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.

Countrywide Loan Modification Information

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

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

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

Mortgage Relief Options:

ü  Temporary Forbearance

ü  Repayment Plan for Delinquent Loan Payments

ü  Mortgage Rate Reduction

ü  Extended Mortgage Terms

ü  Re-Amortization of Outstanding Mortgage

ü  Foreclosure Stay

ü  Home Refinancing

ü  Short Sale
Deed in Lieu of Foreclosure

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

Noted IndyMac Loan Modification Qualifications:

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

ü  Inability to afford your current mortgage payments.

ü  Missed home loan payments.

ü  Ability to make modified payments.

ü  May need to prove financial hardship.

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

Mortgage Relief Options:

-      Repayment plan

-      Interest-rate reduction

-      Extension of loan term

-      Conditional forbearance

-      Foreclosure stay

-      Principal deferral

-      Short sale

-      Deed in lieu of foreclosure

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

Chase/ WAMU Contact Info for Loan Modification Programs

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

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

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

Loan Relief Options:

Ø  Repayment plan

Ø   Principal forbearance

Ø  Mortgage modification in hardship situations

Ø  Extension of loan term

Ø  Deferral of principal

Ø  Interest rate reduction

Ø  Foreclosure moratorium

Ø  Interest-Only Payments limited to ten years

Ø  Hope for Homeowners Program

Ø  Refinancing with lender-paid closing costs

Ø  Pre-foreclosure short sale

Ø  Deed in lieu of foreclosure

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

Citi Mortgage Contact Info for Loan Modification Programs

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

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

Required qualifications for loan modifications:

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

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

Mortgage Relief Options:

Ø  Mortgage Rate Reduction.

Ø  Extension of loan term.

Ø  Forgiveness of principal.

Ø  Foreclosure moratorium.

Ø  Financial education services.

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

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