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

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

Mortgage Foreclosures Spiked 81% in 2008

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

 

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

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

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

Countrywide Loan Modification Information

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

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

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

Mortgage Relief Options:

ü  Temporary Forbearance

ü  Repayment Plan for Delinquent Loan Payments

ü  Mortgage Rate Reduction

ü  Extended Mortgage Terms

ü  Re-Amortization of Outstanding Mortgage

ü  Foreclosure Stay

ü  Home Refinancing

ü  Short Sale
Deed in Lieu of Foreclosure

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

Noted IndyMac Loan Modification Qualifications:

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

ü  Inability to afford your current mortgage payments.

ü  Missed home loan payments.

ü  Ability to make modified payments.

ü  May need to prove financial hardship.

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

Mortgage Relief Options:

-      Repayment plan

-      Interest-rate reduction

-      Extension of loan term

-      Conditional forbearance

-      Foreclosure stay

-      Principal deferral

-      Short sale

-      Deed in lieu of foreclosure

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

Chase/ WAMU Contact Info for Loan Modification Programs

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

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

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

Loan Relief Options:

Ø  Repayment plan

Ø   Principal forbearance

Ø  Mortgage modification in hardship situations

Ø  Extension of loan term

Ø  Deferral of principal

Ø  Interest rate reduction

Ø  Foreclosure moratorium

Ø  Interest-Only Payments limited to ten years

Ø  Hope for Homeowners Program

Ø  Refinancing with lender-paid closing costs

Ø  Pre-foreclosure short sale

Ø  Deed in lieu of foreclosure

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

Citi Mortgage Contact Info for Loan Modification Programs

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

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

Required qualifications for loan modifications:

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

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

Mortgage Relief Options:

Ø  Mortgage Rate Reduction.

Ø  Extension of loan term.

Ø  Forgiveness of principal.

Ø  Foreclosure moratorium.

Ø  Financial education services.

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

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

With its bailouts of Bear Stearns and American International Group, the Federal Reserve took a vast portfolio of mortgages onto its books. Now, it is trying to use its control of billions of dollars worth of home loans to help prevent foreclosures. The Fed will seek to revise negotiated mortgage terms it owns that might otherwise enter foreclosure, Chairman Ben S. Bernanke told congressional leaders in a letter yesterday. The decision won praise from congressional Democrats, who took it as a sign that the central bank’s leaders are cooperating with mortgage relief efforts from the government’s power to try to reduce home foreclosures nationally.

It is unclear how many homeowners stand to benefit. Under the program, the Federal Reserve can provide loan modifications by reducing what a homeowner owes on a mortgage, lower the interest rate, lengthen the term of a loan or take other steps to keep a loan from defaulting, if doing so would offer taxpayers a better long-term payoff than foreclosure. Individual borrowers are unlikely to know whether their mortgage loans are owned by the Fed, but if they qualify for a renegotiation, they would deal only with their mortgage servicer.  The Fed is emphasizing reducing the amount of principal owed by people at risk of foreclosure, particularly those with a mortgage loan balance that is more than 125% of the estimated value of their property. Private lenders have been reluctant to renegotiate mortgage rates that way, as some of the institutions that own those loans, in the form of mortgage-backed securities, stand to lose money and therefore object.  Bernanke has previously advocated principal reductions, saying in a speech in March that they could be an “effective means of avoiding delinquency and foreclosure.” Mortgage modification programs remain the hottest alternative to home refinancing.

This week the House Judiciary Committee approved legislation aimed at helping Americans keep their homes through bankruptcy.  I introduced the Helping Families Save Their Homes In Bankruptcy Act of 2009 to give courts the power to modify mortgages to bring them in line with underlying home values. For families in distress, this is a much-needed home financing reform. And considering the realistic mortgage alternatives, it is fair to all concerned.

I have been working on this bill for nearly two years. I believe it represents one of the most tangible and productive steps we can take to limit the fallout from the real-estate depression that has been sweeping the nation. While it is not the entire answer to the economic crisis, it is a common-sense and practical approach to stopping a downward spiral where foreclosures also depress nearby home values and thereby hurt other homeowners. This spiral is not helping anyone — not homeowners, not lenders, and certainly not communities.

Some argue that we are acting too quickly, and that we should delay my legislation to give homeowners and lenders more time to modify the terms of existing home loans on a voluntary basis outside of bankruptcy. But the evidence shows that such modifications don’t work. For one thing, many of the service companies who control the mortgage loans claim they are not legally permitted to agree to voluntary loan modifications. And even when they are legally permitted to agree, their financial incentives are stacked in the direction of foreclosure.

As a result, the much-vaunted federal “Hope for Homeowners” program launched in October has been only a limited success. The program is supposed to facilitate new mortgages for homeowners if FHA mortgage lenders agree to reduce the amount of money owed on a home to 90% of its assessed value. The FHA loan program went into effect with the goal of helping hundreds of thousands of homeowners. To date, it has processed less than 400 FHA Hope for Homeowners applications. To those who claim that my bill will end up harming consumers by increasing the cost of credit, I would respectfully suggest that they are not taking account of the track record of the modern-day bankruptcy code.

For more than three decades, the bankruptcy code has permitted the very kind of court modification we are considering today, for every other form of secured debt, including loans secured by second homes, investment properties, luxury yachts, and jets. For over twenty years, this very kind of mortgage modification has been available for home mortgages already — if the home is a family farm. There is no indication that this has in any way increased the cost of credit for any of these kinds of home loans.

As for my legislation, we have narrowed it to apply only to existing mortgages. So it will have no effect on new home mortgages and cannot impact their cost. This is one reason why Citigroup is now among the many business and consumer groups that support this proposal. It’s also one reason why the Obama administration supports my bill.  Article Written By JOHN CONYERS JR.  Read the complete article >

Recent mortgage loan delinquency reports indicated that 10% of homeowners in the United States are now in default with their lender. Mortgage loan modification experts forecast that in the next year or two that the number of borrower’s defaulting will double to more than 20 million households, with many others on the verge. This is nearing epidemic proportions, say industry professionals. With the fear of foreclosure and the threat of losing their houses, many homeowners remain discouraged because they have been turned down for mortgage refinancing. In addition, these borrowers are often misinformed about loan modifications and alternative mortgage relief solutions that may be available to prevent foreclosures.  The Loan Modification Buzz reports that consumers are fed up with low rate talk that in most cases is only available to homeowners who have high credit scores and tangible equity in their home.

As seen on CNN Money, homeowners need to demand that their bank show proof of a promissory note, which many banks lose or destroy. Without this evidence your house could be saved from foreclosure.

Loan modification programs continue to invade the mortgage sector, because so many homeowners are turned down by their lender when seeking a refinance loan. In most cases the borrower does not have enough equity, but many homeowners are delinquent on their mortgage and their credit scores are too low for most refinance opportunities.

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.

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.

In a recent article written by Michael Forsy, the President-elect Barack Obama says he will use the remaining $350 billion in funds for the Troubled Asset Relief Program to soften the foreclosure crisis and ease credit markets for businesses and families and to help reduce mortgage loan payments for people facing foreclosure, his top economic adviser Larry Summers said.  Loan modification plans remain a focal point for mortgage relief and Obama continues to persuade lenders to provide negotiated loan modifications that provide payment relief.

In a letter to congressional leaders, Summers said the incoming administration will work with Congress to institute tougher accountability standards for the program, work to overhaul bankruptcy laws, and “impose tough and transparent conditions on firms receiving taxpayer assistance.”   Summers pledged that taxpayer money would only be used “when sufficient private capital cannot be attracted.”  Summers is Obama’s incoming head of the National Economic Council.  Read the original article.

In California, mortgage lenders can foreclose on deeds of trusts or mortgages in default using either a judicial or non judicial foreclosure process.  When considering foreclosure prevention with a short sale or modification, it is important to understand California foreclosure laws.  The judicial process of home foreclosure begins with the mortgage lender filing a Notice of Default.  The lender files a lawsuit to get the local court force foreclose, is used when no power of sale is present in the mortgage or deed of trust. However, the State of California has made it clear that lenders and mortgage servicing companies must make every effort to provide a loan workout or mortgage modification prior to the pursuit of the foreclosure process. 

In most cases, if the loan modification process is unsuccessful and the local court concurs with the mortgage lender’s foreclosure request, your property will be auctioned off to the bidder who makes the best offer.   Using this type of foreclosure process, mortgage lenders may seek a deficiency judgment and under certain circumstances, the borrower may have up to one year to redeem the property.

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage note, in which the borrower has authorized the sale of property to pay off the balance on a mortgage in the event that the borrower defaults. In deeds of trust or a deed in lieu of foreclosure, where a power of sale exists, the power given to the mortgage lender to sell the property may be completed by the trustee.

A notice of sale must be: 1) recorded in the county where the property is located at least fourteen (14) days prior to the sale; 2) mailed by certified, return receipt requested, to the borrower at least twenty (20) days before the sale; 3) posted on the property itself at least twenty (20) days before the sale; and 4) posted in one (1) public place in the county where the property is to be sold.   The notice of sale must contain the time and location of the foreclosure sale, as well as the property address, the trustee’s name, address and phone number and a statement that the property will be sold at auction.

The defaulting homeowner has up until 5 days before the foreclosure sale to cure the default and stop the process.  Mortgage lenders may not seek a deficiency judgment after a non-judicial foreclosure sale and the borrower has no rights of redemption.

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.

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.

What is Loss and Mitigation? Mortgage loss and mitigation is a legal process where mortgage lenders work with homeowners to create a more affordable home loan scenario. The loss and mitigation process typically produces the following results:

Loan Modification – This is the fastest growing mortgage relief remedy – Let our attorneys negotiate with your mortgage lender to get your 1^st and 2^nd mortgages with lower rates and reduced monthly payments.

Bankruptcy – BK’s can certainly delay foreclosure but once you are actually in bankruptcy, your mortgage lender can actually force a foreclosure if you miss one payment.

Refinance – We have established relationships with very reputable lenders who offer FHA home loans, conforming and jumbo mortgage loans that are in default and risking foreclosure, but there must be significant equity, unless you qualify for FHA Hope for Homeowners loan that requires the lender to lower the mortgage balance to fair market value. 

Deed-in-lieu of Foreclosure – One option that is rarely available is to get your lender to agree to a deed in lieu of foreclosure.

Short Sale – If you decide that don’t want to keep your house, this is great alternative to just walking away.  Our team may be able to negotiate a Short Sale with your mortgage lender. In some cases, the bank may accept less than what you actually owe on the mortgage.  These days many mortgage lenders are accepting a short sale to prevent the high costs of the foreclosure process.

« Older Posts