Archive for the ‘loan modification’ Category
Wednesday, January 2nd, 2013
As expected, Congress has extended the Mortgage Forgiveness Debt Relief Act for one more year. This extension assures that homeowners who short sell their homes, obtain loan modifications or are subject to foreclosures, will not be liable for the taxation on mortgage debt that is forgiven by the lender(s).
Homeowners who currently have a short sale on the market, in escrow, or are considering listing their property as a short sale can breathe a sigh of relief and continue to pursue this path. However, as always, it is important to make sure to consult with your accountant, attorney, and a qualified short sale Realtor before pursuing a short sale or loan modification, in order to assure you are aware of all possible consequences and that it is the right option for you at this time.
The settlement reached by Congress also maintains the current capital gains rates on the sale of principal residences – the first $250,000 for single tax payers and $500,000 for married couples will be excluded.
Wednesday, September 19th, 2012
Some of the big lenders are making grievous errors that are costing homeowners, buyers and their agents time, money and much aggravation. The biggest problem is that oftentimes departments claiming to help borrowers do not communicate. Let’s look at an example.
Let’s say a seller is in the middle of a short sale, almost to the approval phase when, to his excitement, he discovers his loan interest rate has reset and lowered – maybe he can actually afford the payments now, and wouldn’t that be great to keep his home! So he calls the loan modification department, and the representative tells him they can help him work it out, but he must cancel his short sale, so together they contact the short sale department and the seller cancels his short sale.
The seller has nothing in writing stating that his loan modification will be granted, and no promises are made. Here is the issue: the loan modification department let the seller cancel the short sale without providing terms and explaining how any agreements will work, including any monetary consequences involved. If the loan modification does not work out in his favor, the seller may have no options left but to foreclose (unless the lender allows another short sale attempt).
The above scenario is frustrating, and as much as it would make me very happy for all the distressed sellers out there to discover there was a way for them to keep their homes, I do not believe that anyone should make a decision without facts, including either a written offer with terms or a written agreement.
The solution here is for the loan modification department and the short sale departments to communicate and change their policy. Sellers should not be required to cancel their short sales until they know whether they will qualify for a loan modification. Even if they do qualify, they may not like nor be able to afford the new payments. Therefore, there should be a holding period for the short sale, where the seller and the loan modification department have to work out a plan. This period should take no longer than 10-14 days. If at the end of that period the seller is not satisfied with the terms offered, s/he should be able to jump back into the short sale.
This is a simple solution that will prevent unnecessary foreclosures…because NO ONE SHOULD MAKE A DECISION WITHOUT LEARNING ALL THE FACTS AND CONSEQUENCES FIRST. I challenge big lenders to do the right thing and truly help distressed borrowers by not pushing them into a corner from which they may not be able to escape.
Thursday, September 29th, 2011
With the economy in turmoil and people scared to make big purchases, the real estate business is undoubtedly challenged. In difficult times some people panic, and I see that happening amongst distressed borrowers, yet there is a process to the situation that you need to follow in order to have a chance to save your home and your credit. I have blogged on this topic before and it is worth repeating.
If you are in a distressed situation you need to approach it methodically, even if you don’t believe that there are options. Foreclosure should be the last resort. Here are some steps you can take to try and avoid it:
1. Contact your lender. I know this sounds horrible, but you need to start somewhere. Some lenders, like Bank of America, actually have been stepping up to help people avoid foreclosure. You need to have all pertinent information ready when you call – your loan number, employment information, bank statements, etc. You want to see if you can qualify for a loan modification. This will take some time, but you need to get the ball rolling sooner rather than later, as soon as you discover you are unable to pay your mortgage or if you have a change of circumstance.
2. Contact a counselor if your bank cannot help you. There is a wonderful free counseling organization called HopeNow that can help you evaluate your situation and see what options may be out there for you to peruse. You can reach them at 888-995-HOPE. You can find them on the web at http://www.HopeNow.com.
3. Investigate ALL other possible options. If you are in the military, there are options that may be available to you. You may be able to qualify for a deed in lieu of foreclosure, refinancing, postponement, or a reverse mortgage if you are older and have equity in your home. There are stalling tactics you may be able to use while you find a way to get yourself on track. There are government programs that may help you if you are unemployed. Investigate all options, but do not feel overwhelmed. If you speak with your lender or a counselor you can whittle down the available options.
4. Short sale. When there is no other option a short sale is better than going through foreclosure. You need to speak with an experienced agent if you are considering this option. Make sure you understand all tax and credit consequences – speak with your accountant or an attorney. Many lenders will bless short sales, and it is a good idea to work with someone experienced because they can try to get lender approval at the get-go. Some lenders are even evaluating homes now and telling the homeowners what price they will accept on the short sale BEFORE the home is listed. You may also qualify for programs like HAFA (Home Affordable Foreclosure Alternatives Program), which allows you to collect up to $3000 from your lender toward moving expenses.
It is important to understand the foreclosure laws in your state and the consequences they carry. If you are having difficulties with your mortgage please do not just give up – you need to try and find a solution before succumbing to foreclosure. Do not walk away from your home either, as that is a voluntary foreclosure. If you spend a little time you may find a solution that lets you avoid foreclosure, so hang in there.
If there are any distressed property issues you would like to see addressed in this blog, please let me know in the comment section below. If you do not see the comment section, simply click on the title to this blog and then scroll back down.
Tuesday, September 6th, 2011
There has been quite a bit going on in the distressed property market as of late, and if you are a homeowner who is underwater or are unable to continue to pay your mortgage, there is some good news on the horizon to help you.
HAMP incentives increased for early borrower assistance: Fannie Mae has increased HAMP incentives to servicers who work out loan modifications with borrowers. HAMP – the Home Affordable Modification Program – is a program that encourages lenders to work with homeowners in issuing loan modifications. It gives financial incentives to the lenders who successfully work modifications. With the new increase, the feds are attempting to sweeten the proverbial pot to encourage even more modifications in lieu of short sales and foreclosures, and the goal is to do so early in the delinquency process. While the lenders still have to agree to issue the modifications, hopefully these extra incentives will push them toward looking more closely at modifications before rushing to initiate foreclosure proceedings.
Housing counseling agencies awarded money by HUD: HUD (The U.S. Department of Housing and Urban Development) has awarded $10 million to housing counseling agencies across the country, in order to strengthen counseling available to struggling homeowners. The money will be distributed to areas that face high incidences of foreclosures, and is good news for desperate homeowners.
Feds are telling states to design more state-specific programs to help borrowers: Several prominent economists have been sharing their view that states can do more to help distressed homeowners, acknowledging that the biggest problem in doing so is state funding. To that regard, HUD earlier this year created the EHLP – the Emergency Homeowner’s Loan Program. It, along with other federal programs, provided $1 billion to states with programs geared toward helping homeowners. Many state programs have realized great success in this endeavor, and the problem facing these programs going forward will be the federal budget situation. If you are looking for a way to get help with a distressed home situation, now is a great time to find out if there are any state programs that can assist you.
If you are delinquent on your mortgage and have not discussed options with a counselor, a Realtor and your accountant or financial planner, it is imperative that you do so. There are options available to you, but the longer you wait, the less of a chance that you may be able to reap the benefits of any of these options. The government is attempting to help you, and there are some programs available for free, such as HopeNow, the free counseling agency that can review your situation with you and make suggestions about available options. They can be reached at (888)995-HOPE.
Sunday, August 7th, 2011
In trying times you can surely bet that there will be those who will come up with ideas – some good, some bad. There is one mortgage servicer that has been following a plan for the last year, and it has proven successful in helping underwater homeowners (those who owe more to their mortgagors than the current market value of their homes). The program has been so successful it is going to be applied to many more loans the servicer is acquiring.
Ocwen Financial, a mortgage company that services 460,000 loans throughout the country, just completed a one year study of their new program, achieving an unbelievable 2.6% redefault rate (compared to nationwide 40-50% redefault rates for federal programs). Here is how it works: the mortgage servicer agrees to reduce your loan balance to the point that your debt is 5% below current appraisal value (giving you equity in your home). They then modify your mortgage so your new monthly payments are based on your reduced principal balance. Over the next three years, in annual increments, they write off the amounts of the original debt that they reduced (so you are truly paying a mortgage based on current value, with equity, and there is no tacking on the old balance to the end of your loan).
There is a catch: the homeowner has to agree to keep loan payments current, and has to share 25% of any future gain realized if the home is resold. Sounds like a good plan, right? Considering that there are an estimated 11 million homeowners who are underwater on their mortgages, with an expectation of 2 million of those who will face foreclosure (according to an article posted today by Ken Harney), this could be a program that might prevent more foreclosures if adopted by other lenders.
I think this idea is good enough to share, and I hope that other lenders will follow suit and initiate similar programs. Some big lenders, like Wells Fargo and Bank of America, do offer principal reduction programs, but they do not utilize the “shared appreciation feature” inherent in Ocwen’s plan. I believe it is a brilliant possible solution for many people, so if your loan is not serviced by Ocwen please discuss this with your lender. Thank you to Ken Harney for bringing this story to light.
Friday, July 8th, 2011
Obama Administration Extends Foreclosure Programs for the Unemployed. Those who are unemployed and have an FHA loan will soon be given up to a year of forbearance on their payments, giving them time to find a new job before losing their homes. This announcement arose from the fact that many Americans are unemployed for more than three months, making the current forbearance period (4 months) unfair in giving the homeowner a chance to get caught up and not lose their homes. Missed payments, plus interest, will be added on to the back end of the loan. The new program will start August 1 and last for 2 years.
Loan Limit Changes are on the Horizon. Starting October 1, unless Congress decides to be realistic and prevent the change, federal conforming loan limit maximums will change from $729,750 to $625,500. In preparation for this some lenders, like Bank of America, have already stopped accepting applications for loans over the new limit. Those seeking higher loan amounts through Fannie, Freddie or the FHA will need to apply for non-conforming loans, which have higher interest rates. Many politicians, organizations and other industry-related entities have been hard at work to prevent these changes, which they believe (and I agree) will be bad news for the already-injured housing market, pushing a recovery further into the future. Let’s hope these changes are prevented.
San Diego County Property Assessment Values Rise. For the first time since 2008 county property values have risen, and albeit a small amount (0.51%), it is still positive news for San Diego’s housing market. The only cities that did not see assessed value increases were Carlsbad, Chula Vista and Imperial Beach. The average a homeowner will have to pay due to the increase is about $260.
Bill Calls for Merger of Fannie Mae and Freddie Mac. The struggle to do away with Fannie and Freddie continues, and the latest news comes from a California Republican, who wants to merge the two into a government-held corporation. Freddie, Fannie (who own or guarantee 56% of all home loans in the U.S.) and their cousin Ginnie Mae back the majority of mortgage loans on the market – if they were not around there would likely not be any mortgages available now. Debaters have been arguing on whether to keep them under government control or sell them and get the government completely out of the mortgage market. This new option throws another log in the fire. I am sure the debate about what to do with Fannie and Freddie will continue.
Government Still Toying with Idea of Mortgage Servicer Oversight. Again, the government is announcing that it plans to start regulating mortgage servicers. Citing the risk of consumer harm with the current system (you think?), the Consumer Financial Protection Bureau plans to put the choke collar on these firms. The power to impose these restrictions on non-bank servicers, who are not subject to federal banking regulations, was provided by last year’s Dodd-Frank Act. Details are still in the works so it will be interesting to see what transpires. If you are a buyer and are planning on applying for a loan, I highly suggest you speak with your mortgage professional right away.
Big Banks Modifying More Loans (but not in the way we hope). Big banks have been modifying, or attempting to modify, more loans. But the interesting part is that they have been doing so of their own volition – contacting those borrowers who are not yet late with payments, but who pose a risk of future default. While this seems like a great idea in theory, many borrowers who have tried to get modifications complain that it doesn’t help those who reach out to the lender for help – modifications that should be granted are not, while those that shouldn’t (not yet in default or borrower hasn’t contacted lender yet) are granted. It’s frustrating for people who are honestly trying to work out a plan to stay in their homes. I think the lenders need to address those who have stepped up and asked for help before contacting those who have not…a “deal with what is in front of you NOW, and worry about the future in the future” concept. What do you think?
Wednesday, June 15th, 2011
Over the past several years there have been attempts to let judges take over lender issues, such as those related to foreclosures and bankruptcy. Some states, like California and New York, have allowed judges to intervene in ruling on improper foreclosures, or in cases where lenders assign mortgages for which they have no documented proof of ownership. There is much controversy in allowing the courts to step in and help fix some of these housing-related issues, but I think it is high time we do so.
The courts, although not known for being expeditious in many instances, could revolutionize the housing crisis by appointing judges to focus specifically on these cases. Not only would it protect future homeowners from wrongful foreclosures, but it would send a message to lenders to be more thorough in their processes, and likely lead to more and quicker loan modifications and short sale blessings.
Call me simple, or maybe blame it on my law school education, but I don’t understand why so many problems take so long to remedy, when all it does is create more problems and batter our economy even further. There ARE solutions to problems, but it seems we don’t tend to implement them. Politicians talk about solutions until they are blue in the face, but why not just put one in place and see what happens. Things can’t possibly get any worse. If it doesn’t work, we’ll try something else – but we can’t sit around doing NOTHING!
So I say let the judges look at pre-foreclosure filings. Make the lenders prove ownership. Jumping through these hoops a few times will likely be a hassle, hopefully causing lenders to think twice about NOT looking at loan modifications or short sales as options for distressed sellers. The burden on the legal system and the expense associated with it would likely be temporary, and surely not as great as the current strain on housing and the costs of foreclosure.
What do you think?
Monday, June 13th, 2011
Downpayment increase rule under debate: If you haven’t heard, banking industry regulators have a rule on the table that would require buyers to pay a minimum of 20% down on home purchases. Although many lenders require this already there are some loans that can be obtained with very little money down, such as FHA loans (which require only 3.5% down). This has stirred much debate amongst buyers, sellers, Realtors, economists and politicians, with studies concluding that 30% of the home sales market would be decimated.
Congress’ intention in raising downpayment rates is to provide stronger borrowers, thus preventing fewer loan defaults in the future. But many groups, including the National Association of Realtors (NAR) are vehemently opposed to such legislation and have been lobbying against the proposal. I will keep you updated.
Mortgage Servicers in the Hot Seat Again: At least 14 regulated mortgage servicers have been scolded by banking regulators for negligence and misconduct in servicing, or failing to properly service loans. The U.S. Treasury also recently released a report indicating performance by the 10 largest HAMP (Home Affordable Modification Program) servicers. They found 4 need substantial improvement (including Bank of America, Wells Fargo and JP Morgan Chase), and are withholding future financial incentives under the program to the 3 mentioned above until improvements are made and problems addressed.
Home Sales Expected to Rise This Year: Some economists, like Lawrence Yun – chief economist for the National Association of Realtors – predict sales for the remainder of the year will improve for the following reasons: more jobs, stock market wealth is on the rise, apartment rents are climbing, conditions of high affordability continue, home values are at historically low levels, investors are out in the market nice again looking to hedge against inflation, lenders starting to shorten lengthy short sale processes, and the number of foreign buyers has increased due to market conditions. Of course there are other factors to keep an eye on, like gas prices and the fate of Congress’ attempt to increase down payments on home purchases (see above), but there seem to be strong factors indicating this may in fact be true. Let’s hope so.
Thursday, May 5th, 2011
I have discussed before the importance of state foreclosure prevention programs, and the fact that more states would be initiating or revising their programs due to cancellation of federal programs and counseling. In my most recent blog on MoneyPress I discuss the main ideas behind these programs and provide a list of which states offer assistance, as well as links to their websites. To read the blog visit http://bit.ly/jtaDqR
Monday, April 18th, 2011
In what I personally think is a big mistake, Congress announced that it is eliminating $88 million in funds for housing counseling programs. These are the programs that allow struggling homeowners and others with questions to call in and get counseling advice. It is often the first step in pre-foreclosure, or even in avoiding foreclosure altogether.
One of my favorite counseling hotlines, HopeNow, stated that it is not being shut down, but will be effected by the cuts. I have referred people to HopeNow for years. It is approved by the Department of Housing and Urban Development (HUD) and the people who work the phone lines actually know what they are talking about. The biggest complaint I have heard is that sometimes one has to hold for help for some time, but the advice is real and they really do go over specific situations and crunch numbers with callers.
Why would the government want to cut these programs? Well, I think that the government is busy trying to come up with ways to prevent foreclosures and help the housing mess by implementing new programs (of course, we have not seen these as of yet, but the most promising seem to be on the way, stemming from the robo-signing lender punishment saga). At the same time they are trying to trim our exorbitant budget, so these goals may conflict.
Many states are creating their own programs to cover the slack the federal programs have left behind after being canceled, but there are only a handful that have such programs in operation already.
So what is a troubled homeowner to do now? Some federal programs have been eliminated, not all states have yet implemented programs to help, and the mandated lender reforms (currently in the works as punishment for the robo-signing scandal) are not yet finalized. People need to know their options.
Basically there are three options, and some of them have multiple sub-options:
1. Stay in your home. To do so you may need to look into a loan modification, change of job, or a complete reevaluation of your finances so that you can eliminate or lower other expenses. You may need to get creative, consider getting a second job, renting a room or putting your young children to work (just a hint of black humor/sarcasm–of course I don’t recommend this).
2. Sell your home. If you cannot make number one work and you need to sell it will either be a traditional sale or a short sale. Either way, make sure to work with a Realtor who is experienced in your area, and if you are doing a short sale make sure that person is experienced in this regard. You also should look into the HAFA program if you are considering a short sale–at least you can get money to help with moving expenses (up to $3000–see previous posts. To find them go to the categories list to the right of my blog and click on short sales).
3. Foreclosure. This is the last resort, or course. But many times there may be no other option if you are in over your head financially, have a job loss, illness, changed circumstances, divorce, etc. Just make sure you speak with your financial planner, attorney or accountant (or all 3, in my opinion) before doing so. You need to understand all options so you can make the right choice.
As we continue to see cuts to vital programs options may dwindle, at least for a while. I have discussed multiple times how I feel states will start to jump in to help residents with their own programs, much like California has done with Keep Your Home California. If you do not yet have a program in your state I would still advise contacting HopeNow or La Raza. Your lender may have counselors available to help you as well. But do not wait until it is too late. If you are not yet delinquent on your payments you need to start researching now. Best of luck.