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

While many of the loans that went into default were originated in early 2007, the median origination month for last quarter’s defaulted home loans was July 2006, the same month as during the prior three quarters. According to DataQuick, the median origination month a year before was June 2006, so the foreclosure process has moved forward through one month of bad loans during the last 12 months.  “Mid-2006 was clearly the worst of the ‘loans gone wild’ period and it’s taking a long time to work through them,” Walsh said. “We’re also watching foreclosure activity start to move into more established mid-level neighborhoods. Homeowners were able to make their payments longer than homeowners in entry-level neighborhoods, but because of the recession and job losses, that’s changing.”  The mortgage lenders that originated the most loans that went into default last quarter were Countrywide with 5,588, Wells Fargo with 3,482 and Washington Mutual with 3,460. Along with Bank of America (1,760 loans) and World Savings (1,869), they were also the most active lenders in the second half of 2006. Last quarter’s default rate on loans originated in the second half of 2006 ranged from 1.5% for Bank of America to 13.1% for World Savings, according to DataQuick.

On mortgage loans from primary residences, California homeowners were a median five months behind on their mortgage payments when lenders filed notice. The borrowers owed a median $13,510 on a median $325,818 mortgage.  On home equity loans and lines of credit in default, borrowers owed a median $3,939 on a median $62,965 credit line. The amount of the credit line that was actually in use can’t be determined from public records.

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.

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%.

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?”

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.

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 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.