Archive for February, 2009
Friday, February 27th, 2009
For those of you who read my post of a few days ago (How the new Homeowner Affordability and Stability Plan Can Help You, February 24)), you should know that over the last several days there has been a great deal of information released on the details of this plan, of which I feel the need to share. I would encourage you to read the prior post in conjunction with this one.
As the author of a book written to help people through the foreclosure mess (www.MortgageWalkawayOptions.com), I was particularly optimistic about the new plan, thinking that so many people would have a new option available to them, and would thus get help. Since the plan goes into effect next week, on March 4, there have been many questions, information released on a daily basis, and much argument on late night political and news shows over the plan. Today I spent a lot of time pouring over some of the information, which I will summarize.
1. How is Eligibility Determined Under the Program? It is important to know that ALL of the details will be announced on March 4, however from the information available it is easy enough to figure out some of the key points of the plan, but here are the main requirements:
a) You must make enough income to be able to afford new payments
b) The program is limited to loans held or securitized by Fannie Mae or Freddie Mac. To find out if your loan is held by either of these entities you can call your lender after March 4.
c) Your home must be your primary residence (no second/vacation/rental properties). Multiple unit properties WILL qualify as long as you live in one of the units as your primary residence.
d) Your loan cannot exceed current Fannie Mae or Freddie Mac loan limits (this could eliminate many people).
e) Your lender is NOT REQUIRED to modify your loanâ€šthe program is voluntary. As I mentioned in my other blog there are financial incentives to lenders to offer the modifications.
2. Will Principal Balances on the New Loans Be Reduced? NO. While the wording in the plan did not indicate this, it has become clear that the new loan that is created will lower your payments (because you will have a new, lower interest rate), BUT there will be no reduction in your principal balance. As I mentioned in my other post, you will have the opportunity to reduce that principal balance by $5,000 at the end of 5 years if you are current on all your payments at that time, but other than that the balance will be unaffected. Caveat: If you are a borrower paying interest only payments and you refinance to a lower, fixed rate you may not see your payments go down, BUT you will likely save a great deal over the life of the loan.
3. What if You Have Both a First and Second Mortgage? The ball is in the lender’s court on this one. As long as the amount due on your first mortgage is less than 105% of the value of the property, the lender of the second loan can choose whether or not you will be able to refinance; this will basically depend on whether the second lender can remain in second position and on whether you can afford the new payment terms on the first mortgage.
4. Interest Rates on the New Loans: These will be determined by the market rates and will typically be 15 or 30 year term mortgages with fixed rates. Good news: there will be no prepayment penalties or balloon payments.
5. Do you Need to be Behind on Mortgage Payments to Qualify? No. As long as you have sufficient income to make payments on the new loan and are at risk of imminent default you can qualify under the program (assuming you meet the other criteria).
I hope this is a start to clarifying the program for everyone. It certainly has opened my eyes. The best piece of advice I can offer you is to GET EDUCATED and understand other possible options that may be available to you. My book provides this information in a very basic format if you need more information. You can download it at www.MortgageWalkawayOptions.com.
I thought maybe this book might become obsolete in light of the new program, but now more than ever it is important to understand all options. To find out if you qualify under the new legislation please call your lender after March 4 and tell them you would like to be considered under the new Homeowner Affordability and Stability plan. Best of luck to you.
Tuesday, February 24th, 2009
As you likely know, the Obama administration has instituted a new plan to help homeowners facing foreclosure-the Homeowner Affordability and Stability Plan. The good news is that the plan actually reaches beyond merely helping those who are behind on their paymentsâ€šit will actually help those who are current with payments but have declined property values. It also is going to help the pre-foreclosure process in general, mainly loan modifications. There are three different sub-categories of assistance.
First, the plan is going to allow 3-4 million responsible homeowners access to low-cost refinancing and loan modifications, thus reducing monthly payments and creating a new loan that reflects the current value of your home. Hallelujah!
Second, the new plan is going to create a $75 billion stability initiative to help at-risk homeowners who are struggling to make their mortgage payments but cannot sell their homes (because the home’s value has decreased below the amount owed on the loans). The goal of this part of the plan is to help people stay in their homes, and to protect neighborhoods from foreclosures that bring prices down even further. Loan modifications will be allowed BEFORE borrowers miss payments (something that has not been done up until now), thus supporting responsible homeowners.
This second part of the plan has some fantastic built-in financial incentives for both lenders and borrowers. Lenders will be paid for every eligible loan modification granted, AND also will receive monthly fees as long as the borrower stays current on the loan. This will continue for three years. Service providers will also be paid for initiating modifications BEFORE a borrower has defaulted on their payments.
Borrowers will reap some benefits tooâ€šif they stay current with their payments on the new loan they will receive up to $1000 a year for five years toward reducing the balance of the principal on the loan. So if you fall under this category and get a modification, as long as you keep current on your payments for five years you will have your principal balance reduced by $5,000 at the end of that periodâ€šÃ„Â¶can you say â€šÃ„ÃºFANTASTIC!â€šÃ„Ã¹ Really, how often does the government just give away free money?!
The final BIG news under this second part of the plan is that the government is going to create CLEAR and CONSISTENT GUIDELINES for loan modifications. This means that all lenders will have the same set of rules to follow when granting modifications. You have NO idea how much this will help you if you are a struggling homeowner, but let’s just say this is amazingâ€šno more bending over backwards to figure out what your lender’s program entails (only to find out that since yesterday the plan or offer has changedâ€šyou might laugh but this is common practice).
There will be strict reporting and oversight between the Treasury, HUD, the Federal Reserve and other committees to make sure all the above guidelines are followed. Judicial modifications of home mortgages will be allowed in bankruptcy cases, renters of foreclosed properties will receive financial assistance and help with moving, and other government programs already in existence to help homeowners will be improved.
Third, the plan will support low mortgage rates by building confidence in Fannie Mae and Freddie Mac. This will increase stability and liquidity in mortgage-backed securities and help stabilize the housing market.
This plan is made to really help homeowners and our housing market. With strict oversight and adherence to the guidelines established by the administration, I think this plan could have a big impact on the housing market. But what I am most excited about is that it will help millions of people stay in their homes.
Saturday, February 7th, 2009
Yes, you read the title correctly. Let me explain…
We all remember the horror and tragedy of September 11, 2001. It made many of us question many things–our safety, the future, mortality, hatred, humankind. But out of all the terror and confusion and profound sadness came something beautiful. I felt it so strongly that when it was gone it left a big impression on my life. What was it? It was KINDNESS.
There was a mutual feeling of love and respect from everyone you met, even total strangers. For a short time the word “selfish” did not seem to exist–people did not cut in line, speed up in their cars so you couldn’t get over to the next lane. People held doors open, smiled, made eye contact. Sales clerks were not annoyed, no one was rude. It was almost surreal, but it was a glimpse of what our world needs more of. They say that tragedy humbles people. Well I sure felt a difference for a while. It lasted maybe a few weeks, maybe even a month (the time that has passed makes it hard to be sure), but it was definitely there. Whenever I discuss this with others they agree with me that it “just felt different.”
I consider myself to be a positive person, and I try to bring out that quality in others. I have thought about the post-911 behavior for years and wondered why we can’t each try to emulate that on a daily basis. Our media and newspapers scream out headlines of doom and gloom on a daily basis–unemployment, depression, recession, foreclosure, going out of business, liquidation, fraud, scams. It is human nature to take in all of this, and it almost requires a super-human nature to NOT let it affect us. Personally, I stopped watching the news and I am considering canceling my newspaper subscription. If doom is what sells papers than I do not want to buy them. Maybe that will send a message to the media? Probably not, but it will help keep me positive.
If everyone focused on the GOOD that is in this world and on how to make things better, think of the difference it would make. You cannot change the world but you can change your own world; that will effect the lives of all the people with whom you come into contact. Just think: if your smile, your caring words, your help made someone’s life a little brighter. Then they would “pay it forward,” as the similarly titled movie demonstrated, and go on to do so for someone else. If we each took those small steps in our daily lives this world would slowly be a better place!
I don’t know if this nation will return to post-911, but I do know that if we start with ourselves it is a step in the right direction.
Wednesday, February 4th, 2009
Many homeowners have been hit hard by the recent changes in the housing market. We all know someone who has been threatened with foreclosure or is fearful that they will lose their home due to interest rates resetting, job loss, illness or other factors.
Some homeowners took equity out of their homes in good times and with decreased values they now find that their homes are worth less than what they actually owe. All this fear has lead many to foreclosure, including intentional foreclosure or â€šÃ„Ãºwalk aways.â€šÃ„Ã¹
Whether it’s a friend, neighbor, family member or yourself facing this issue the fact is that it effects all of us by bringing down property values. The reality is that there are other options to foreclosure and walking away, including loan modification.
This option is getting a great deal of attention in the media right now due to the lenders’ panic to come up with solutions to foreclosure. The good news is that modifications are easier to get now than before, but you have to understand how to to approach this subject so that you can successfully work with the bank and possibly save your home.
The following information is from my book, Mortgage Walkaway Options. Let’s start with the basics. A loan modification occurs when there is a change in one or more of the terms of a loan, which reduces the loan amount and generally makes payments more affordable.
In simple terms, it means refinancing a loan to a lower amount. The lender and borrower must agree in writing to change the terms of the loan. Up until now many lenders didn’t want to speak with borrowers who had not yet defaulted on their loans.
This is because they had a plethora of active files sitting on the desks of their loss mitigation department already, and they were having trouble dealing with the ones who were in default and did not have the manpower to add more files that were not yet considered risky. Luckily that seems to be changing. There are a few recent regulations and announcements that will help you achieve a successful loan modification.
Firstly, if your first loan is with Bank of America or JP Morgan Chase you are in luck. B of A, now one of the largest lenders in the business, announced in October that it was going to begin review of all of its loans that were variable interest rate loans and option ARMs. Upon review, the lender plans to notify homeowners if they qualify for loan modification, and then to work with the homeowners toward resolution. Chase also announce it is putting a hold on foreclosures with the intent to work out modifications with qualified borrowers.
This news is HUGE for several reasons: one, it takes the burden off the homeowner to try for resolution with a lender who often does not have time nor manpower to help.
Two, the bank is actually being proactive in preventing more foreclosures, which will help many stay in their homes and eventually help the real estate market and likely induce other lenders to follow suit.
If your loan is with another lender who has not yet instituted such a policy, you can seek help under the newly enacted government plan, Hope for Homeowners. This legislation took effect October 1, 2008 and allows you to refinance your loan into a new 30-year fixed rate loan if you qualify.
Your loan will be based upon an appraisal of the CURRENT market value of your home, so if prices have gone down since you purchased your new loan payments will be based upon current values, making them much more affordable.
This program requires you to contact the lender to initiate the process. There are important considerations you need to be aware of in regards to this program. For example, if you sell your home after the modification takes place the new lender will be entitled to a percentage of the gain on the property (appreciation and equity sharing). The amount changes over time.
Also, you will not be able to take out equity on your property after the change unless these second liens are directly related to property maintenance.
To understand fully the ramifications and qualifications under this legislation you can go to the website, www.MortgageWalkawayOptions.com and download my book, or you can feel free to call me and I will be happy to help you. My direct number is (760) 310-9466.
Most importantly, know your options in the face of foreclosure and educate yourself BEFORE taking any action. Right now is a great time to modify a loan, as there is a general consensus among lenders that this option benefits them the most (as does it benefit you, the homeowner).
Take advantage of the programs available to you so that you don’t have to lose your home or worry about an upcoming rate change. Just as important, you need to be in constant contact with your lenderâ€škeep a record of all correspondence and communications with your lender and be vigilantâ€škeep calling.
If you are not having luck there are numerous counseling groups that can assist you. My favorite is HopeNow. They can be reached at (866)995-HOPE (4673). Best of luck to you!
Wednesday, February 4th, 2009
If you are facing foreclosure or know you may be unable to make your mortgage payments going forward, read on. As of the last quarter of 2008 there are several potentially helpful programs that have either been launched or are in the launching phase, most of them favoring loan modification as an option to foreclosure.
These include the Hope for Homeowners bill (H4H), lender-created programs (including Countrywide Financial, Citigroup, Bank of America, JP Morgan Chase and IndyMac Federal Bank, FDIC) and a new Federal Government Loan Modification program born in November 2008 (with participants including Fannie Mae, Freddie Mac, Federal Housing Home Loan Banks, Wells Fargo, Hope Now, Department of the Treasury, Federal Housing Administration and the Federal Housing Finance Agency).
Keep in mind that none of these programs guarantee automatic assistance and that loan modifications are handled on a case-by-case basis. You need to understand the qualifications under each program and be prepared before you pick up the phone to call your lender. When you have all the informationâ€šÃ„Ã®such as your loan number, bank statements, your most current mortgage statement, income information and documentation and a letter demonstrating financial hardship, then you are ready to call your lender and get to work.
Again, as this information changes on a continuous basis, please do not forget to check our New Updates site for the most current information and links to all new programs. That site is free for all book purchasers at our website: www.MortgageWalkawayOptions.com. The following information on current lender programs offering assistance is new. There is also information in our book on other programs that can help you, such as the Hope for Homeowners bill and others.
Lender programs are a hot topic right now. Countrywide Financial/Bank of America was the first lender to most recently announce its plans to help borrowers. As part of the initiative, Bank of America agreed to cut monthly housing payments, including mortgage, property taxes and insurance, to no more than 34% of gross income. This plan is expected to help keep as many as 400,000 troubled borrowers in their homes. It targets holders of subprime adjustable rate mortgage (ARMs), subprime fixed rate loans and option ARMs. Prime and Alt-A borrowers, who did not document their income, will be eligible for the program as well.
Following on the heels of this announcement came JP Morgan Chase and Citigroup with announcements that they too were going to help mortgage holders stay in their homes and avoid foreclosure.
Chase temporarily suspended foreclosures for 90 days, with plans to introduce new financing alternatives and open new counseling centers staffed with more loan counselors to get borrowers qualified for loan modifications. The lender expects to help over 400,000 borrowers in the next two years.
Citigroup followed with an announcement that it too will suspend foreclosures and has plans to help over 500,000 distressed homeowners stay in their homes by reworking delinquent home loans. Please visit the website of your lender to get further information on mortgage assistance programs.
The FDIC, the federal agency that insures most bank deposits made in the U.S., announced a plan to prevent approximately 1.5 million homes from foreclosing by offering financial incentives to mortgage servicers who modify loans. They plan to pay the providers a fee to cover expenses for each loan modification and also to share up to 50% of any losses incurred should a newly modified loan default in the future. To be eligible borrowers would have to be at least two months behind in payments on loans for homes that they live in (no second/vacation homes or rental properties would qualify). The service providers of the loans would be able to lower the borrowers’ monthly payments to about 31% of the borrowers’ monthly income. The program is set to begin December 15, 2008.You can visit their website for plan specifics at http://fdic.gov/consumers/loans/loanmod/index.html.
Keep yourself educated so you know all the most current options and informationâ€šit may very well help you keep your home. Visit our website to order our book for full analysis of all available options at www.MortgageWalkawayOptions.com.
Tuesday, February 3rd, 2009
Hot off the wires: there is a bill pending that would help people facing foreclosures in their ability to work out new mortgages. It would allow judges to authorize loan terms for primary residences after the owners have declared bankruptcy. This is a brilliant idea and in my opinion has the most potential of anything I have seen so far in the foreclosure assistance arena.
The argument against the bill is that many lenders would likely be hit hard. Not only would they lose the authority to negotiate new loans with lenders, but they could also be dragged into bankruptcy court by millions of defaulting borrowers. This would likely cause lenders to lose even more money than they would if they actually worked out the loans sitting on desks of thousands of loss mitigation department employees.
Naysayers insist that the bill would trickle down to new homebuyers via higher interest rates coupled with larger required down payments. This would obviously be a result of lenders making up for their losses by trying to prevent the same thing from happening in the futureâ€šthe risk of a judge taking over their job would be great.
Those supporting the bill, including President Obama and most of the Democratic House and Senate members, feel this program would spare taxpayers money since it would be handled by the courts and not take money from bailout programs that earmark funds for mortgage modification programs. It would most likely prove to be much more efficient than individual lender workouts; for one because many lenders have way too many files to deal with and cannot dedicate the time needed to each borrower, and secondly because many lenders change policies and/or flat out change their minds in the middle of the loan modification process. Unfortunately as many people facing foreclosure know, it is a nightmare to attempt to deal with the lender.
If you are in the middle of attempting a workout with your lender, or if you forsee the need to do so in the future, hold onto your hats. If this new bill is passed there is no telling how quickly it may take effect. But if the new administration gives any indication hopefully it will help millions of homeowners in a more efficient way, allowing more people to stay in their homes.
For up to the minute updates on this and other pending legislation and program review, go to www.MortgageWalkawayOptions.com. If you purchase my book on foreclosure options you will be able to access our update link, which provides constant updates on everything related to foreclosures and mortgage workout programs.