More On The Struggle To Fight Foreclosure
Even the Obama administration admits that its Making Home Affordable modification program has gotten off to a rocky start. This morning, the White House released the first official stats of the $75 billion initiative. So far, lenders have offered to modify mortgages for 406,540 delinquent borrowers. But only 235,250 of those home loans have been put into trial modifications by participating loan servicing firms. Among those, only 50,000 were successful, The American Prospect reports. Compare that to the number of people in danger of foreclosure -- 3.5 million, according to the Center for Responsible Lending -- and it becomes clear that the program is woefully under performing.
Click Here!Matthew Katz at NPR's Planet Money blog links to a New York Times story that explains one major problem the program faces: Despite subsidies from the government, it often makes more financial sense for banks to collect delinquency fees instead of spending resources to alter loans. More from the Gray Lady:
Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.
The Woodstock Institute points out some flaws in the Boston Federal Reserve paper underlying this emerging consensus, including the fact that a majority of the modifications made during the period studied did not actually lower monthly payments. Instead, servicers actually "increased or held constant the payment amount" on the off-chance that the economy would rebound and homeowners would suddenly be able to pay off their loan. That clearly hasn't happened. But with added governmental pressure on the banks, Woodstock says loan mods are still "still the most important tool available to avoid the negative effects of foreclosures on our communities."
Click Here!
But this new data also supports Sen. Dick Durbin's claim that alternatives, like right-to-rent or mortgage bankruptcy reform, are needed at the federal level to stop the flood of foreclosures. Even if Making Home Affordable picks up steam, the numbers are just too daunting to stay the course.
Click Here!
Produce The Note “How-To”
Fight Foreclosure: Make ‘Em Produce The Note!
Using the “produce the note” strategy is something all homeowners facing foreclosure can do. If you believe you’ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process. Read the step by step “how to” under the videos.
Special note: In some states, a lender can foreclose on your home without going to court. These are called non-judicial foreclosure states. You can still use the “Produce the Note” strategy in these states, but it takes a few more steps on your part.
WHO OWNS THE NOTE?
Your goal is to make certain the institution suing you is, in fact, the owner of the note (see steps to follow below). There is only one original note for your mortgage that has your signature on it. This is the document that proves you owe the debt.
During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street. In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage. This is the key to the produce the note strategy. Now, many lenders are moving to foreclose on homeowners, resulting in part from problems they created, and don’t have the proper paperwork to prove they have a right to foreclose.
THE HARM
If you don’t challenge your lender, the court will simply allow the foreclosure to proceed. It’s important to hold lenders accountable for their carelessness. This is the biggest asset in your life. It’s just a piece of paper to them, and one they likely either lost or destroyed.
When you get a copy of the foreclosure suit, many lenders now automatically include a count to re-establish the note. It often reads like this: “…the Mortgage note has either been lost or destroyed and the Plaintiff is unable to state the manner in which this occurred.” In other words, they are admitting they don’t have the note that proves they have a right to foreclose.
If the lender is allowed to proceed without that proof, there is a possibility another institution, which may have bought your note along the way, will also try to collect the same debt from you again.
A Tennessee borrower recently had precisely that happen to her. Her lender, Ameriquest, foreclosed on her in July of 2007. About three months later, another bank sent her a default notice for the mortgage on the house she just lost. She called to find out what was going on. After being transferred from place to place and left on hold for lengthy periods of time, no one could explain what happened. They said they would get back to her, but never did. Now, she faces the risk of having her credit continually damaged for a debt she no longer owes.
FIGHT FOR FAIRNESS
This process is not intended to help you get your house for free. The primary goal is to delay the foreclosure and put pressure on the lender to negotiate. Despite all the hype about lenders wanting to help homeowners avoid foreclosure, most borrowers know that’s not the reality.
Too many homeowners have experienced lender resistance to their efforts to work out a payment structure to keep them in their homes. Many lenders bear responsibility for these defaults, because they put borrowers into unfair loans using deceptive, hard-sell practices and then made the problem worse with predatory servicing.
Most homeowners just want these lenders to give them reasonable terms on their mortgages, many of which were predatory to begin with. With the help of judges who see through these predatory practices, lenders will feel the pressure to work with borrowers to keep them in their homes. Don’t forget lenders made incredible amounts of money by using irresponsible practices to issue and service these loans. That greed led to the foreclosure crisis we’re in today. Allowing lenders to continue foreclosing on home after home, destroying our neighborhoods and our economy hurts us all. So, make it hard for your lender to take your home. Make ‘em produce the note!
STEPS TO FOLLOW
A. If your lender has already filed suit to foreclose on your home:
Use the first form. It’s a fill-in-the-blank legal request to your lender asking that the original note be produced, before it can proceed with the foreclosure. In some jurisdictions, the courts require the original request to be filed with the clerk of court and a copy of the request to be sent to the attorney representing the lender. To find out the rules where you live, call the Clerk of Court in your jurisdiction.
If the lender’s attorney does not respond within 30 days, file a motion to compel with the court and request that the court set a hearing on your motion. That, in effect, asks the judge to order the lender to produce the documents.
The judge will issue a ruling at your hearing. Many judges around the country are becoming more sympathetic to homeowners, because of the prevalence of predatory lending and servicing. In the past, many lenders have relied upon using lost note affidavits, but in many cases, that’s no longer enough to satisfy the judge. They are holding the lender to the letter of the law, requiring them to produce evidence that they are the true owners of the note.
For example:
In October 2007, Ohio Federal Court Judge Christopher Boyko dismissed 14 foreclosure cases brought by investors, ruling they failed to prove they owned the properties they were trying to seize.
B. If you are in default, but your lender has not yet filed suit against you:
Use the second form. It’s a fill-in-the-blank letter to your lender which also requests they produce the original note, before taking foreclosure action against you.
If the lender does not respond and files suit against you to foreclose, follow the steps above.
Using the “produce the note” strategy is something all homeowners facing foreclosure can do. If you believe you’ve been treated unfairly, fight back. We have created templates for a legal request, a letter to your lender and a motion to compel to help you through the process. Read the step by step “how to” under the videos.
Special note: In some states, a lender can foreclose on your home without going to court. These are called non-judicial foreclosure states. You can still use the “Produce the Note” strategy in these states, but it takes a few more steps on your part.
WHO OWNS THE NOTE?
Your goal is to make certain the institution suing you is, in fact, the owner of the note (see steps to follow below). There is only one original note for your mortgage that has your signature on it. This is the document that proves you owe the debt.
During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street. In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage. This is the key to the produce the note strategy. Now, many lenders are moving to foreclose on homeowners, resulting in part from problems they created, and don’t have the proper paperwork to prove they have a right to foreclose.
THE HARM
If you don’t challenge your lender, the court will simply allow the foreclosure to proceed. It’s important to hold lenders accountable for their carelessness. This is the biggest asset in your life. It’s just a piece of paper to them, and one they likely either lost or destroyed.
When you get a copy of the foreclosure suit, many lenders now automatically include a count to re-establish the note. It often reads like this: “…the Mortgage note has either been lost or destroyed and the Plaintiff is unable to state the manner in which this occurred.” In other words, they are admitting they don’t have the note that proves they have a right to foreclose.
If the lender is allowed to proceed without that proof, there is a possibility another institution, which may have bought your note along the way, will also try to collect the same debt from you again.
A Tennessee borrower recently had precisely that happen to her. Her lender, Ameriquest, foreclosed on her in July of 2007. About three months later, another bank sent her a default notice for the mortgage on the house she just lost. She called to find out what was going on. After being transferred from place to place and left on hold for lengthy periods of time, no one could explain what happened. They said they would get back to her, but never did. Now, she faces the risk of having her credit continually damaged for a debt she no longer owes.
FIGHT FOR FAIRNESS
This process is not intended to help you get your house for free. The primary goal is to delay the foreclosure and put pressure on the lender to negotiate. Despite all the hype about lenders wanting to help homeowners avoid foreclosure, most borrowers know that’s not the reality.
Too many homeowners have experienced lender resistance to their efforts to work out a payment structure to keep them in their homes. Many lenders bear responsibility for these defaults, because they put borrowers into unfair loans using deceptive, hard-sell practices and then made the problem worse with predatory servicing.
Most homeowners just want these lenders to give them reasonable terms on their mortgages, many of which were predatory to begin with. With the help of judges who see through these predatory practices, lenders will feel the pressure to work with borrowers to keep them in their homes. Don’t forget lenders made incredible amounts of money by using irresponsible practices to issue and service these loans. That greed led to the foreclosure crisis we’re in today. Allowing lenders to continue foreclosing on home after home, destroying our neighborhoods and our economy hurts us all. So, make it hard for your lender to take your home. Make ‘em produce the note!
STEPS TO FOLLOW
A. If your lender has already filed suit to foreclose on your home:
Use the first form. It’s a fill-in-the-blank legal request to your lender asking that the original note be produced, before it can proceed with the foreclosure. In some jurisdictions, the courts require the original request to be filed with the clerk of court and a copy of the request to be sent to the attorney representing the lender. To find out the rules where you live, call the Clerk of Court in your jurisdiction.
If the lender’s attorney does not respond within 30 days, file a motion to compel with the court and request that the court set a hearing on your motion. That, in effect, asks the judge to order the lender to produce the documents.
The judge will issue a ruling at your hearing. Many judges around the country are becoming more sympathetic to homeowners, because of the prevalence of predatory lending and servicing. In the past, many lenders have relied upon using lost note affidavits, but in many cases, that’s no longer enough to satisfy the judge. They are holding the lender to the letter of the law, requiring them to produce evidence that they are the true owners of the note.
For example:
In October 2007, Ohio Federal Court Judge Christopher Boyko dismissed 14 foreclosure cases brought by investors, ruling they failed to prove they owned the properties they were trying to seize.
B. If you are in default, but your lender has not yet filed suit against you:
Use the second form. It’s a fill-in-the-blank letter to your lender which also requests they produce the original note, before taking foreclosure action against you.
If the lender does not respond and files suit against you to foreclose, follow the steps above.
Mortgage Crisis Over? Please, It's Just Beginning
Now that all those sub-prime loans have defaulted and folks who couldn't afford their houses have been evicted, the foreclosure crisis is over, right?
Wrong.
Why?
Because subprime loans aren't the only loans that began with a couple of years of fantastic teaser rates that made houses seem affordable. And over the next few years, all of those other loans will reset.
Now that interest rates are low, the folks who still have jobs and equity in their houses will refinance. Others, however, will be stuck paying higher rates--or they'll walk away from their houses.
Fund manager John Hussman of the Hussman Funds explains:
If there is any good news at present, it is that the capital infusions of late-2008 have temporarily stabilized the banking system, and that the U.S. economy is presently enjoying a brief and modest reprieve from the financial crisis. This is largely the result of an ebbing in the rate of sub-prime mortgage resets, which reached their peak in mid-2008, with corresponding mortgage losses and foreclosures a few months later. Since this crisis began, the profile of mortgage resets has been well-correlated with subsequent foreclosures.
Unfortunately, the reset schedule above depicts only sub-prime mortgages. As the recent housing bubble progressed, the profile of mortgage originations changed, so that at the very peak of the housing bubble, new originations took the form of Alt-As (low or no requirement to document income) and Option-ARMs (teaser rates, with no required principal repayments).
A broader profile of mortgage resets is presented below (though even this chart does not include the full range of adjustable mortgage products).
This reset profile is of great concern, because the majority of resets are still ahead. Moreover, the mortgages to which these resets will apply are primarily those originated late in the housing bubble, at the highest prices, and therefore having the largest probable loss. Though many of these mortgages are tied to LIBOR, and therefore benefit from low LIBOR rates, the interest rates on the mortgages are typically reset to a significant spread above LIBOR, and this spread remains constant as interest rates change. Undoubtedly, some Alt-A and option-ARM foreclosures have already occurred, but the likelihood is that major additional foreclosures and mortgage losses lie ahead. If we fail to address foreclosure abatement during the current window of opportunity (early to mid-2009), there may not be time for legislative efforts to contain the resulting fallout.
Wrong.
Why?
Because subprime loans aren't the only loans that began with a couple of years of fantastic teaser rates that made houses seem affordable. And over the next few years, all of those other loans will reset.
Now that interest rates are low, the folks who still have jobs and equity in their houses will refinance. Others, however, will be stuck paying higher rates--or they'll walk away from their houses.
Fund manager John Hussman of the Hussman Funds explains:
If there is any good news at present, it is that the capital infusions of late-2008 have temporarily stabilized the banking system, and that the U.S. economy is presently enjoying a brief and modest reprieve from the financial crisis. This is largely the result of an ebbing in the rate of sub-prime mortgage resets, which reached their peak in mid-2008, with corresponding mortgage losses and foreclosures a few months later. Since this crisis began, the profile of mortgage resets has been well-correlated with subsequent foreclosures.
Unfortunately, the reset schedule above depicts only sub-prime mortgages. As the recent housing bubble progressed, the profile of mortgage originations changed, so that at the very peak of the housing bubble, new originations took the form of Alt-As (low or no requirement to document income) and Option-ARMs (teaser rates, with no required principal repayments).
A broader profile of mortgage resets is presented below (though even this chart does not include the full range of adjustable mortgage products).
This reset profile is of great concern, because the majority of resets are still ahead. Moreover, the mortgages to which these resets will apply are primarily those originated late in the housing bubble, at the highest prices, and therefore having the largest probable loss. Though many of these mortgages are tied to LIBOR, and therefore benefit from low LIBOR rates, the interest rates on the mortgages are typically reset to a significant spread above LIBOR, and this spread remains constant as interest rates change. Undoubtedly, some Alt-A and option-ARM foreclosures have already occurred, but the likelihood is that major additional foreclosures and mortgage losses lie ahead. If we fail to address foreclosure abatement during the current window of opportunity (early to mid-2009), there may not be time for legislative efforts to contain the resulting fallout.
BEWARE: Lenders Slick Tactics
WARNING!
Once you have entered into an agreement to have your loan modified and signed an authorization to represent, your lender may be QUICK to call you. This call will be made in an effort to offer you some kind of deal, which more than likely, will not be to your best long term interest. In some instances this change is a short term one; 3, 6, 8 or 11 month change then you go back to the same struggle. A loan modification is a permanent change for 30 to 40 years in most cases. Just be aware of what you accept, you should allow your negotiator to negotiate on your behalf before accepting ANY terms directly from lender (refer to blog Mortgage Companies Still Determine How Much Help is Given February 18, 2009).
While you are waiting to get your loan modified SAVE, SAVE, SAVE (as best as you can) one to two mortgage payments, some lenders are asking for some type of down payment. Also, due to the high default rate of previous loan modifications (approximately 50% default) lenders are offering payment arrangements for up to 3 months and then give clients a modification. This is in an effort to assure that the client is able to make the payments. This is still tough to negotiate, but it can be done.
Once you have entered into an agreement to have your loan modified and signed an authorization to represent, your lender may be QUICK to call you. This call will be made in an effort to offer you some kind of deal, which more than likely, will not be to your best long term interest. In some instances this change is a short term one; 3, 6, 8 or 11 month change then you go back to the same struggle. A loan modification is a permanent change for 30 to 40 years in most cases. Just be aware of what you accept, you should allow your negotiator to negotiate on your behalf before accepting ANY terms directly from lender (refer to blog Mortgage Companies Still Determine How Much Help is Given February 18, 2009).
While you are waiting to get your loan modified SAVE, SAVE, SAVE (as best as you can) one to two mortgage payments, some lenders are asking for some type of down payment. Also, due to the high default rate of previous loan modifications (approximately 50% default) lenders are offering payment arrangements for up to 3 months and then give clients a modification. This is in an effort to assure that the client is able to make the payments. This is still tough to negotiate, but it can be done.
Loan Modifications Getting Eaiser
Mortgage banks are making the job easier to get loan modifications done. Banks feel they have something to gain if your loan is modified. Remember the HOPE Now and the FHA modification programs, they promised to help thousands, well to date they have helped a combined 600 people approximately. There is no need to believe that any part of the Presidents Mortgage package is going to be different. Think of all the government and state backed programs that you can think of, okay now, how many of those programs are operating the way they should or to your satisfaction. New Jersey introduced their own mortgage plan but can’t get it off the ground because they are not offering enough financial incentive to attract quality employees to facilitate it.
If the government spent even an hour with the people who actually need help and that are genuinely attempting to make a better life for themselves and their families, they would see the flaws in the system. The banks were not interested in helping the borrower when there was an incentive to add hundreds of thousands of dollars in interest to the bottom-line, why would they jump at the opportunity to get $1000 per person.
What it really comes down to is how bad do you want your home and how hard will you work to keep it. The job to keep your home is not going to be an easy task without an advocate in your corner. Banks will offer the most lucrative plan that benefits their budget not yours. To an unaware consumer this is the option that they may take without exploring better alternatives. Remember “don’t be a statistic”, get help, PROFESSIONAL help.
If the government spent even an hour with the people who actually need help and that are genuinely attempting to make a better life for themselves and their families, they would see the flaws in the system. The banks were not interested in helping the borrower when there was an incentive to add hundreds of thousands of dollars in interest to the bottom-line, why would they jump at the opportunity to get $1000 per person.
What it really comes down to is how bad do you want your home and how hard will you work to keep it. The job to keep your home is not going to be an easy task without an advocate in your corner. Banks will offer the most lucrative plan that benefits their budget not yours. To an unaware consumer this is the option that they may take without exploring better alternatives. Remember “don’t be a statistic”, get help, PROFESSIONAL help.
YOU MAY NOT QUALIFY FOR HELP....on your own!!!
The Foreclosure Plan For People Not In Foreclosure
Under the new program rolled out by President Obama there are many stipulations. The plan does not help those who are in foreclosure or in default. If you as a home owner do not understand how to structure a financial expense and income sheet that your mortgage company wants to see, you will be denied a modification. As stated in a previous post the mortgage companies still determine "Who (gets modified) and How Much (of a modification)". Without having a professional assist you, you can change your new full time job description to "Saving My Home". Most people (80%) that attempt to "do it themselves" lose their savings and their home. Look we could fix or own cars, represent ourselves in court and even take a home remedy, but why would you when there are professionals that can do a much better job.
Now don't just get help from anybody investigate a few areas:
· Length of time in business
· Who is running the company and their background
· The track record. Can THEY provide Referrals?
· Before you spend a dime, can they give you a written guarantee
· Are they giving you a guarantee, either the modification will be done
· GUARANTEED and/or any money spent will be refunded back to you if it is not modified
The most important of all of these; can you track your progress yourself. Unfortunately you may not find out you are losing your home until it is too late. Do your homework and your due diligence, don't be a statistic.
Under the new program rolled out by President Obama there are many stipulations. The plan does not help those who are in foreclosure or in default. If you as a home owner do not understand how to structure a financial expense and income sheet that your mortgage company wants to see, you will be denied a modification. As stated in a previous post the mortgage companies still determine "Who (gets modified) and How Much (of a modification)". Without having a professional assist you, you can change your new full time job description to "Saving My Home". Most people (80%) that attempt to "do it themselves" lose their savings and their home. Look we could fix or own cars, represent ourselves in court and even take a home remedy, but why would you when there are professionals that can do a much better job.
Now don't just get help from anybody investigate a few areas:
· Length of time in business
· Who is running the company and their background
· The track record. Can THEY provide Referrals?
· Before you spend a dime, can they give you a written guarantee
· Are they giving you a guarantee, either the modification will be done
· GUARANTEED and/or any money spent will be refunded back to you if it is not modified
The most important of all of these; can you track your progress yourself. Unfortunately you may not find out you are losing your home until it is too late. Do your homework and your due diligence, don't be a statistic.
Obama foreclosure fix open for business
Federal officials release details of $75 billion loan modification and refinancing programs. Start contacting loan servicers.
Last Updated: March 4, 2009: 2:54 PM ET
NEW YORK (CNNMoney.com) -- The Obama administration's foreclosure prevention program is open for business.
The multipronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so housing payments are no more than 31% of monthly gross income. Separately, homeowners who haven't missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.
The $75 billion loan modification plan will provide incentives to borrowers and loan servicers and investors to spur mortgage modifications. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.
"This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans," said Housing Secretary Shaun Donovan.
Administration officials once again stressed that they are not using taxpayer money to bailout irresponsible homebuyers, listing those who will not qualify for assistance: people who bought investment properties, lied on their mortgage documents or purchased multimillion dollar homes.
Borrowers can now contact their servicers to see whether they are eligible for assistance. Federal officials have posted additional information for borrowers to determine their eligibility at www.hud.gov. They will also promote the program at homeownership events nationwide.
Who's eligible for modification?
The administration Wednesday released additional eligibility criteria and program guidelines.
The loan modification plan focuses on people who are behind in their payments or are at risk of default.
Federal officials clarified the definition of "at risk" as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.
To participate in the loan modification plan, borrowers must:
have obtained their mortgage before Jan. 1, 2009;
have a primary mortgage of less than $729,500;
live in the property;
fully document their income by providing tax returns and pay stubs;
sign a statement of financial hardship;
and go for counseling if their total household debt - including auto loans, credit cards and alimony - totals more than 55% of their income.
The modification program will be in effect until the end of 2012, but loans can only be adjusted once.
Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers' total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% - but the interest rate can't go below 2%.
The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower. This should prevent borrowers from suffering the "payment shock" that sent many borrowers with adjustable-rate mortgage into default in recent years.
If rate reductions aren't enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan's balance.
Servicers will receive $1,000 for each loan modified, as well as additional annual bonuses if borrowers keep up with payments. Mortgage investors will receive one-time $1,500 incentive payments for restructuring qualifying loans that are not yet delinquent. Finally, borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.
While the program is voluntary, once servicers commit to participating, they must evaluate all loans that may be eligible. Financial institutions that receive government money going forward must participate.
Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify.
The government is also providing incentives to servicers and borrowers to enter into "short sales" or "deed-in-lieu of foreclosure" agreements with those who can't afford to stay in their homes. In these cases, the bank agrees to take back the home for less than what's owed without filing for foreclosure.
The program also includes a new provision to eliminate borrowers' second mortgages, which will reduce their overall debt levels. Investors in those mortgages, who at times have blocked modifications because they don't benefit from the adjustments, will be paid to eliminate those claims. Details on how much they'll receive will be announced in coming weeks, senior government officials said. Servicers that get second-mortgage holders to participate will receive an additional $250.
The refinancing program
The refinancing program, which is open to homeowners who took out loans from Fannie Mae and Freddie Mac, allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However, borrowers cannot owe more than 105% of the value of their home and must be current on their payments.
The program ends in June 2010. Each servicer will provide details on the terms and costs associated with the refinancing program.
Be patient
While borrowers can now start contacting servicers, it may take several weeks for companies to implement the guidelines, said a senior mortgage industry official in a conference call with reporters.
Servicers are adding staff to handle the expected deluge of calls. Bank of America, for instance, just boosted its servicing staff by 1,000 people.
Still, officials warned borrowers - many of whom have complained of long waits and unresponsive staff at servicers - to be patient.
"There will definitely be a flood of activity, so it's important for consumers to be patient and be persistent and to take a hard look at their own personal financial situation so they can come prepared to really move the process forward as rapidly as possible," the officials said.
First Published: March 4, 2009: 9:
Last Updated: March 4, 2009: 2:54 PM ET
NEW YORK (CNNMoney.com) -- The Obama administration's foreclosure prevention program is open for business.
The multipronged fix calls for companies to help as many 4 million struggling borrowers by modifying loans so housing payments are no more than 31% of monthly gross income. Separately, homeowners who haven't missed a payment can refinance into lower-cost loans even if they have little or no equity. This is expected to help up to 5 million homeowners.
The $75 billion loan modification plan will provide incentives to borrowers and loan servicers and investors to spur mortgage modifications. The government will also subsidize interest rate reductions to get borrowers to affordable monthly payments.
"This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans," said Housing Secretary Shaun Donovan.
Administration officials once again stressed that they are not using taxpayer money to bailout irresponsible homebuyers, listing those who will not qualify for assistance: people who bought investment properties, lied on their mortgage documents or purchased multimillion dollar homes.
Borrowers can now contact their servicers to see whether they are eligible for assistance. Federal officials have posted additional information for borrowers to determine their eligibility at www.hud.gov. They will also promote the program at homeownership events nationwide.
Who's eligible for modification?
The administration Wednesday released additional eligibility criteria and program guidelines.
The loan modification plan focuses on people who are behind in their payments or are at risk of default.
Federal officials clarified the definition of "at risk" as those: suffering serious hardships, declines in income or increase in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.
To participate in the loan modification plan, borrowers must:
have obtained their mortgage before Jan. 1, 2009;
have a primary mortgage of less than $729,500;
live in the property;
fully document their income by providing tax returns and pay stubs;
sign a statement of financial hardship;
and go for counseling if their total household debt - including auto loans, credit cards and alimony - totals more than 55% of their income.
The modification program will be in effect until the end of 2012, but loans can only be adjusted once.
Officials also unveiled more details on how servicers will modify the loans. First, they must reduce interest rates so that borrowers' total house payments are not more than 38% of their monthly income. The government will then subsidize servicers dollar-for-dollar to lower that ratio to 31% - but the interest rate can't go below 2%.
The new interest rate would then remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower. This should prevent borrowers from suffering the "payment shock" that sent many borrowers with adjustable-rate mortgage into default in recent years.
If rate reductions aren't enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan's balance.
Servicers will receive $1,000 for each loan modified, as well as additional annual bonuses if borrowers keep up with payments. Mortgage investors will receive one-time $1,500 incentive payments for restructuring qualifying loans that are not yet delinquent. Finally, borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.
While the program is voluntary, once servicers commit to participating, they must evaluate all loans that may be eligible. Financial institutions that receive government money going forward must participate.
Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify.
The government is also providing incentives to servicers and borrowers to enter into "short sales" or "deed-in-lieu of foreclosure" agreements with those who can't afford to stay in their homes. In these cases, the bank agrees to take back the home for less than what's owed without filing for foreclosure.
The program also includes a new provision to eliminate borrowers' second mortgages, which will reduce their overall debt levels. Investors in those mortgages, who at times have blocked modifications because they don't benefit from the adjustments, will be paid to eliminate those claims. Details on how much they'll receive will be announced in coming weeks, senior government officials said. Servicers that get second-mortgage holders to participate will receive an additional $250.
The refinancing program
The refinancing program, which is open to homeowners who took out loans from Fannie Mae and Freddie Mac, allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However, borrowers cannot owe more than 105% of the value of their home and must be current on their payments.
The program ends in June 2010. Each servicer will provide details on the terms and costs associated with the refinancing program.
Be patient
While borrowers can now start contacting servicers, it may take several weeks for companies to implement the guidelines, said a senior mortgage industry official in a conference call with reporters.
Servicers are adding staff to handle the expected deluge of calls. Bank of America, for instance, just boosted its servicing staff by 1,000 people.
Still, officials warned borrowers - many of whom have complained of long waits and unresponsive staff at servicers - to be patient.
"There will definitely be a flood of activity, so it's important for consumers to be patient and be persistent and to take a hard look at their own personal financial situation so they can come prepared to really move the process forward as rapidly as possible," the officials said.
First Published: March 4, 2009: 9:
Processing Vs. Negotiating. Processors are paper-pushers not loan negotiators.
Editorial by Brian Suder of HRP
Monday March 2nd, 2009
Over the past year many start-up companies jumped
into loss mitigation and attempted to define their place in this industry. In reality, 90% of the people involved with loss mitigation start-ups are green and don’t fully understand the complexities associated with loan modification. They make statements like, “I hire this company to do our processing”. If the people running these companies think negotiating a home loan from foreclosure is the duty of a processor, then they are in for a surprise.
Home Rescue Programs’ success rate is higher than any other firm in the country. Our three (3) phase process is the backbone of this achievement.
Phase 1: Hire a team of seasoned & over qualified underwriters. These underwriters have all previously worked for some of the top lenders including Wells Fargo, Countrywide, Option One, New Century....the list goes on. Their qualifications include 10+ years of underwriting experience, passing strict personality tests, and organizational assessments. Why underwriters you may ask? Seasoned underwriters have the analytical mind set, necessary to negotiate a home loan. In fact, most lenders hire former underwriters for their own loss mitigation departments. Underwriters know how to communicate with fellow underwriters. The bottom line is the lender only cares for what is in its best interests. The lender also has a fiduciary responsibility to its stock holders and investors. So we map out the full costs and ultimately the loss the lender will endure by foreclosing on a homeowners’ loan in today’s depressed real estate market. We customize each proposal for each individual homeowner. We show the lender why a performing loan is better for them than a foreclosure.
Phase 2: Most loan modifications are negotiated in phase one, but sometimes lenders want to play hard ball. When this happens, we bring out our Forensic Loan Auditors. These analysts conduct a full review of the homeowners’ loan documents to reveal lender mistakes in RESPA, ECOA, HMDA, TILA and APR. Because such a large number of loan docs were drawn between 2001 to 2007, many mistakes were made during this time. We show the lender the serious legal mistakes it made and use the results of this audit as leverage. Many times this additional tool provides the weight necessary to obtain the modification.
Phase 3: Bring out the attorneys. If the lender is still not being nice, our attorneys take over. We don’t like to bring in our attorneys until phase 3 for a variety of reasons. Primarily, we have a good relationship with the major lenders and service providers. Our attorneys take a vastly different approach. They show the lender all of its legal blunders reveled in the audit. They aggressively advise the lender as to what it did wrong. Lenders don’t like hearing that. Furthermore, our legal team can pursue a series of other tactics that includes asking for the original note. This simple request can stall a sale date for well over a year. By this time our attorneys usually have enough ammo to pursue a case against the lender. In such cases, the settlement typically results in a loan modification.
Monday March 2nd, 2009
Over the past year many start-up companies jumped
into loss mitigation and attempted to define their place in this industry. In reality, 90% of the people involved with loss mitigation start-ups are green and don’t fully understand the complexities associated with loan modification. They make statements like, “I hire this company to do our processing”. If the people running these companies think negotiating a home loan from foreclosure is the duty of a processor, then they are in for a surprise.Home Rescue Programs’ success rate is higher than any other firm in the country. Our three (3) phase process is the backbone of this achievement.
Phase 1: Hire a team of seasoned & over qualified underwriters. These underwriters have all previously worked for some of the top lenders including Wells Fargo, Countrywide, Option One, New Century....the list goes on. Their qualifications include 10+ years of underwriting experience, passing strict personality tests, and organizational assessments. Why underwriters you may ask? Seasoned underwriters have the analytical mind set, necessary to negotiate a home loan. In fact, most lenders hire former underwriters for their own loss mitigation departments. Underwriters know how to communicate with fellow underwriters. The bottom line is the lender only cares for what is in its best interests. The lender also has a fiduciary responsibility to its stock holders and investors. So we map out the full costs and ultimately the loss the lender will endure by foreclosing on a homeowners’ loan in today’s depressed real estate market. We customize each proposal for each individual homeowner. We show the lender why a performing loan is better for them than a foreclosure.
Phase 2: Most loan modifications are negotiated in phase one, but sometimes lenders want to play hard ball. When this happens, we bring out our Forensic Loan Auditors. These analysts conduct a full review of the homeowners’ loan documents to reveal lender mistakes in RESPA, ECOA, HMDA, TILA and APR. Because such a large number of loan docs were drawn between 2001 to 2007, many mistakes were made during this time. We show the lender the serious legal mistakes it made and use the results of this audit as leverage. Many times this additional tool provides the weight necessary to obtain the modification.
Phase 3: Bring out the attorneys. If the lender is still not being nice, our attorneys take over. We don’t like to bring in our attorneys until phase 3 for a variety of reasons. Primarily, we have a good relationship with the major lenders and service providers. Our attorneys take a vastly different approach. They show the lender all of its legal blunders reveled in the audit. They aggressively advise the lender as to what it did wrong. Lenders don’t like hearing that. Furthermore, our legal team can pursue a series of other tactics that includes asking for the original note. This simple request can stall a sale date for well over a year. By this time our attorneys usually have enough ammo to pursue a case against the lender. In such cases, the settlement typically results in a loan modification.
Renters feel the CRUNCH of foreclosure TOO!
Is anyone safe? Not from the looks of it. Even people who rent may be affected by the foreclosure crisis.
TRUTH
In order to project future performance, it is important to visit past efforts in helping homeowners face foreclosure. Past performance: FHA Secure: Projected to help 80,000 Actually helped 266. Hope for Homeowners: Projected to help 400,000 actually helped 312. Projections for President Obama’s loan modification program are that it may help 3 to 4 million homeowners. I project it will help far less. Perhaps we’ll break a thousand this time. This new plan appears to be a bailout for the banks, disguised as a bailout for homeowners. Same siren as FHA secure and H4H, she’s just wearing a different dress.
Will this piece of the Foreclosure Rescue package from the President help stabilize falling values? No. Instead, it will just flatten out the cliff diving and extend the pain that much longer. Think About It!!
Will this piece of the Foreclosure Rescue package from the President help stabilize falling values? No. Instead, it will just flatten out the cliff diving and extend the pain that much longer. Think About It!!
THE GOVERNMENT IS NOT GOING TO SAVE YOU: What have they done for you lately?
The more and more we speak to clients we are hearing more lately, "I want to see what the government is going to do". WHAT!!! If history is any forecaster of the future...what have they done for you in the past? We live in a society where 98% of Americans by the age of 65 will be dependent on friends, family and the federal government. This is ludicrous to think that someone that does not care about you or your family is going to swoop down and save the day for you. It is this type of mentality that has gotten most of America in the state that it is in today. No one but you is going to save you. You have to do something to help yourself. There will not be any real money coming to you. Don’t be a sitting duck in the pond surrounded by hunters. Remember, In God We Trust, everyone else can run a marathon and even then YOU STILL have to do something.
Loan Modification can be one of the best solutions for saving your home:
1) You are saving one of the biggest investments you will ever make in a lifetime.
2) If your house is a home you are saving something with priceless value: the memories
you have there, having your kids raised in there, and also if you put work into/or built
your home.
3) Avoid bankruptcy. This can be so damaging in so many different ways: credit is damage,
take years to get your credit right again, and you will have to make a substantial monthly
payments on top of all your other financial difficulties.
There are dozens more reasons why loan modification is beneficial in not only foreclosure situations but also being 30 days late in your mortgage. The right company can not only assist you in your financial situation as far as your mortgage but can relieve you from alot of stress and worries.
2) If your house is a home you are saving something with priceless value: the memories
you have there, having your kids raised in there, and also if you put work into/or built
your home.
3) Avoid bankruptcy. This can be so damaging in so many different ways: credit is damage,
take years to get your credit right again, and you will have to make a substantial monthly
payments on top of all your other financial difficulties.
There are dozens more reasons why loan modification is beneficial in not only foreclosure situations but also being 30 days late in your mortgage. The right company can not only assist you in your financial situation as far as your mortgage but can relieve you from alot of stress and worries.
Loan Modification: Frequently Asked Questions
A Loan Modification is a permanent change in one or more of the terms of a mortgagor's loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.
Question 1: In utilizing the Loan Modification option to bring an asset current, can the mortgagee include all fees and corporate advances?
Question 1: 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 2: 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 3: 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 4: When utilizing a Loan Modification option, can a mortgagee capitalize an escrow advance for Homeowner's Association fees?
Answer: HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow Obligations states: Mortgagees must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage.
Question 5: 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: Are mortgagees required to perform an escrow analysis when completing a Loan Modification?
Answer: Yes, mortgagees are to perform a retroactive escrow analysis at the time the Loan Modification to ensure that the delinquent payments being capitalized reflect the actual escrow requirements required for those months capitalized.
Question 7: Is the mortgagor eligible for the upfront premium refund at payoff of a modified loan?
Answer: It depends upon when the closing date occurred. For assets closed:
After July 1, 1991 but before January 1, 2001, the 7-year unearned premium refund schedule shown in Mortgagee Letter 1994-1 remains in effect,
On or after January 1, 2001 that are subsequently refinanced, the 5-year refund schedule shown in the attachment of Mortgagee Letter 2000-46 applies, or
On or after December 8, 2004, refunds of upfront MIP are eliminated except, when the mortgagor refinances to another FHA insured mortgage. The refund schedule attached to Mortgagee Letter 2005-03 has been modified to a 3-year period.
Question 8: 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.
www.homerescueprogram.net/homerescuepro
Helping client in bankruptcy
We were having a discussion in the office if we could help a client in bankruptcy. Well......we are happy to find out from our underwriting department that even if a client has filed we can help. We would simply appeal to the court or apply with the bankruptcy attorney to allow for a modification of the existing loan.
Lenders are making it more difficult to modify loans however we are having great success with even the most difficult lenders. Get a free ore approval at www.homerescuepro.net or click the button at the top of this page.
Mortgage Companies Still Determine How Much Help Given
Although the mortgage plan sounds like a life saver the final decision is in the bank's hands. The greed shown from these institutions is indicative of how they will handle desperate borrowers. Banks will be able to decide "who and how much". Don't be fooled, still consult a professional and hire them to negotiate for you.
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