be signed by the Governor on October 11th, and go into effect immediately thereafter.  SB 94’s author is California State Senator Ron Calderon, the Chair of the Senate Banking Committee, which shouldn’t come as much of a surprise to anyone familiar with the bigger picture.  Sen. Calderon, while acknowledging that fee-for-service providers can provide valuable services to homeowners at risk of foreclosure, authored SB 94 to ensure that providers of these loan modification services are not compensated until the contracted services have been performed.

SB 94 prevents loan modification companies, brokers, individuals… and even lawyers… from receiving fees or any other form of compensation until after the contracted services have been rendered.  What loan modification company in their right mind would go through 120 days of work negotiating a loan modification with their client’s lender only to have the client say, sorry we don’t have the money to pay you for your services. 

The loan modification bill will now go to the Democratic controlled Senate where it is expected to pass.  Loan modification executive, Glen Silver said in a recent press conference, “Too bad for genuine loan modification companies, Bush couldn’t get a third term, because he wouldn’t have signed it, but we know everyone’s buddy Obama would sign a national bill as soon as he smells political success.”  Silver continued, “The President would be able tell his buddies on capitol hill that he saved Americans from loan mod scams, but really he is just going to kill the loan mod business and lenders will get their leverage back.  I guarantee the lender lobbyists created this bill.

Watch this Video Proclaiming Salvation from their Short-Sided Loan Modification Bill

Supporters of the loan modification fraud bill say that the state is literally teeming with con artists who take advantage of homeowners desperate to save their homes from foreclosure by charging hefty fees up front and then failing to deliver anything of value in return.  They say that by making it illegal to charge up-front fees, they will be protecting consumers from being scammed.

Yes there have been some shady brokers who committed predatory lending abuses that took advantage of distressed homeowners, but thousands of borrowers benefitted from genuine mortgage relief negotiations from trust-worthy loan modification firms across California. The actual number of loan mod scams remains unclear.  Now that we’ve learned that lenders and servicers have only modified an average of 9% of qualified mortgages under the Obama plan, it’s hard to tell which companies were scamming and which were made to look like scams by the servicers and lenders who failed to live up to their agreement with the federal government.

In fact, ever since it’s come to light that mortgage servicers have been sued hundreds of times, that they continue to violate the HAMP provisions, that they foreclose when they’re not supposed to, charge up-front fees for mortgage loan modification plans, require homeowners to sign waivers, and so much more, who can be sure who the scammers really are.  Let’s consider how the President is cracking down on corruption…Bank of America, received the worst grade of any bank on Obama’s report card listing because they only modified 4% of the home loans from borrower’s who were eligible for mortgage relief since the plan began.  Didn’t the government give Bank of America 200 billion in the bank bail-out of the century?  Bank executives assert that the loss mitigation department is running into obstacles handling the incoming phone calls.

A new study shows why restructuring mortgages and implementing a loan modification plan that works is harder than it seems.  Even though the foreclosure crisis is awful, there has at least been nationwide agreement on the best solution for foreclosure prevention: Get more mortgage lenders to modify the home loans of more homeowners. Whittling down the principal, interest or both should benefit all concerned: Homeowners get to keep their houses; lenders save the huge cost of repossessing and reselling a distressed homes; and neighborhoods avoid the appearance of dropping property values. It should be a win-win-win — which is why the Bush administration launched an effort to promote loan modifications and the Obama administration continued the expansion of loan workouts.   Even so, none of these loss mitigation programs has quite lived up to its promise. Under the Obama administration’s Home Affordable Modification Program (HAMP), the Treasury Department offered lenders up to $75 billion to help them defray the cost of reducing borrowers’ monthly payments to 31% of their incomes. It also enticed loan servicers with $1,000 for each modification, plus another $1,000 for each modified loan that is still performing after 3 years. The Obama administration estimated that as many as 4 million households would benefit. But after 4 months, only 350,000 borrowers have even been offered new home mortgages, just over half of which have gone into effect, according to the Treasury. . According to RealtyTrac 1,155,299 homes are facing new foreclosure filings from March through June,

FOX Video on Loan Modification for Preventing Foreclosures

It’s still too early to pass final judgment on HAMP. Cleary the program and others like it are struggling in part because of the rising rate of unemployment, which makes it impossible for many people to pay any kind of mortgage, even a more affordable one. No doubt, as critics of the financial industry suggest, many servicers have been slow to train enough staff to do modifications and investors in mortgage-backed securities pose a lingering obstacle.   But new research suggests that the mortgage loan modification effort may also be based on faulty economic assumptions.

According to economists at the Federal Reserve Bank of Boston, the win-win-win concept of mortgage modification understates two of lenders’ strongest incentives to foreclose. The first is that roughly 30% of troubled debtors eventually can pay without a loan modification; thus, for lenders, 30% of the total cost of the loan modification is wasted. And since lenders can’t know in advance which 30% will “self-cure,” they hesitate to offer any mortgage modifications.   The 2nd problem is the risk that homeowners re-default on a modified loan. By the time that happens, the value of the house has declined further, and foreclosure costs the lender even more than it would have earlier. The HAMP program includes $10 billion for partial protection against that risk, but it may not be enough, especially given the sour outlook for employment.

According to a recent report from Foreclosure Related News, mortgage fraud reports spiked 36% in the United States last year as distressed homeowners and mortgage professionals tried to maintain their standard of living from the boom years, the U.S. Federal Bureau of Investigation said last week, calling fraud rampant and growing.  The State of Maryland recently issued cease-and-desist orders against seventeen loan-modification companies, part of a national effort to go after consultants the Federal Trade Commission alleges are “con artists” preying on homeowners in trouble. 

Here’s what the federal agency says about “Operation Loan Lies”:The FTC charged that the defendants falsely claimed that they would either obtain a mortgage loan modification or stop foreclosure, or both, and that some of the defendants falsely represented that they would give consumers refunds if they failed to do so. After charging consumers the equivalent of one month’s mortgage payment or more in advance, these companies often did little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. After failing to provide the promised services, the defendants that promised refunds did not honor those promises. Several were mortgage broker outfits and several were loan modification companies that were run by attorneys.

The state Department of Labor, Licensing and Regulation offers suggestions for avoiding foreclosure-help scams, including this one: “Beware of any person or organization asking you to pay up-front fees in exchange for providing mortgage counseling services or mortgage modification of a delinquent home loan.”  Remember, HUD-approved nonprofits have counselors who help borrowers navigate their lenders’ loan-modification process, and they do foreclosure-prevention work free of charge. Here’s the list of Maryland housing counseling groups.

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.

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.

 

Chase announced today that it has extended its mortgage modification efforts to their mortgage loans that are owned by investors that it services — about $1.1 trillion of home mortgages — significantly expanding the outreach and effectiveness of the mortgage relief announced previously with their mortgage modification programs. Chase now owns WAMU, so the number of loan modifications possibilities is staggering.  These foreclosure prevention efforts include investor-owned home loans held in securitizations.

 

Based on the company’s review of investor agreements and its experience with investors and trustees to date, Chase has made the decision that they can legally restructure loans with loan modifications of the majority of mortgage loans owned by investors consistent with the relevant investor agreements and the best interests of investors and intends to offer loan modifications where their loss mitigation department deems appropriate. Chase will continue to seek investor approval in the small number of situations where investor agreements contain specific terms that may limit modification actions Chase can take.  “Building on our loan modification efforts for Chase-owned mortgage loans, we have reviewed closely the terms of our investor agreements and have worked with investors, trustees, government officials and other interested parties to fashion an approach to foreclosure prevention efforts that will work for investors and homeowners,” said Charles W. Scharf, Chief Executive Officer for Retail Financial Services at Chase.

 

“When homes are foreclosed, everybody suffers, so working aggressively to modify all home loans -whether owned by Chase or owned by others – on terms that should work for the borrower, makes good sense for everyone,” he said. “Our experience at Chase shows that when home loans are properly modified, using income verification and other appropriate qualifying criteria, they perform very well over time.”  Chase announced enhanced foreclosure prevention efforts on October 31, and the company now has in place the people, programs and tools to help more borrowers remain in their houses.  Since early 2007, Chase has prevented about 330,000 foreclosures, primarily by modifying loan terms. Since its October announcement covering Chase-owned loans, Chase has accomplished the following below:

 

o    Delayed starting foreclosure on over $22 billion of Chase-owned mortgages of more than 80,000 homeowners so that Chase could review those home loans for possible mortgage modification under the enhanced program.

 

o    Implemented the previously-announced, more attractive package of loan workout offers for delinquent homeowners.

 

o    Finalized for mailing in early February proactive mortgage relief offers to borrowers of Chase-owned loans at imminent risk of default.

 

o    Selected locations for 24 Chase Homeownership Centers in areas with a high rate of foreclosures and loan delinquencies where counselors can work face-to-face with struggling homeowners. Two of the centers are now open; 12 are expected to be open by Feb. 28; and the remaining 10 are scheduled to open by mid-March.

 

o    Added 300 new loss mitigation counselors in the last 11 weeks to provide better help to troubled borrowers, bringing the total number of counselors to more than 2,500.

 

o    Initiated an independent review process to ensure each borrower was contacted properly and offered loan modification plans prior to foreclosure, if appropriate.

 

o    Developed a robust financial modeling tool to analyze and compare the net present value of a home in foreclosure to the net present value of a proposed loan modification; use of this tool will allow Chase to determine that it is acting in the best interests of investors when making loan modifications.

 

o    Worked to help establish a non-profit clearinghouse to join Chase and other mortgage lenders who want to donate or discount their owned real estate with the non-profit and government agencies that can use these properties. Chase is continuing to work with individual non-profit and government agencies; to date, Chase has completed five donations and has 47 discounted sales pending.

 

o    Worked with Fannie Mae and Freddie Mac to implement their new Streamlined Modification Program for borrowers at least 90 days delinquent; 19,000 letters were mailed in the last week of 2008.

 

Chase continues to work with Fannie Mae to implement Fannie Mae’s previously announced program to assist distressed homeowners in an effort to minimize loan defaults and foreclosures. Through the initiative, Chase believes it will be able to meaningfully increase the number of homeowners it can help.

According to a recent RealtyTrac report, over than 860,000 properties were actually taken back by mortgage lender in REO’s that more than double the 2007 level.  In another article, Moody’s Economy, a research firm, predicted the number of homes lost to foreclosure will likely to increase by another 18 % this year before tapering off slightly through 2011.  Still, mortgage foreclosures which continue breaking records going back thirty years, according to the Mortgage Bankers Association will most likely continue foreclosing well above standard levels for years to come, and that will continue to keep home sale prices from rebounding.  “Hitting bottom is a lot different than coming off the bottom,” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles.

The annual RealtyTrac foreclosure report announced that 2.3 million American homeowners faced foreclosure proceedings last year, an 81 % increase from 2007, with the worst yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices.  This foreclosure report comes as Democrats, including President-elect Barack Obama, develop plans to use up to $100 billion of the remaining $350 billion in financial bailout money in an attempt to prevent the foreclosure crisis from blazing a fire burning homes across the country.  Loan modification programs have begun to show some positive results as FDIC Chairman, Sheila Bair stepped up to endorse a federal outline for loan workouts after banks like Indy Mac, Bear Stearns and Lehman Brothers started failing.

FDIC Chief: Foreclosure Plan Needed

Thousands of homeowners in Virginia threatened with foreclosure will now be offered some mortgage relief with reduced rate loan modification assistance.  Virginia Attorney General Bob McDonnell says 8,900 homeowners will get some mortgage relief from the $8.4 billion Countrywide Financial settlement, resulting in nearly $213 million in assistance.

Homeowners who were involved in subprime mortgage loans with balloon payments are eligible for relief with lower rate loan modifications. Hundreds of others who have already lost their homes could also get some compensation.  “Everybody that has been that has been affected by, what we’ve alleged, are deceptive practices by failing to disclose all the terms of the increased payments will be afforded some relief under this agreement,” McDonell says.  Countrywide loss mitigation departments, which are owned by Bank of America, promised to contact eligible borrowers with mortgage relief options.

What are the chances of getting a loan modification through a company like Countrywide or WAMU if we are current on our mortgage?

Unfortunately most loan modification firms report better results from clients that were a few months late.  It may be simply that mortgage lenders do not see the need to modify or restructure a loan in which the borrowers are not delinquent.  With the foreclosure crisis moving down Main Street and hitting the prime credit homes, we may see these results change. For now distressed borrowers who are achieving better mortgage relief results because the mortgage lenders and investment banks do not want the deeply depreciated properties that will increase their loss even more.

Do you have to pay thousands of dollars to get a loan modification?

No, most mortgage lenders do not require borrowers to pay for a mortgage loan modification agreement. However, loan modifications can be complicated and most loan work-outs take 3-4 months to complete.  The mortgage companies have not invested the build the staff needed to keep up with the demand of funding loss mitigation departments during this foreclosure crisis.  Paying a law office or loan modification company a few thousand dollars to negotiate a new mortgage with lowered interest rates that potentially could save you hundreds of thousands of dollars is a small price to pay for such a significant financial gain.

Is Loan modification the best solution to losing a home to foreclosure?

Loan modifications have become the most popular choice for loan relief for homeowners.  It is not the only loss mitigation solution however.  Traditional refinancing has typically been rejected before applying for a loan modification. If you have a significant amount of equity left in your home, a foreclosure bailout loan may be an option to get your outstanding balance caught up, but the interest rate are usually high with hard money loans, so it would be more like a band-aid.  Short Sales can be effective if you absolutely can’t afford your home with or without the modification or maybe you believe that you’re home is so far underwater with your mortgage balance being so much greater than the property value that you would rather sell it short and move on. 

Is it lawful to charge homeowners money upfront to assist in negotiating a loan modification with the lenders loss mitigation department?

Foreclosure prevention has evolved into a big business.  With millions of delinquent borrowers facing foreclosure, the demand for negotiating services has escalated into a new type of loan origination.  Attorneys are allowed to charge for their legal advice in advance.  If you are working with a non attorney backed loan modification or real estate broker they are required to hold any money advanced in an escrow account until a loan modification is agreed.  Predatory lending laws are in the process of changes to protect homeowners against abusive practices from unscrupulous mortgage lenders.

If a loan workout is not achieved what are my other options?

Let’s face it; you don’t always get everything you want in the first stages of loss mitigation. Short sale, forbearance, and a deed in Lieu are several popular alternatives if a loan modification is not initially negotiated with the mortgage lender to check out.

At this point, clearly the Bush administration is stalling on following FDIC Chairwoman Sheila Bair’s recommended loan modification plan.  Lawmakers have begun taking matters into their own hands.  Last week, Rep. Maxine Waters, D-California, introduced the first legislation incorporating Bair’s proposal to systematically restructure mortgages and provide a government guarantee against default. The measure is estimated to ultimately save 1.5 million homeowners from foreclosure and would cost $24.4 billion, which Waters would take from the $700 billion financial industry bailout bill.  “The current foreclosure crisis continues to spiral out of control and our current programs for dealing with this crisis are simply not getting the job done,” Waters said.  Waters’ action is one more sign that Democratic lawmakers want more to be done to help minimize the crisis of delinquent homeowners. Rep. Barney Frank, D-Mass., head of the powerful House Financial Services Committee, said Monday that any new proposals involving the bailout funds must include foreclosure prevention programs.  Waters’ bill, however, will likely have to be reintroduced when the new Congress takes office next year unless similar measures are worked into any new bailout proposals. Several banks, and mortgage lending companies Fannie Mae and Freddie Mac, have recently put their own loan modification plans into place. And as part of its federal bailout, Citigroup must start provide loan modifications in accordance with Bair’s guidelines.

                 

Meanwhile, the number of homes falling into foreclosure is rising daily. A record 1.35 million homes are in foreclosure and a historic high 6.99% of borrowers are behind on their payments, the Mortgage Bankers Association reported last week.  Bair has been a vocal advocate for rolling out a systematic mortgage modification plan and she actually put her loan mod plan into action with IndyMac, which the FDIC took over in July.  Reports have indicated that FDIC officials had a role in restructuring over 5,000 home loans as of mid-November.

A mortgage loan modification is when the mortgage lender agrees to modify your existing mortgage in order to keep you in your home in lieu of your hardship. The loan modification agreement was designed to help make your current loan more affordable. Usually it is accomplished by the lender agreeing to lower the mortgage rate that in turn reduces the monthly payment for a few years. Years ago this was only available when a homeowner was seriously delinquent and suffered a hardship such as a job loss, divorce or illness. Now, homeowners can obtain loan relief from their mortgage lender for more affordable payment solutions to combat the foreclosure crisis and eliminate the interest rate adjustments from your adjustable rate mortgage loans.

In a recent article, Averett suggested it makes economic sense to foreclose in some cases. What happens to the homeowner who successfully had their loan modified with better terms and lower mortgage rates just ahead of that borrower getting laid off from his or her job?  Does the mortgage lender renegotiate the mortgage rate again to meet that person’s new income level?  Indeed, studies have shown that nearly one-third of borrowers who’ve had their mortgage loans modified are in trouble again after three months. 

And what about the borrower whose loan is now “under water,” the term used to describe a home loan that is now larger than the value of the property on which it was based?  The borrower’s home loan terms could be renegotiated, but they will still have to pay off an outstanding mortgage balance that far exceeds the value their home. If their neighbor throws in the towel to foreclosure, then the home will be resold at its current value and the first homeowner discussed now faces a neighbor whose home loan payments are significantly less than his or hers.  At some point, the first homeowner asks himself why he’s bothering, and he defaults as well.  “The homeowner says, ‘I’m paying a fortune for my mortgage. I’ve got to save for retirement. I’ve got to put my kids through college. I’m getting out too,” she said.  That person might be better off renting a home at half the amount he or she is paying for their mortgage — very plausible in some areas of the country.  The problem is that throwing in the towel leads to more foreclosures, which pushes down the value of homes even more, which leads to more foreclosures and so on…

Michael D. Calhoun, president of the Center for Responsible Lending, recently expressed skepticism that voluntary loan modifications could have a significant impact on the swelling number of foreclosures.  In testimony before Congress Wednesday, Calhoun strongly recommended allowing bankruptcy judges to oversee the modification process, saying it’s the “most efficient and cost effective” solution.  “Judicial loan modifications will provide a strong incentive for servicers and investors to make voluntary programs work, since they will have clear authority to avoid judicial modifications by offering their own workout solutions outside of bankruptcy,” said Calhoun.  “Bankruptcy courts already modify mortgage loans for all manner of other debts, including mortgage loans on vacation homes and investment properties. They should be permitted to do so for a homeowner’s primary residence, which is typically the asset most critical to a family’s financial and physical security,” Calhoun added.  Averett believes the only cure for the rapid rise in foreclosures will be the stabilization of housing market. But she was philosophical about loan modification agreements.  “They will help some people in some instances, but there are just too many forces against the homeowner. There’s a lot of people you simply can’t help,” she said.  Read complete article >

According to San Diego’s 10 News, People’s First Financial has some satisfied customers and unhappy homeowners seeking a modification for a reduced rate home loan.  The 10News I-Team started taking a closer look at how this Mira Mesa company works after getting complaints from customers.  Lina Lopez is a mother of three whose husband and father was laid off from work. The I-Team went to Apple Valley to talk to her and another concerned client, Mark Walker.  Lopez says she paid $2,500 to People’s First Financial after being made a promise.  “She said, ‘We can help you lower your payments,’” says Lopez. “They were so easy to get a hold of but once they got my last payment, I got voicemails.”  Lopez says the company couldn’t help her, and when she tried to get her money back she was denied.

A similar thing happened to Mark Walker after he paid $1,500 to the loan company after he claims he was promised to get better interest rates.  He says he agreed to the modification agreement because the company promised to refund his money they were unable to modify his mortgage. He claims the sales associate informed him the company would also reduce their principal amount while getting a lower mortgage rate.  “We sent them the information they wanted, but we never back from them,” says Walker.  That’s no surprise, if you ask Jay Nichols. Nichols was Walker’s sales representative and left the company after five months.  “I was there and didn’t feel comfortable letting people go into foreclosure and not giving them their money back. If we fail, we fail, give the money back. The managers did not feel that way and I didn’t want to be a part of it,” Nichols says.  He explains the sales reps have nothing to do with the negotiating process. Their job is to get people in the door. From there, the client’s files go to a group of negotiators that work with the lenders to lower their monthly payments. Nichols says if the company can’t, it’s supposed to refund the customers money.  “What we’re selling them on the phone is we’ll help you save your home, you’ll pay us a lot of money to do that. If we can’t do that we will give you your money back,” Nichols says.  He quit after a few of his clients did not receive the refund they were promised.  “I sold the person on believing in the company and I didn’t know that it wasn’t going to happen,” he says.

When the I-Team went to get answers, Trevor Hutchison explained they never make promises to customers. He tells the I-Team they have many satisfied customers, and they charge people to “research and analyze” their situation.  “We look for solutions for them,” Trever Hutchison says. “They sign up with us for research and analysis to analyze what situation is, so we can poke and prod lender in the right direction or provide them with a refinance.”  He says people expect immediate results, but the process can take up to 120 days. 

Court records show the company has been sued by dissatisfied customers previously.  > For more information about a California Loan Modification Company, make sure you work with a foreclosure prevention company that provides at least a partial refund if the modification is not accepted by the lender and working with a foreclosure lawyer is suggested in case you need representation in court.  California homeowners need to be aware that the loan modification process is time consuming and can be confusing with quickly evolving foreclosure laws.  Loan modifications and legally negotiated mortgage terms do take time, so it is imperative that you choose a loan modification company that has the ability and willingness to work in the best interest of you the homeowner. 

One of our clients found our website and asked us the following question, “I am almost sixty days late…How late can you I be and still qualify for a home loan modification?” We have found this to be one of our more frequently asked questions, so we have added it to our FAQ and wanted to address it on our blog.  

With the recent bank mergers and current political dynamic, we have found that the answer will vary significantly depending upon the lender and the hardship.  So many homeowners have become delinquent on their mortgage loans that most of the banks simply can’t keep up.  This means that in most cases 60 days is not too late to start the loan modification process.  Legal Loan Relief reports that banks like WAMU, Chase, Countrywide and Indymac are making every effort to modify their client’s home mortgages.

Arnold Schwarzenegger continues his mission to help distressed California homeowners by proposing additional home mortgage relief in an effort to stabilize the golden state’s economy.  The California governor announced a new plan to encourage lending companies to modify existing mortgage loans as a way of preventing foreclosure.  Like Obama’s previous suggestions, Schwarzenegger proposed a 90-day moratorium for homeowners risking foreclosure. Mortgage lenders still would have the option for exemption in unique circumstances.

Several weeks ago, Schwarzenegger vetoed a Democratic bill to ban bad mortgage lending practices.  The governor’s new proposal comes in advance of his call for a special legislative session to address the budget gap and other issues.  Regardless of the budgets deficits, California homeowners need mortgage loan relief as most traditional refinancing options have evaportated.  Most California borrowers have watched the equity in their home disappear and many have adjustable rate mortgages that exceed their budgets.  The California Governor seeks cooperation from lenders and banks with mortgage loan modifications, forbearances and loan work-out agreements.

 

 

A Loan Modification is term for a mortgage note modification that involves a revision of terms without formally refinancing the home loan.  The process involves restructuring the mortgage loan terms with a new interest rate and or a revised amortization schedule. The goal of a loan modification is to modify terms to stop a foreclosure with a mortgage payment the borrowers can afford.

Question: In utilizing the Loan Modification option to bring an asset current, can the mortgagee include all fees and corporate advances?

Answer: Mortgagee Letter 2008-21 states in part: Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.

 

Question : May a mortgagee perform an interior inspection of the property if they have concerns about property condition?

Answer: Yes, the mortgagee may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the mortgagor’s continued ability to support the modified mortgage payment.

 

Question : Can a mortgagee include late charges in the Loan Modification?

Answer: Mortgagee Letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the Loan Modification.

 

Question : Is there a new basis interest rate which mortgagees may assess when completing a loan modification?

Answer: Yes, Mortgagee Letter 2008-21 states that the new basis interest rate is 200 points above the monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of 10 years.

 

Question 6: Will HUD subordinate a Partial Claim, should a mortgagor subsequently default and qualify for a Loan Modification?

Answer: If a mortgagor subsequently defaults and qualifies for a Loan Modification, HUD will subordinate the Partial Claim.

 

Question 9: Can a mortgagee qualify an asset for the loan modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?

Answer: Based upon this scenario, the mortgagee should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the mortgagee should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.  Read Complete HUD Article

All right here. Since our Loan Modification Company is focused on preserving homeownership. We understand how traumatic the prospect of losing your house can be. We also understand that what you need now are clear answers, alternative solutions, and immediate action. Loan Modification Outlet is here to help you restructure your mortgage so that you can secure a monthly payment that is affordable. If your loan is insured by PMI Mortgage Insurance Company chances are good Loss Mitigation Specialists for most lenders will help you find solutions to avoid foreclosure or reduce its impact. We’re here to help at no charge to you. But the first step is up to you.

o    Learn about the workout options that might be available to you.

o    Complete the financial Information Form so that our Loss Mitigation Specialists can best assess your particular situation and help you faster.

o    Contact your mortgage lender.

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