With home foreclosures breaking records every quarter, the Obama administration’s program to attack the housing crisis has been a disappointment mortgage lenders report that they continue to struggle getting the required paperwork, while homeowners and housing counselors say processing the mortgage bottleneck appears to be impossible. The $75 billion program has performed so poorly that some housing advocates say the Obama administration needs to reconsider their entire approach on mortgage relief and loan modifications. Mortgage refinance opportunities continue to narrow so loan workouts may be the last hope to prevent foreclosures for these distressed homeowners.

Mortgage loan modifications are, for some homeowners, the only hope they have of keeping their home as unemployment and a slow economy still takes its toll.  Big lenders like Bank of America, Wells Fargo, and JP Morgan have the majority of mortgage loans that homeowners are seeking to modify and while the home loan modification numbers for these lenders rose from November to December 2009, many are wondering what will be the story in 2010?  Without home loan modifications, many homeowners’ mortgage loan payment would be too costly as those who, pre-recession, were able to meet payments have seen financial hardships that are causing them to struggle just for the most basic of needs.

However, Bank of America, Wells Fargo, and JP Morgan have done a great many home loan modifications, but there is call for more action and modifications to be moved from a trial phase to a permanent phase. The problems in the program and slowness of the transition in permanent home loan modifications have been traced to both lenders and homeowners.  There are stories from homeowners saying they are ignored and passed over for modifications, while lenders have stories of homeowners not filling out paperwork or following the correct procedure to ensure a permanent loan modification. 

With unemployment the next big issue that must be addressed, big lenders like Bank of America, JP Morgan, and Wells Fargo are in a great position to help homeowners, even if some who are given modifications still fail to make payments down the road.  If multiple modifications are made and even just a handful of homes benefit from the home loan mortgage modification then many people believe it would all have been worth it.  Read the original blog post online

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%.

Bank of America has provided mortgage relief through concluded and trial loan modifications to more than 600,000 homeowners since January 2008.” A spokesman for Bank of America said they remain focused on providing loss mitigation solutions to help distressed customers maintain homeownership.”  Loan modification strategies remain in the big picture for companies like B of A, Wells Fargo, Citi and Chase.  The loan modification processing centers at these banks is clearly bottle-necked, so you may need to work with an experienced law firm that specializes in foreclosure prevention solutions.  Many of the California loan modification prgrams have been outsourced to processing centers in Arizona, Nevada and Texas.

Many distressed homeowners have suffered from loan modification fraud.  In an effort to further protect California homeowners from predatory lending and loan modification fraud, CA Bill 764 by led by Pedro Nava of Santa Barbara introduced a new law only allowing individuals or loan modification companies to collect fees only after a mortgage loan modification is successfully obtained. Many lawmakers had warned distressed homeowners against paying advanced fees. Those loan modification fees can be in the thousands of dollars, and often times these companies or individuals will do little or no work after getting their fees. In his veto message of AB 764, Governor Schwarzenegger wrote, “I do not agree with the provision of this bill that will only allow fees to be collected if a mortgage loan modification is successful. This could adversely affect legitimate businesses that provide loan modification services.”

Jeff Morris of the Loan Modification Relief firm in California expressed approval in the Governor’s action. “Even though there is unfortunate fraud happening, it does not mean that you need to attack all loan modification companies.  Morris continued, “If loan modification companies were not allowed to charge fees up-front, there would be no more loan modifications, because the process can take 6 months for successful mortgage relief.  Who in their right mind would work for free for 6 months?”

Home loan investors say they need further protection from more significant home price depreciation than the US government is presently providing them in return for agreeing to offer loan modification programs on their mortgage portfolios.  Mortgage investors continue to report problems on the secondary market because of re-defaults from loan modifications that still were not affordable enough for these distressed homeowners.

Obama’s mortgage relief czar rolled the Home Affordable Modification Program, which pays incentive fees to loan servicing companies that agree to renegotiate home loan terms, includes extra payments to investors that consent to mortgage loan modifications in dropping real estate markets. FHA refinance loans have made an attempt to help struggling homeowners get a lower fixed rate, but not enough people qualify.  These loan payments, for as much as $5,000, are meant to compensate the investor for the risk that the borrower will end up re-defaulting again and the home will be forced into a foreclosure and ultimately sold in an even lower property value market.  Hedge fund company, Magnetar Capital LLC has started lobbying the government to provide much greater downside protection for holders of privately owned mortgage-securities and wholesale home loans. Article was written by Kate Berry.

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.

State and federal officials have launched ‘”Operation Loan Lies” — an effort targeting nearly 200 loan modifications firms for a number of alleged illegal practices including promising services they can’t deliver, charging more than $5,000 in advance fees and misrepresenting their affiliations with mortgage servicers.  Former Ditech executive, Jeff Morris said in a recent interview with Loan Modification Buzz, “There is nothing wrong with paying a loan modification company money to renegotiate the terms of your mortgage, but make sure the company actually submits a loan workout request with your lender’s loss mitigation department.”  Morris reminded the news company that not all loan modification firms were bad and that some were actually save families from foreclosure.

Federal and state agencies took 189 actions today against modification and foreclosure-rescue firms, the Federal Trade Commission announced. The coordinated actions were part of a national law-enforcement effort by 2 federal and 23 state agencies to crack down on loan modification scams.  “Operation Loan Lies,” has targeted loan modification firms that allegedly promised to obtain modifications or stop foreclosures, but the companies actually did nothing. Advance fees charged by the loss mitigation firms were equal to one or more mortgage payments, but no loan negotiations ever took place. 

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.

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.

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

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. 

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.

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