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Loan Modification Outlet offers mortgage modification relief for homeowners that are struggling with an adjustable rate mortgage or an employment issue that caused a loss of income. LMO offer loss mitigation solutions with low rate loan modifications that stop foreclosure!

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November 2008
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Mortgage Loss and Mitigation

30th November 2008

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 1st and 2nd 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.

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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 >

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According to a recent Mercury News article, San Jose homeowner Salvador Ruiz paid a foreclosure prevention company $8,950 to negotiate the terms of his home loans with mortgage loan modifications on two properties four months ago, but he says they did nothing and haven’t returned his money. “They tell me everything’s OK, but they haven’t done anything so far,” said Ruiz, who is filing a complaint with the California Department of Real Estate. With non-profits and banks overwhelmed by the demand for their services from people like Ruiz, an army of consultants has sprung up in San Jose and around the state offering homeowners loan work-out assistance banks to provide home loan modifications for a fee.

Some of these businesses charge as much as $5,000 in advance, and many desperate homeowners facing foreclosure will pay to modify their home mortgages to a more affordable loan payment. But some customers are complaining that little was done for the money they paid, while some services have turned out to be scams. “It’s a relatively new phenomenon,” said California Department of Real Estate spokesman Tom Pool. “It’s becoming an issue. As always, people get very clever when they see an opportunity.” Real estate brokers are required to obtain permission from the DRE to collect fees in advance, but do not need permission if they charge after completion of the work. Pool said the agency has issued “desist-and-refrain” orders to a few unapproved companies that were charging advance fees. The DRE advises consumers to check its website to verify that a loan modification company has any negative marks. “Some of our clients have paid companies for modifications and not received service,” said Keisha Woods of EPA Can Do, an East Palo Alto non-profit. “We are advising our clients not to pay for any type of modification service.” EPA Can Do helps low- to medium-income homeowners negotiate loan work-outs for homeowners facing foreclosure or future trouble from a future adjustable interest-rate reset, and helps transition those who do lose their houses, Woods said.

The state Attorney General’s office is prosecuting First Gov, also called Foreclosure Prevention Services, a Los Angeles company that promised to renegotiate loans for $1,500 to $5,000 but instead “ripped them off for thousands of dollars” while their homes went into foreclosure, according to the Attorney General’s office. “Loan modification scams are becoming more and more prevalent across the country, particularly in California,” Attorney General Jerry Brown said when First Gov officials were arrested earlier this month.

Most major banks have their own loan modification processes, which customers can deal with on their own. And non-profits such as Project Sentinel and Neighborhood Housing Services-Silicon Valley will help clients negotiate with banks for free. But these services are clearly overwhelmed by the demand. “The reality is, we’re swamped,” said Martin Eichner of Project Sentinel in Sunnyvale. “We’re currently averaging 12 hours of counselor time per case. It’s labor-intensive, so the idea of charging for the work is not unreasonable. The problem is charging fees in advance before accomplishing anything.” Said Marlene Santiago, a foreclosure intervention counselor with Neighborhood Housing Services: “On Mondays, we have 70 voice mails waiting. It takes me two hours to go through them. We need help, we really do.” Ruiz, the San Jose property owner, ultimately turned to another private company, Home Resolution and Credit Services, which was opened in July by real estate agent Robert Aldana and broker Martha Lopez-Chubb. It’s one of two San Jose companies registered with the DRE to accept advance fees for mortgage modifications. “Plain and simple, if there was enough help out there for free, we would not exist,” said Aldana, who does local Spanish-language radio and television broadcasts on real estate. Read Complete Article

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If you are asked to pay in advance, check the Department of Real Estate”s website to see if the loan relief service dealing with has permission to collect advance fees: Ask to see the mortgage company”s “no objection” letter from the Department of Real Estate. California Foreclosure Lawyers do not have to register with the state as long as they are California attorneys. Real estate and mortgage brokers are allowed to modify mortgage loans as long as their services are fully completed before they are paid. Loan Modification Outlet is an attorney backed mortgage relief service with partial refund options depending on how far along the individual is in the loan modification process to receive a refund.

  • Carefully review the agreement and consider obtaining independent advice before signing it or advancing any fees.
  • Compare the services and fees offered by other licensed brokers on the Department of Real Estate”s list.
  • Do not pay anyone in advance if you have already received a Notice of Default from your mortgage lender.
  • Check with local non-profits that help people modify their home loans without charging money upfront. See More California DRE tips >

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A California-based advocacy group that helped start the grassroots foreclosure freeze movement has taken its appeal to help homeowners to Capitol Hill this week.  Robert Gnaizda, general counsel of The Greenlining Institute, told Legal Newsline that he met with FDIC. Chairwoman Sheila Bair on Monday, and that he would meet with Speaker of House Nancy Pelosi, D-Calif., and Chairman of the House Finance Committee Rep. Barney Frank, D-Mass., on Tuesday.  Gnaizda said he is telling these political powerhouses that investor influence could block loan modification efforts and that a 120-day national freeze on foreclosure activity is critical to prevent foreclosures to reach epidemic proportions.  “Legislation is being introduced,” Gnaizda said, “that has the support of the entire Democratic Party, calling for a foreclosure moratorium of 120 days.”  Gnaizda is also here to criticize the $8.68 billion settlement reached by California Attorney General Jerry Brown, Illinois Attorney General Lisa Madigan and Countrywide Financial Corp. over its alleged predatory lending practices.  The attorneys general called the settlement with Bank of America, which bought Countrywide in July, a historic achievement and the largest settlement of its kind.

But Gnaizda said it suffers from a “fatal flaw” in that it favors Wall Street investors over Main Street homeowners.  “We cannot accept the Bank of America settlement as the gold standard,” Gnaizda said he told Bair, “and despite what the California Attorney General says, Bank of America does not have the power to address those loans that are in the hands of the investors.”  Gnaizda said hedge fund investors that bought mortgage loan securities have been outspoken recently against the potential billions in losses that could occur from modifying loans.  But the California attorney general’s office told Legal Newsline on Tuesday these claims mischaracterized the settlement.  “Countywide has represented to us, and it has been documented in the judgment that it has existing authority or it has substantial investor approval to modify mortgage loans,” said Benjamin Diehl, California Deputy Attorney General for Consumer Law. “It’s one of the two, perhaps in some cases even both.”

Gnaizda, along with San Diego City Attorney Mike Aguirre, have argued that the settlement did not contain an admission of fraud by Countrywide. The pair believes that only an admission of fraud would force hedge funds to allow Bank of America to revise loans.  But the admission of fraud is not necessary, according to Diehl.  “We have the investors on board,” Diehl said, “so we have a program that is going to save homes. The dickering over whether there is an admission of fraud misses the point. The program is being lauded nationally and followed by other mortgage lenders as witnessed by recent announcements from JP Morgan Chase and Citibank.”  Aguirre, who like Brown and Madigan is a Democrat, originally called the settlement a “home run,” but has since been critical of it. Despite their party ties, Aguirre and Brown sparred frequently during the course of the Countrywide negotiations.  Aguirre is the only city attorney to have sued Countrywide. He has not yet agreed to settle his lawsuit. Aguirre also sued both Wachovia and Washington Mutual for predatory lending practices.   But Aguirre lost his bid for re-election on Nov. 4 to Republican Jan Goldsmith, who said he would drop all these suits once he assumes the city attorney post.

Diehl said other states that have sued or will soon sue Countrywide will negotiate their own settlements, though he expects most to follow suit with the deal struck by California and Illinois.  “The terms are going to be fairly universal, especially the loan modification program,” Diehl said.  Which is precisely what motivated Gnaizda’s trip to Washington. Gnaizda believes a tougher deal that ensures protection for homeowners that stop foreclosure with a moratorium providing loan modifications is the only way to ensure victims of predatory loans are protected.   He believes that only 20 % of Countrywide homeowners who face foreclosure will be helped by the settlement.  Diehl said the final percentage cannot be determined because the future of the economy remains in doubt.  “I suspect the real number will end up being higher,” he said. “How it works on the exact percentage depends somewhat on what happens with the economy in the next two and half years. Trying to speculate to a percentage is very hard to do.”  Diehl said he believes the Countrywide settlement will serve as an effective model for future protection of homeowners.

“This is a program that at the time we negotiated it with Countrywide and the attorney general of Illinois, we were proud of,” Diehl said.  “We are hopeful and confident that it will help homeowners avoid foreclosures. We’ve seen the influence it has had. On the other hand, we’re always hopeful that lenders can do more. We don’t want to be seen as a ceiling. If anything we want it be seen as a floor that even more can be done in the future, because that will help even more people save their homes.”

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According to an article written by Jay Mallin of Bloomberg News, FDIC chairwoman Sheila Bair could have a defined role with Obama administration because of her foreclosure prevention efforts. Bair continues to push the limits with expanded loan modification programs to prevent foreclosure for distressed homeowners across the country. Her recent proposal for additional mortgage relief aid puts her at odds with the Bush administration, yet the timing could be right for the next regime that continues to promote change with loan modifications and home loan reform. Sheila Bair, chairwoman of the Federal Deposit Insurance Corp remains one of the few government officials whose reputation and image may have has been improved during the subprime mortgage meltdown and foreclosure crisis. The republican woman offers a full arsenal as an author of children’s books, FDIC chairwoman who has aggressively pursued and rallied for the U.S. government to expand their scope and reach out with progressive mortgage restructuring to ease the pain for the millions of struggling homeowners. According to Mallin she is even winning praise from Democrats who appreciate her non partisan approach to fighting off foreclosure and improving predatory lending laws.

As the Bush administration gallops off into the sunset, she becomes more vocal with a strong advocating for her foreclosure and mortgage relief plan that certainly could help promote the non partisan message that President Elect, Barack Obama looks to install. Bair may just have earned herself a leading role for this new administration. Just last week she took several more steps that suggest she is on a mission as she publicly criticized the highly touted foreclosure prevention plan that Paulson’s Treasury Department and other agencies were bragging about. She pointed out the loan modification plans deficiencies that she believes fall short of what American homeowners need. On Friday, Bair released details of better mortgage loan modification plan that require a $24.4-billion injection. Her program aims to prevent 1.5 million foreclosures — even though Treasury Secretary Henry M. Paulson had told reporters earlier in the week that he had changed his mind and that they would not pay bad mortgage loans.

“Sheila’s very ambitious, and I think she’s looking for a job promotion in the Obama administration,” said Bert Ely, a banking industry consultant. “Even though she’s a Republican, she’s much more in tune with the Democrats.”Bair’s Republican registration and her Democratic leanings on handling the mortgage crisis could make her an appealing choice for Obama, analysts said. She has been mentioned as a dark-horse candidate for Treasury secretary, having served as assistant secretary for financial institutions in 2001 and 2002. She has also been thought of as a mortgage czar to oversee the various government efforts to stem foreclosures, should Obama create such a position. “I wouldn’t mind seeing her as Treasury secretary,” said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal Washington think tank. He said Obama would be “foolish” not to find a place for Bair in his administration considering her performance during the financial crisis. Bush appointed Bair, 54, to a five-year term as chairwoman of the FDIC in 2006. It is an independent agency, similar to the Federal Reserve, so Bair does not have to step down with the change of administration. Her term on the FDIC board extends even longer, until 2013. But Bair would heed the desire of the new president, said FDIC spokesman Andrew Gray. “She has said she believes any incoming president should have the power to choose their own economic team. She would respect any decisions made by the president-elect,” Gray said, adding that would include stepping down as FDIC chief or serving in a different capacity. “She would be open to his decisions on where he may think she can be best utilized,” Gray said.

The FDIC was created during the Great Depression to provide government-backed insurance for bank deposits. But its boss usually works in obscurity, except during severe financial turmoil. Bair has taken the job to a new level. She was one of the first government officials to recognize the problems of subprime loans. At a conference in October 2007, she told investors: “More needs to be done, and done sooner rather than later,” to restructure mortgages and modify mortgage loans for troubled homeowners.

She took a prominent role in the Bush administration’s response this fall, including successfully pressing for a significant expansion of deposit insurance. Bair has also made reducing foreclosures one of her priorities. After the FDIC took over failed IndyMac Bank of Pasadena in July, the agency developed a plan to reach out to struggling homeowners and make their mortgage loans more affordable. Consumer advocates marched in accordingly with praise for Bair’s foreclosure prevention efforts. The homeowners relief plan, which has had mixed results, is the basis for Bair’s $24.4-billion proposal to have the government cover as much as 50% of the losses on modified mortgage loans in hopes of persuading lenders to restructure them.

Bair’s work has drawn praise from many congressional Democrats. Last month, House Financial Services panel Chairman Barney Frank (D-Mass.) and Rep. Maxine Waters (D-Los Angeles) wrote to Bush urging him to have Bair head a government-wide effort to coordinate operations to help homeowners. Bush has not created such a position. And his administration has been cool to Bair’s mortgage restructuring plan because it calls for additional spending. Last week, federal officials announced a less ambitious plan to modify several hundred thousand holders of mortgage loans owned or guaranteed by government-run Fannie Mae and Freddie Mac. But Bair publicly criticized the plan. Then on Friday she formally rolled out her own proposal, even though the administration had said it would not fund it. Gray said the move was designed to give lawmakers and others specifics so they could decide whether the foreclosure prevention plan was worth enacting. “I think she and her staff are more focused on where the Democrats are on this than where the Republicans are,” Ely said. That could pave the way for a new job for Bair after Jan. 20. “I wouldn’t be surprised if the Obama administration [creates] a mortgage modification czar,” Ely said. “Or in this case, a mortgage modification czarina.”

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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.

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The Bush administration increased its taxpayer bailout of a single Wall Street corporation, AIG, to a colossal $150billion because the initial $85 billion bailout failed. To put that into perspective, $150 billion is more than the entire budget of the state of California. We also learned the Treasury Department, in the dark of night and without apparent legal authority, secretly changed a little- known tax law in order to give a $140billion windfall to banks at the expense of taxpayers. Meanwhile, thousands of home foreclosures continued to occur and ordinary citizens continued to suffer. The last eight years provide strong evidence that trickle-down economics is intellectually bankrupt. There is little reason to believe the current administration’s trickle-down solution of showering Wall Street with vast amounts of taxpayer monies is going to fare any better. We need a solution from the ground up, one that helps not just Gordon Gecko the banker, but Joe the homeowner.

The root cause of the financial meltdown is the massive and continuing wave of home foreclosures. In California, we had 101,100 foreclosure filings in August, which equated to about one foreclosure filing every 30 seconds. Many Wall Street firms disintegrated after the mortgage assets they held became toxic and worthless because too many homeowners started defaulting on loans. If we can reduce the number of foreclosures on the ground, we will steady Wall Street, stabilize housing prices, keep families in their homes and start our economic recovery much sooner. That is why I have authored a bill designed to force Wall Street to help the struggling homeowners on California Street. The bill, known as the California Foreclosure Prevention Act, is a bottoms-up solution that builds upon a recent proposal by Gov. Arnold Schwarzenegger.

The California Foreclosure Prevention Act contains three main points. First, the bill imposes a 120-day foreclosure moratorium on home foreclosures to allow time for the homeowner and the lender to try to work out a solution. Second, a bank can avoid the foreclosure moratorium if it has a comprehensive loan modification plan based on criteria established by the Federal Deposit Insurance Corp. Part of the criteria includes modifying mortgage loans for borrowers in default so that approximately 38% of the borrower’s debt-to-income ratio goes toward paying the mortgage. Loan-modification solutions can include freezing interest rates, reducing interest rates, reducing principal or extending the term of the loan. Third, the bill provides strong oversight and accountability provisions. There will be mandated reporting to the state Legislature and consultations with executive and legislative officials. Unlike the Bush administration’s taxpayer bailouts, not a single dime of taxpayer funds will be used to modify home loans. It is Wall Street firms and banks that will be paying for the loan modifications.

The California Foreclosure Prevention Act, if enacted into law, would be the first law in the nation to provide for a foreclosure moratorium unless banks provide a program for comprehensive loan modifications. Because states have virtually sole authority over the foreclosure process, this act would apply to both state- and federally chartered institutions. The hope is that other states will replicate this model to start forcing more loan modifications to occur.

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The government and the mortgage industry leaders announced the launch of the most sweeping effort yet to aid distressed homeowners by accelerating the process for loan modifications hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac. FHA, which seized control of the two mortgage finance companies in September, announced the plan Tuesday along with other U.S. government and industry officials, including Hope Now, an alliance of mortgage companies organized by the Bush administration last year. Foreclosures hurt families, their neighbors, whole communities and the overall housing market,” said James Lockhart, the housing finance agency’s director. “We need to stop this downward spiral.”

The mortgage modification plan could have tremendous importance because Fannie Mae and Freddie Mac own or guarantee nearly 31 million U.S. mortgage loans or nearly 6 of every 10 outstanding. Still, government officials did not have an estimate of how many people would qualify for the new program. Officials hope the new approach, which goes into effect December. 15., will become a model for loan servicing companies, which collect money for mortgage lenders and then distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.

To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 % or more than the home is currently worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy. Borrowers would get help in several ways: The interest rate would be reduced so that borrowers would not pay more than 38 % of their income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free. While mortgage lenders have beefed up their efforts to aid borrowers over the past year, their earlier efforts have not kept up with the worst housing recession in decades.

And critics were quick to pour water on the latest plan. “Instead of a massive foreclosure prevention program, we wait for a homeowner to be in a failing position before doing anything, which often is too late,” said John Taylor, president and CEO of the National Community Reinvestment Coalition. “It’s been the foreclosures that have been driving the economic downturn and we’ve been saying that for 13 months now. To stop the bleeding is to end foreclosures,” he continued. “But now that so many other sectors in the economy have fallen, I’m not sure if we’re past the point of no return. It’s appalling that they don’t get.”

More than 4 million American homeowners, or 9 % of borrowers with a mortgage were either behind on their mortgage payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association. According to former WMC mortgage executive, Scott Hess, “The clock is ticking for distressed homeowners who are looking to stop the foreclosure process and it’s about time the government stepped in to provide some much needed mortgage relief.”

Tuesday’s announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer. He moved out of his home in Mill Valley, Calif., at the start of this month — taking his children, three dogs and one cat with him — after failing at several to attempts to get a loan modification, loan work-out or a short sale — where the lender agrees to receive less than the loan is worth. Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end he couldn’t convince Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan. “I feel like I missed the boat,” he said of the new efforts to help more homeowners. “I’m just mad at the whole system.”

One reason the problem has been so tough to solve for borrowers like Courtney is that the vast majority of troubled loans were packaged into complicated investments that have proven extremely difficult to unwind. Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors around the world. And it appears the majority of those loans will not be helped by the new plan. The remaining 20 percent are “whole loans,” which are easier to modify because they have only one owner. Nevertheless, Tuesday’s announcement coupled with recent and more aggressive strategies from the major retail banks are important steps to correct the foreclosure crisis. After more than a year of slow and weak initiatives, there appears to be a serious effort to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.

Citigroup announced late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. The New York-based banking giant also said it is also working to expand the program to include mortgages for which the bank collects payments but does not own. Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said. Citi Mortgage plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal or increasing the term of the loan.

Late last month, Chase expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The mortgage lending giant has already modified about $40 billion in mortgage loans, helping 250,000 customers since early 2007. Bank of America recently stated that beginning Dec. 1, it will modify an estimated 400,000 home loans held by newly acquired Countrywide Home Loans as part of an $8.4 billion legal settlement reached with 11 states in early October.

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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.

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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.



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Chase Mortgage, also known as JPMorgan Chase has joined Countrywide and GMAC by now offering mortgage loan modifications.  According to the Associated Press, last week, Chase loss and mitigation department said it is launching a new program to reduce the number of home foreclosures it undertakes The mortgage loan bank will not put any homes into foreclosure for the next 90 days while it implements the foreclosure prevention program, which is expected to help as many as 400,000 borrowers with about $70 billion in loans.

The modification program will also be offered to customers of Washington Mutual, which JPMorgan Chase recently acquired, and EMC, which was a mortgage unit of Bear Stearns Cos. and bought by JPMorgan in February, according to the AP. The program is apparently designed to help rework multiple mortgages, instead of going through time-consuming case-by-case reviews.  Since 2007, the Chase has modified about $40 billion in mortgage loans which have helped about 250,000 homeowners.

JPMorgan’s latest, expanded plan calls for setting up 24 regional counseling centers, hiring 300 additional loan counselors, creating new home financing alternatives, reaching out to borrowers with prequalified loan modification terms, and a new process to review each loan before it enters foreclosure. Also, when JPMorgan bought Washington Mutual and EMC, it acquired many home mortgages that were called option-ARM loans that featured adjustable interest rates that allowed the borrower choose whether to pay the full mortgage loan payment or less than the interest that was due. The mortgage restructuring program will eliminate that option.

As part of a legal settlement, Bank of America has said it will start a loan modification program on Dec. 1 that is expected to cover about 400,000 loans held by Countrywide Financial Corp.  The FDIC has had some success with its loan modification program since taking over IndyMac Bancorp over the summer, which may have influenced JPMorgan’s program.  Plans for regional counseling centers, hiring additional loan counselors, and dumping those pick-a-payment options sound like a good start, even if they are a little bit late. Do you think the bank’s efforts will make a difference, or just delay the inevitable?

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