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February 2019
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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.

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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. 

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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%

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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.

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I received another inquiry about a mortgage relief through a law firm.  A loan workout is a negotiation with your attorney and lender with the goal of modifying your mortgage terms to something you can afford.  The process is very strategic and requires a significant amount of legal maneuvering to achieve the best results for you.  The attorney that represents you means “everything” to your case.  That is why you should feel comfortable working with a law firm to negotiate a reduced payment achieved through a loan modification.

Loan Modification Tips from Jeff Morris on Negotiating with Mortgage Lenders


There are 4 primary reasons why most people like working with an attorney-backed loan modification company versus a mortgage broker or individual. 


1.    First, make sure the law firm is an AV rated law firm which means it’s ranked the highest in the nation – sort of like a Johnny Cochrane style law firm. 


2.    Secondly, the lead attorney should be ranked in the top 1% in the state of California – which puts him ahead of 99% of the rest of the attorneys statewide. 


3.    Thirdly, choose a law firm that will allows you to break up your payments into 3 or 4 low payments.  This helps significantly when a person is in a financial bind. 


4.    Lastly, 95% of your calls are coming from pop up loan modification companies.  You should contract work from one of the most well respected law firms in all of California that was doing business prior to the turn of the century.


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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

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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.

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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.

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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.

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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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A Loan Modification is term for a mortgage note modification that involves a revision of terms without formally refinancing the home loan. The process involves restructuring the mortgage loan terms with a new interest rate and or a revised amortization schedule. The goal of a loan modification is to modify terms to stop a foreclosure with a mortgage payment the borrowers can afford.

Question: In utilizing the Loan Modification option to bring an asset current, can the mortgagee include all fees and corporate advances?

Answer: Mortgagee Letter 2008-21 states in part: Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.

Question : May a mortgagee perform an interior inspection of the property if they have concerns about property condition?

Answer: Yes, the mortgagee may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the mortgagor’s continued ability to support the modified mortgage payment.

Question : Can a mortgagee include late charges in the Loan Modification?

Answer: Mortgagee Letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the Loan Modification.

Question : Is there a new basis interest rate which mortgagees may assess when completing a loan modification?

Answer: Yes, Mortgagee Letter 2008-21 states that the new basis interest rate is 200 points above the monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of 10 years.

Question 6: Will HUD subordinate a Partial Claim, should a mortgagor subsequently default and qualify for a Loan Modification?

Answer: If a mortgagor subsequently defaults and qualifies for a Loan Modification, HUD will subordinate the Partial Claim.

Question 9: Can a mortgagee qualify an asset for the loan modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?

Answer: Based upon this scenario, the mortgagee should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the mortgagee should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage. Read Complete HUD Article

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The government is considering a plan that would help around 3 million homeowners avoid foreclosure, sources briefed on the matter said. A final deal had not been reached as of Wednesday afternoon and negotiations could still fall apart, but government agencies were contemplating using around $50 billion from the recently passed bailout of the financial industry to guarantee about $500 billion in mortgages. This new plan could include loan modifications that would lower interest rates for a five-year period, according to two people briefed on the mortgage loan modification plan, who asked not to be identified because details were still being worked out and the plan was not yet public. This foreclosure prevention plan would be the most generous effort yet to limit damages from the U.S. housing recession, which has damaged credit markets globally.

More than four million American homeowners with a home loan were at least one payment behind on their mortgage at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association. The government’s program would be run by the Federal Deposit Insurance Corp. The agency’s chairman, Sheila Bair, said last week she was working “closely and creatively” with the Treasury Department on such a plan, but revealed few details. Andrew Gray, an FDIC spokesman, said it would be “premature to speculate about any final framework or parameters of a potential program.” Treasury Department spokeswoman Jennifer Zuccarelli called details of the loan modification plan “simply inaccurate.” She said the Bush administration “is looking at ways to reduce foreclosures, and that process is ongoing,” but has not decided on a final approach.

Borrowers across the country have expressed anger over the government’s existing loan assistance programs, which critics say have been too slow and small in scope to have much impact on soaring foreclosures. On Wednesday, about 100 demonstrators marched in front of the headquarters of Fannie Mae, and forced a mid-afternoon meeting with the company’s chief executive, Herbert Allison. Some held signs that read “Restructure our mortgage loans now,” “Fannie Mae destroys lives” and “Foreclose on Fannie Mae.” Bruce Marks, chief executive of the Boston-based Neighborhood Assistance Corp. of America, called on Fannie Mae to adopt a program similar to the one the FDIC put in place at failed IndyMac Bank of Pasadena, Calif. Borrowers there are getting interest rates of about three percent for five years.

According to Nationwide Marketing president Bryan Dornan, “Clearly homeowners need a new opportunity to improve their mortgage payment when they do not qualify to refinance their existing home loan.” Dornan continued, “In some cases refinancing just doesn’t helped enough, so loan modification will help the homeowner, while providing a cost-effective solution for the lender because foreclosures are expensive and property values have been declining quickly.”

The nation’s top mortgage lenders will continue their discussions with the government regarding foreclosure prevention. Over the past 10 weeks, Fannie Mae says it has received more than 40,000 defaulting loans and stopped eighty percent of them from going into foreclosure. After meeting with Allison, Marks said the chief executive “understands the issue of making these mortgages affordable over the long term.” Last month, the government seized control Fannie Mae and Freddie Mac, the two biggest U.S. mortgage finance companies, with a rescue plan that could require the Treasury Department to inject as much as $100 billion into each to keep them afloat.

It was unclear Wednesday what role Fannie and Freddie would play in the government’s sweeping plan to help millions of American homeowners. But lawmakers on Capitol Hill want the companies to take a more aggressive approach. Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee said in a statement that “federal agencies and financial institutions must do more to modify the mortgages they hold in order to stop foreclosures and help families keep their homes.” By guaranteeing millions of mortgage loans, the government could help restore confidence in the market for securities backed by home loans. That was where the global credit crisis started, leading to this month’s dramatic stock market plunge. As a surprising number of homeowners began defaulting on their loans, investors could no longer put a value on the securities which were backed by pools of mortgages.

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Restructuring Mortgage Loans

28th October 2008

All right here. Since our Loan Modification Company is focused on preserving homeownership. We understand how traumatic the prospect of losing your house can be. We also understand that what you need now are clear answers, alternative solutions, and immediate action. Loan Modification Outlet is here to help you restructure your mortgage so that you can secure a monthly payment that is affordable. If your loan is insured by PMI Mortgage Insurance Company chances are good Loss Mitigation Specialists for most lenders will help you find solutions to avoid foreclosure or reduce its impact. We’re here to help at no charge to you. But the first step is up to you.

o    Learn about the workout options that might be available to you.

o    Complete the financial Information Form so that our Loss Mitigation Specialists can best assess your particular situation and help you faster.

o    Contact your mortgage lender.

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Mortgage lending measures to keep homeowners out of foreclosure have slipped, according to the State Foreclosure Prevention Working Group — a group of state attorneys general and state banking regulators working to prevent home foreclosures. “Too many homeowners are trying to avoid foreclosure without receiving any meaningful assistance by their home loan servicer,” the report concluded, “a reality that is growing worse rather than better, as the number of delinquent mortgage loans, prime and sub-prime, increases.”

The Working Group issued its third “Analysis of Subprime Mortgage Servicing Performance,” based on data collected from subprime mortgage servicers. The recent foreclosure report said nearly 8 out of 10 homeowners that are delinquent on their mortgage payment are not on track for any loan modification or loss mitigation solution that would help them to avoid foreclosure, a higher percentage than this company found in its April report.

The Working Group’s third report concluded: “While some progress has been made in preventing foreclosures, the empirical evidence is profoundly disappointing.” “Servicers appear to have reached the ‘low-hanging fruit’ of non-prime loans facing interest rate hikes, while not developing effective approaches to address the bulk of sub-prime mortgages which are in default before interest rate resets,” the report said. “Based on the rising number of delinquent mortgage loans from borrowers with good credit and projected numbers of payment option ARM loans facing reset over the next two years, we fear that continued reactive approaches will lead to another wave of unnecessary and preventable foreclosures.”

The report says “the number of mortgage loans on track for a loan modification has dropped precipitously” in recent months. “The mortgage industry’s failure to develop a more pragmatic approach to stop foreclosures has only increased  property values to decline even further with more anticipated losses on home loan portfolios,” according to the state officials’ new report.

More and more mortgage lenders are presenting loan modification options to their customers rather than taking on more properties that are worth far less than what they appear to be valued at on paper. “We are troubled that more homeowners are not receiving enough helpful assistance to stop preventable foreclosures,” said Iowa Attorney General, Tom Miller, a founder and leader of the State Foreclosure Prevention Working Group. “While banks and Wall Street firms continue to report record write-downs of mortgage loan portfolios and securities, the losses do not appear to be flowing down to the majority homeowners in the form of affordable loan modifications.” The result has been record levels of unnecessary home loan defaults that have accelerated declines in property values that have affected all of us.”

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In the wake of the recent financial bail-out, federal regulators told Congress that they are working on a plan that would help some of the distressed homeowners prevent foreclosure.  After the mortgage lending debacle became a global financial crisis, Congress called on former Federal Reserve Chairman Alan Greenspan to discuss his role with the foreclosure crisis.  Greenspan quickly warned that it will likely get worse before it gets better.

Greenspan called the banking and housing chaos a “once-in-a-century credit tsunami” that led to a breakdown in how the free market system functions. Accused of contributing to the meltdown, but denying that it was his fault, Greenspan told a House panel the crisis left him — an unabashed free-market advocate — in a “state of shocked disbelief.” The longtime Fed chief acknowledged under questioning that he had made a “mistake” in believing that banks in operating in their self-interest would be sufficient to protect their shareholders and the equity in their institutions. Greenspan called it “a flaw in the model that I perceived is the critical functioning structure that defines how the world works.” His much-anticipated appearance came as committees in both the House and the Senate held competing hearings on the financial crisis. At one such forum, a senior Treasury official said the Bush administration intends to get a program to help struggling homeowners revise mortgages up and running soon.

The U.S. government’s $700 billion financial rescue effort, told the Senate Banking Committee that the new plan could include setting standards for restructuring mortgage loans that makes them affordable to the homeowner while providing a guarantee to banks that follow the foreclosure prevention procedures. According to Neel Kashkari, who is overseeing the government’s $700 billion financial rescue, “We are passionate about doing everything we can to avoid preventable foreclosures,” he said.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the same Senate panel that the government needs to do more to help tens of thousands of home borrowers avert foreclosure, including setting standards for modifying mortgages into more affordable FHA mortgage loans and providing loan guarantees to banks and other mortgage services that meet them. “Loan guarantees could be used as an incentive for servicers to modify loans,” Bair said. “By doing so, unaffordable home loans could be converted into loans that are sustainable over the long term.” Emergency Economic Stabilization Bill provided a new provision for mortgage lenders to help homeowners avoid foreclosure with a mortgage loan modification agreement. FHA continues to promote sensible loans featuring fixed rate terms and flexible credit guidelines that encourage homeowners to refinance rather than lose their homes to foreclosure. The FDIC is working “closely and creatively” with the Treasury Department on such a plan, she said.

Greenspan told the House Oversight Committee he was wrong in believing that banking institutions would be more prudent in their mortgage lending practices because of the need to protect their stockholders. Greenspan, who stepped down in February 2006 after serving as Fed chairman for 18 1/2 years, was asked to explain and elaborate his role regarding the sub-prime mortgage crisis. Some critics have blamed him for contributing to the problem by leaving interest rates too low for too long and for failing to regulate risky banking practices. Committee Chairman Henry Waxman, D-Calif., suggested that Greenspan contributed to “irresponsible lending practices” by rejecting appeals that the Fed intervene to regulate a surging subprime mortgage industry. “The list of regulatory mistakes and misjudgments is long,” Waxman said of oversight by the Fed and other federal regulators. “My question for you is simple,” Waxman told Greenspan. “Were you wrong?” “Well, partially,” Greenspan said. But he went on to assign the blame on soaring home loan foreclosures on overeager investors who did not properly take into account the threats that would be posed once housing sector stopped its unprecedented upward trend. 

Committee members accused existing and former regulators for not doing more to stop abusive predatory and risky lending practices. Christopher Cox, chairman of the Securities and Exchange Commission, acknowledged to the House panel that “somewhere in this terrible mess, laws were broken.” He said the government was doing the best it could to identify and pursue individuals and companies that broke the law.

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Foreclosure Lawyers of California recently announced expansion of their loan modification program for homeowners facing foreclosure for their California homes.  The number of foreclosures in California continues to explode. If you are facing foreclosure, consider the Foreclosure Lawyers of California because they have a record of proven results for homeowners seeking foreclosure prevention, mortgage restructuring and debt settlement.


According to loan modifier, Jeff Morris, “Homeowners need advice and affordable mortgage payments.”  Morris continued, “Borrowers are starting to realize that there are significant benefits that come with working with a law firm that specializes in defending families and their homes.”  Unforntunately, not all loan modification companies are looking out for the best interest of their client’s.  Attorney Matt McCormick added, “When you sign a retainer with a law firm like Foreclosure Lawyers of America you have unlimited foreclosure fighting resources, because we will do what it takes to keep the family in their house.”


The Foreclosure Lawyers’ foreclosure relief department has dedicated a team of loan modification professionals, attorneys and underwriters who boast of significant mortgage industry experience. Their team pledges to work diligently with your lender and/or invoke Federal Court Remedies to facilitate a solution that fits your budget and goals.

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With California impacted more than any other state by the national home foreclosure crisis, Governor Arnold Schwarzenegger worked with loan servicers from Countrywide, GMAC, Litton and HomEq to agree to streamline “fast-track” procedures with loan modification solutions that could help stop foreclosures with sub-prime borrowers.  Together these four enterprises service more than 25 percent of issued subprime mortgage loans.


“With this type of cooperation from loan servicers, we can save tens of thousands of people from being added to the foreclosure lists. This common-sense approach does not involve a government subsidy or bailout,” said Governor Schwarzenegger. “Borrowers need to do their part too.  If these lenders are willing to meet more than halfway, it’s important that consumers don’t run when they reach out. It was a two-way street that got us into this mess and it will be a two-way street that gets us out.”


The agreement the Governor negotiated with lenders builds off a proposal put forward by Federal Deposit Insurance Corporation Chair Sheila Bair that encourages lending agencies to keep subprime mortgage borrowers at their initial interest rate if they are living in their home, making timely payments, but can’t afford the loan “re-set”–or jump to a higher rate. A half million Californians have sub-prime mortgages that will jump to higher rates in the next two years. Bair’s proposal has been endorsed by the newspapers including the Wall Street Journal and New York Times as well as public and community leaders. Governor Schwarzenegger is the first to spur servicers to publicly commit to modifying loans in a streamlined and scalable manner.


Schwarzenegger also announced additional steps the state is taking to help homeowners avoid foreclosure.  Through a statewide outreach campaign, which will include public service announcements, the Governor will help reinforce the importance for consumers to reach out to their lender if they are at risk of foreclosure.  The Governor will also continue to lobby Congress to raise federal loan limits so that more California families can take advantage of these secure products, rather than relying on subprime loans.  “Losing your home in a foreclosure is an emotional crash that can take years to recover from, but we don’t have to sit idly by and watch the American dream turn into the American nightmare. We must take steps at both the state and federal level to make sure future mortgages are on more sound economic footing.  In the meantime, by working together, we can protect the American dream and our economy without hurting the American taxpayer,” said Governor Schwarzenegger.


Seven of the top sixteen metropolitan areas with the highest rates of foreclosures in the nation are in California, according to the latest data from RealtyTrac. In the Stockton, Riverside/San Bernardino, Sacramento, Bakersfield, Oakland, Fresno and San Diego metropolitan areas, there was an average rate of approximately one foreclosure filing for every sixty households in the last quarter. The Governor made his announcement this morning at a meeting with San Joaquin Valley elected, business and community leaders in Fresno, which ranked 13 on the list.


This year, Governor Schwarzenegger signed legislation to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities.  The Governor has also pledged to work with lawmakers in the coming year to take additional steps to protect homebuyers.   Earlier this year, the Governor directed his Cabinet to form the Interdepartmental Task Force on Non-Traditional Mortgages. California was one of the first states in the nation to form a task force to examine the alarming developments in the non-traditional mortgage market.  The task force consists of leadership from two agencies and seven departments responsible for all aspects of this complex issue.

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Governor Arnold Schwarzenegger today announced the launch of the Community Stabilization Home Loan Program, a special program designed to help first-time homebuyers purchase homes in communities hardest hit by the foreclosure crisis.  Under the program, first-time homebuyers will be eligible for below-market interest rate loans to purchase foreclosed homes in ZIP codes with some of the state’s highest foreclosure rates.  ”We have taken a number of actions to help prevent foreclosures, but we also want to address the many already-foreclosed-on homes that sit vacant in our neighborhoods today,” said Governor Schwarzenegger. “This program will not only make it easier for families to purchase their first home, but will also help stabilize neighborhoods that have homes sitting empty.  No one single effort can solve our nationwide housing crisis, but together these measures make an important difference in California’s neighborhoods.”  Mortgage lenders are required to make every effort possible to provide foreclosure prevention solutions with loan modifications.

Run by the California Housing Finance Agency, a state agency that finances safe, affordable loans for first-time homebuyers, the program will be available in ZIP codes identified as the most impacted by foreclosures in California including Riverside, Stanislaus, San Joaquin and Merced counties. Areas in Los Angeles, Contra Costa and Alameda counties are also included.  Several mortgage lenders have agreed to partner in the program and offer sales prices on bank-owned properties at least 12 percent below estimated value in the identified ZIP codes.

The $200 million bond fund allocation is provided by the California Debt Limit Allocation Committee to fund the program at no cost to the state’s General Fund.  “This mortgage relief package will give many first time home buyers the opportunity to attain the American dream while also helping areas of the state that have been hit hardest by the mortgage crisis,” said State Treasurer Bill Lockyer, who chairs the Committee.  “I commend the Governor and CalHFA for their leadership and am pleased to work with them to help address California’s housing crisis.”

California has been impacted more than any other state by the national home foreclosure crisis, and the state has taken aggressive steps to help homeowners facing problems with their mortgages. To help those hit hard by the housing crisis, the Governor has:



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Over 100 million households have learned about where to go for help if they’re experiencing mortgage trouble that might lead to foreclosure through a national public service advertising campaign led by NeighborWorks(R) America in partnership with the Ad Council.  Launching with material financial support from the home loan and financial services industries in June 2007, the television, radio, Internet and outdoor ad campaign is the third most active Ad Council campaign, trailing only the organization’s effort to promote broadcast TV parental controls and the long-running drunk driving prevention campaign.

In all, the mortgage and financial services industry supported public service advertising campaign has generated nearly $74 million in donated ad time.  As a result of this and other outreach efforts by participating non-profit organizations, mortgage lenders and thousands of homeowners who faced possible home foreclosure have contacted non-profit housing counselors around the county and received information regarding loan modifications that can help families avoid foreclosure.

“The advertising campaign continues to show progress and success,” said Kenneth D. Wade, CEO of NeighborWorks America. “With more than 100 million broadcast, Internet and outdoor media impressions since the campaign’s launch a year ago, we know that many people who would have been foreclosed upon have prevented foreclosure and remain in their homes.”

“The current financial crisis has its beginnings in the weakness of the housing market,” explained Wade. “We believe that an important step in reversing the current decline in the housing market involves continued outreach to homeowners with the right information they need to help them save their homes or get into a more sustainable housing situation. That’s why this effort will continue into 2009 and NeighborWorks America is working on additional tactics to help strengthen homeownership and stabilize communities.”

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Millions of people across the nation are facing home loan defaults and ultimately foreclosure.  The foreclosure epidemic has spread throughout every state because of the slumping home sales and mortgage crisis. One popular option that many borrowers are taking to prevent foreclosure is called a loan modification. This refinancing alternative is becoming more realistic for the “average borrower” because mortgage lenders do not want to take on more properties because it has already almost dried up the liquidity of the banking institutions.  The lending companies have come to realize that keeping the homeowners in their residence actually makes the most sense.  Property values have been declining so fast, that the banks will lose more money if they let the foreclosures continue to occur at such a rapid pace.  Foreclosures can be a very costly process for banks and lenders with the average foreclosure costing the bank about $75,000 to sell the home.  Those are costs that are added to the loss from the real estate depreciation.

A loan modification is a revised agreement, in which the lender modifies the current terms and reduces the monthly payment for the borrower.  The primary objective of a loan modification is to restructure the mortgage to a payment that is affordable for the homeowner. Recent state legislation and Congressional initiatives require lenders to make possible every effort to provide loan modifications to homeowners risking foreclosure.

How can a homeowner be sure that they are receiving the full benefit of a loan modification? First of all, borrowers need to learn everything they can about the process of a bank loan modification. Lenders have set up Loss Mitigation Departments specifically to assist borrowers with this option. There are many companies now offering loan modification assistance for a fee. The problem with these companies is they require a large upfront fee with no guarantee of the outcome.  Until recently, mortgage lenders were not proactive in their efforts to help prevent these mounting foreclosures.  The foreclosure epidemic has caused a rift in many families as the divorce rate has increased significantly in the last two years.

Loan Modification Outlet has assembled a team of Christian lawyers and experienced loan modifiers to provide homeowners across the country a better option to foreclosure. Our team strives to to help people retain their homeownership by modifying their mortgage with affordable monthly payments.

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Consumer debt continues to climb each year. Clearly, Americans have a problem spending more money than they have. Debt to income ratios have been increasing significantly with consumers as incomes are declining while outstanding balances increase at a rapid pace. Over the last ten years, homeowners have been able to take out home equity loans and consolidate their credit card debts into a lower more responsible fixed rate payment that they could afford. Back then home values rose annually, so borrowers could refinance their spending problems every few years. When the subprime mortgage debacle turned into a credit crunch, mortgage lenders quickly tightened their loan guidelines. Almost simultaneously, home values began to decline and homeowners were no longer able to refinance and consolidate their debt. People began losing their homes because they were defaulting on their home loans.

Unfortunately a foreclosure epidemic arose and banks began to fail because with increased foreclosures came a serious liquidity problem that significantly limited banks to lend to each other. Even when the Federal Reserve cut interest rate many times, the credit crunch got worse.

Now Americans find themselves with high rate credit card debt and mortgages that are larger than their homes are actually worth. Homeowners aren’t able to refinance for lower payments, debt consolidation or cash out. With home equity loans disappearing, debt settlement has increased dramatically because its legal and gives consumers a true alternative to bankruptcy. Debt settlement provides debt relief because the debt negotiation companies are able to reduce your balances and pay-off your revolving debt that carries the compounding interest.

The other refinancing alternative that has risen in popularity with homeowners has been loan modifications. Mortgage loan modifications are the result of banks restructuring loans for borrowers so they can avoid a foreclosure. The liquidity of banks has eroded in the foreclosure epidemic and now delinquent homeowners seem to have more leverage, because mortgage lenders don’t want your home anymore.

Bryan Dornan is a mortgage industry expert who has published many financial articles online. Mr. Dornan operates several companies like Lead Planet, Loan Modification Outlet and Nationwide Marketing. Dornan recommends the following debt relief websites: debt settlement and Loan Modification. Article Source:

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A new law enacted on July 8, 2008, now requires Lenders of residential loans in the State of California to accept loan modifications in most foreclosure situations.  California Civil Code 2923.6 went into effect on July, 2008, and applies to all residential loans made from January 1, 2003, to December 31, 2007, inclusive, that are secured by residential real property and are for owner-occupied residences.

Practically all residential mortgages have Pooling and Servicing Agreements (“PSA”) since they were transferred to various Mortgage Backed Security Trusts after origination.  These vehicles likewise almost always contain a duty to maximize net present value to its investors and related parties.  Under the new laws, California Civil Code 2823.6 broadens and extends this PSA duty by requiring servicers to accept loan modifications with borrowers.

Essentially, California Civil Code 2923.6(a) states that “a servicer acts in the best interest of all parties if it agrees to or implements a loan modification where the (1) loan is in payment default, and (2) anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.”

Likewise, California Civil Code 2923.6(b) now provides ”that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.”

So what does all this mean?  Well, lets take an example:

John Martin’s loan is presently in default, or reasonably foreseeable of near default.  The house he previously bought 2 years ago for $800,000 with a $640,000 first and $140,000 second, has now plummeted to $375,000.  While Mr. Martin can no longer afford the $9,000 per month mortgage payment, he is willing, able, and ready to execute a modification of his loan on the following terms:

a) New Loan Amount: $330,000.00

b) New Interest Rate: 4.75% fixed

c) New Loan Length: 30 years

d) New Payment: $1,721.44

While this new loan amount of $330,000 is less than the current fair market value, the costs of foreclosure need to be taken into account.  Foreclosures typically cost the lender $50,000 per foreclosure.  For example, the Joint Economic Committee of Congress estimated in June, 2007, that the average foreclosure results in $77.935.00 in costs to the homeowner, lender, local government, and neighbors. Of the $77,935.00 in foreclosure costs, the Joint Economic Committee of Congress estimates that the lender will suffer $50,000.00 in costs in conducting a non-judicial foreclosure on the property, maintaining, rehabilitating, insuring, and reselling the property to a third party. Freddie Mac places this loss higher at $58,759.00.  

Accordingly, the anticipated recovery through foreclosure on a net present value basis is $325,000.00 or less and the recovery under the proposed loan modification at $330,000.00 exceeds the net present recovery through foreclosure of $325,000.00 by over $5,000.00.  Thus California Civil Code 2923.6 would mandate a loan modification to the new terms.

The homeowner just got a new arrow to add to his foreclosure defense quiver.  Pursuant to California Civil Code 2923.6, the lender is now contractually bound to accept the loan modification as provided above.  Failure to do so should allow the borrower to sue for specific performance or wrongful foreclosure in State Court.   Written by Michael G. Doan

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