Posts Tagged ‘Loan Mods’

Understanding Why You Didn’t Qualify for a Loan Mod

Friday, March 25th, 2011

Are you one of the countless homeowners who tried to obtain a loan modification under HAMP (the government’s Home Affordable Modification Program) but were denied? If so you may not have been given a reason, which makes all the time you spent, the hopes you harbored, the pages and pages of documentation you compiled, seem like a complete waste of time. Disclosure requirements have now changed for loan modification denials under HAMP, making it doubtful others will go through the same difficulties.

As of February 1 of this year lenders are required to send disclosure letters to some borrowers who applied for modifications under HAMP but were denied. Yes, I said “some,” so not everyone will receive such information (and I am not sure how this is determined). The letters must reveal up to 33 data points. These are points that the servicer uses to determine whether the borrower qualifies under HAMP, in order to satisfy the net present value (NPV) test. The goal is to make sure the new loan would be in the lender’s best interests so as to prevent future default.

If the borrower feels information used to deny the modification was incorrect, he may appeal the modification to the servicer within 30 days of receipt of the letter. Appeals must be in writing, supported by evidence explaining the perceived correct values. An example is if the home was valued incorrectly. If the borrower has a recent appraisal that changes the valuation she could present that as evidence in the appeal process.

The U.S. Treasury Department is currently creating a website where borrowers will be able to go to run their own HAMP tests to see if they meet the HAMP criteria for a modification. The site should be ready in late springtime. It may be of help to those who want to understand the 51 HAMP data points that are taken into consideration when applying for a modification under the program.

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Lenders Need to “Take it Like a Man” So We Can Move On

Thursday, March 10th, 2011

Mortgage servicers and House Republicans are complaining about proposed punishments for the robo-signing scandal. Surely the servicers didn’t expect a slap on the wrist for the role in initiating foreclosures illegally? Is it not enough that they are the only ones making money on foreclosures, that people are suffering all across this nation because they will not grant loan modifications or bless short sales? Have we not had enough already? I say take your punishment and let us all move on.

The proposed punishments are mostly twofold: First, the servicers will be required to pay fines. The lenders claim that this is a form of bullying and that the federal government should not be able to tell them how to choose which borrowers will qualify for loan modification programs–doing so will increase the rate of defaults in the future. Plus, they say, it is not fair to those homeowners seeking loan modifications who HAVE kept up with mortgage payments despite the hardship.

Republicans say forcing these payments–which could include writing down up to $20 billion in loan balances for borrowers who owe more on their homes than they are worth–is basically rewarding parties who have not been harmed by the robo-signing scandal, therefore they make no sense. Proponents say this is the least servicers can do to help jump-start the housing problems, which they were primarily responsible for in the first place.

Second, the punishment will require lenders to reduce principal balances on defaulted loans and in bankruptcy cases. The banks claim this is unfair because they need to carefully screen each case to reduce the risk of re-defaults down the road. They say that a program that is too generous may encourage home owners to walk away from their homes.

Many Republicans agree that forcing these procedures is like micromanaging the industry and will have a detrimental effect on the financial system. Proponents say that the banks, although most DO have programs in place to evaluate distressed home owners for loan modifications, are just too strict in granting them and take too long to decide whether or not to do so. This perpetuates the vicious cycle in the housing industry and prevents recovery.

This lender mess is so big that most people cannot even grasp the implications. Those effected–from the home owner to the economy to other economies–have been hit hard and will continue to suffer unless these lenders stand up and do things to improve this terrible situation. We need change and we need it NOW. We need regulation and accountability, we need choices for struggling home owners. This can’t be done without the help of the lenders.

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