News
New guidelines effective June 1, 2010, clarify many modification issues.
First, lenders may but are not required to reduce principal balances in a modification down to 115% of the principal balance owing.
Second, lenders may not foreclose on a borrower who is in the process of modification until after the borrower is declined and other options have been considered.
Third, a borrower in bankruptcy may proceed with a modification.
Fourth, unemployed borrowers can have up to six months of reduced payments will seeking new employment.
There are many other points these guidelines clarify. Read them here or here.
Read Supplemental Directive 10-02 here, which prohibits foreclosure during the 30-day period following a modification turn down and requires that borrowers in bankruptcy be considered for modification.
Congress is debating whether to allow judges to cram down mortgages, meaning to reduce the balance owing to the value of the property. Read this report by Martin Andelman. December 8, 2009.
There are complications in buying a bank owned REO property or a short sale property.
Only 2,000 out of 500,000 trial modifications have been converted to permanent modifications. Federal Government Will Push Lenders to Follow Through on Modifications, November 28, 2009
Banks are trying to prevent their clients from utilizing the services of modification companies and modification attorneys. This is a bad faith act on their part. Read what Martin Andelman has to say about this on page 16 of the May edition of The Niche Report.
And that’s not all. Wells Fargo is cutting off mortgage modification companies from taking credit cards in payment for their services and putting them on a negative list which is circulated to other banks.
This should indicate that the mortgage modification companies – and mortgage modification attorneys – are getting good deals for their clients and costing the banks money.
More Links:
A glossary of mortgage terms and teminology.
Housing Fix’s Challenge: Making Modified Loans Attractive, Wall Street Journal, 2-18-9
Distressed Homeowners Get New Options in Plan, Wall Street Journal, 2-18-9
The Compliance Examination Handbook used by bank examiners
The long list of disclosures which lenders must give borrowers.
Read the HAMP Home Affordable Mortgage Program guidelines.
California law, California Civil Code 2923.6, sets a policy that a lender must accept a modification proposed by a borrower if the lender would make more money or lose less money under the modification proposed than the lender would lose if the lender foreclosed. Washington does not have such a law at this time, but Washington often models its laws after California’s. Also the California statute has persuasive precendent. It is not clear just how binding this statute will turn out to be when it is tested in court.
Lenders which are subject to the Home Affordable Program guidelines are subject to a similar requirement:
An NPV Test will be required on each loan that is in Imminent Default or is at least 60 days delinquent under the MBA delinquency calculation. This NPV test will compare the net present value (NPV) of cash flows expected from a modification to the net present value of cash flows expected in the absence of modification. If the NPV of the modification scenario is greater, the NPV result is deemed positive, and the servicer must modify the loan (absent fraud, etc.) However, an “NPV positive” result is not necessary to qualify a loan for a Home Affordable Modification and the associated lender/investor, servicer, and borrower payments.
A humorous and fairly accurate slide show about how we got into this subprime mess
Banks are foreclosing, evicting the owners, and then walking away from the property.
Feds to Offer Easier Aid, Incentives for Modifications and Short Sales, October 13, 2009
You can look up your property and find out if your loan is owned by Fannie Mae.
You can look up your property and find out if your loan is owned by Freddie Mac.
How solvent is your state’s unemployment insurance fund?
The extent of the bank bailout is enormous.
Foreclosures are up in Washington state.
More lawyers are getting involvd in doing loan modifications.
Banks are engaging in sleazy modification behavior.
Banks are getting billions, but homeowners are still in trouble.
Banks do not really want to do modifications. Banks do not want you to hire an attorney.
Fannie Mae is foreclosing and then renting the property to some former owners.
Commercial loans are coming due; property values have dropped.
I’d llike info about modification of my mortgage. I have a co-signer on the loan. Does this affect modification? I am current on loan with Ocwen but my loan and home association fee is over 50% of take home pay.
Thanks
Ps what are your fees
Having a “co-signer” on your loan should not prevent you from obtaining a modification if you otherwise qualify. Ocwen has signed onto the Making Home Affordable program. Your payment, including principal, interest, taxes, insurance, and home owner association dues, should be modifiable. Your payment for PITI and HOA should be no more than 31% of gross income, not take-home pay. Most “co-signers” are really co-owners. Does this co-signer have income? Probably your income and the income of the “co-signer” would be added together and then multiplied by 31% to determine what your total payment should be. If your “co-signer” has moved out and has not contributed to payments, it might be possible to have the “co-signer” income not counted as part of total income. Modification is sometimes very easy and sometimes very complex. My fee is 1.0% of your loan balance or $3,500, whichever is less. I accept credit cards in payment. Feel free to call.