Obama Plan May Back Rewritten Loans

Obama’s Foreclosure Plan May Back Rewritten Loans (Update1)

By Alison Vekshin

Feb. 3 (Bloomberg) -- The Obama administration is considering government guarantees for home loans modified by their servicers, seeking to stem the record surge of foreclosures that’s hammering U.S. property values.

The proposal, which may also have the taxpayer share in the cost of reducing mortgage payments, is aimed at shielding lenders from default after they loosen loan terms for struggling borrowers. Comptroller of the Currency John Dugan, who regulates national banks, said yesterday that “working out the details of it is still something that’s ongoing.”

“We need to help more people stay in their homes” through helping mortgage lenders make more loan modifications, James Lockhart, director of the Federal Housing Finance Agency, said in an interview with Bloomberg Television yesterday. “I’m pleased that the new administration is starting to work on that area.”

President Barack Obama’s team is preparing the biggest effort yet to arrest foreclosures, part of a three-pronged attack on the financial crisis that also aims at restarting business and consumer lending and overhauling regulation. As banks dump on the market the properties acquired through borrower defaults, they are contributing to the biggest slide in property values since the Great Depression.

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Citi Reserves $25.7B For Residential Mortgages

Citigroup Inc. (C: 3.4299 -6.03%), the recipient of $45 billion through the Treasury Department’s Troubled Asset Relief Program, on Tuesday released a progress report detailing the usage of government bailout funds through the fourth quarter 2008. The distribution of some $36.5 billion so far has been made through various lending capacities, “to help expand available credit for consumers and businesses; restore liquidity and stability to the capital markets; and support the recovery of the U.S. economy,” according to Citi’s press release regarding the report.

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Mortgage Modfication Loan Tips

Are you having trouble paying your mortgage? Has your Adjustable Rate Mortgage adjusted so that  you cannot afford the new payment? Were you placed into a bad loan and you can’t refinance into a good one?

The first thing that a homeowner should do is identify that the mortgage on their current property is a lawful one. Meaning that there are no Truth in Lending or RESPA violations and there wasn’t fraud involved on behalf of the lender or broker that originated your loan.

Have a lawyer examine your mortgage loan documents to see if there were any legal violations.

Get  a complete written life of loan history to see all the bogus charges and fees included in their mortgage balance.

See if you are the victim of an inflated appraisal. Find out what comparable properties were selling for in your area at the time you took out your loan.

Red Flags and Things to Look Out For in Your Loan:

Start by comparing the loan you got with the one you thought you were getting. Are the terms the same? That is, is your Annual Percentage Rate (”APR”) the same as the one you were quoted? Are your total monthly payments the same as you were told they would be? Is there a prepayment penalty, and if so, were you told about this prepayment penalty?

If you have refinanced your primary residence, that is, the home your currently live in, then the first thing you should look at is the “notice of Right to Cancel” which is also called the Three Day Right of Rescission. Rescission means that you can cancel the contract. The law treats rescinded contracts as if they had never existed.

You have to be advised of this right in writing.

If the creditor fails to properly provide notice of this right to cancel, the right of rescission may be extended for up to three years. When the right is extended for three years you can rescind the loan at any time before three years, meaning that the loan is treated as if it never existed. Essentially, you become entitled to all profits made by the creditor as a result of this loan. This means that the creditor must refund all interest paid, all closing fees, all broker fees, and even pay for your attorney fees. As you can imagine, this amount can be quite significant. The extended right of rescission is a powerful tool to help borrowers who have been victims of predatory lending.

If it is determined that no laws have been violated on your mortgage, then it’s time to approach your lender for a possible loan workout or loan modification.

The factors they will look at are:

1. Nature of Hardship Causing Your Mortgage Problems
2. Ability to pay
3. Amount Owed
4. Equity in the property
5. Future financial situation
6. What is better for them. To foreclose or pursue a loan workout with you and or modify your loan. Meaning which approach will best benefit the lender in the long run.

A mortgage modification  occurs where the parties to a problem loan mutually agree to workout the problem by creating new and better loan terms. The hope is that the new loan will enable to the borrower to meet their obligations.

When applying for a loan modification, make a game plan on how exactly you are going to approach them. These people want to minimizing loss for their company and they get paid to by getting the most amount of money out of you as possible or declare that your case is un-workable and foreclose on you. That is how they mitigate loss. If you understand this, then you’ll know that you have to approach them and all conversations very carefully.Everything can and will be used against you.

The lender will want to know about your financial status in order to decide if the loan can or should be modified. Gather your pay stubs, tax returns, bank account statements and other financial documents. The sooner you provide this information, the quicker the lender will be able to assess your situation.

They will also want to know your reasons for not making your mortgage payment. Is your problem temporary, such as unexpected medical bills or short term job loss? Is your problem going to be a long-term one? If it is long term, you may want to give up your house or provide a deed in lieu of foreclosure.

PREPARE A MONTHLY BUDGET. List your monthly expenses and income. If you are spending more than 38% of your monthly income on your house payment, chances are that you won't be able to afford your house. If you are close to this 38% limit, you have some hard choices to make. You can cut your expenses by eliminating luxuries such as vacations, health clubs and cable television. If you are eligible, you can take bankruptcy to get rid of your unsecured debt and "reaffirm" your mortgage. If you fall into this category, see a bankruptcy lawyer before doing anything else.

DO NOT SPEND YOUR HOUSE PAYMENTS. Often people stop making their payment because they are falling behind on other bills, or they can’t quite make the whole house payment. PAY YOUR HOUSE PAYMENT FIRST!!!

If you don’t pay your mortgage for 3-4 months and your lender decides to negotiate a repayment plan or a loan modification, then they will want what is called “good faith” money for you to come to the table with. 

Contact your lender as soon as possible or have a third party handle it for you.

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Mortgage Loan Modification - Phony Counselling Scam

Phony Counseling:

This scam has several variations. In all of them the con artist takes your money and doesn't perform any meaningful service. Here is how it works.

1. The con artist requires that you pay him an up-front fee (usually $1500 to $3000).
2. He then "advises" you not to contact your lender, credit counselor, housing counselor or attorney.
3. Sometimes, he then requests that you make your mortgage payments to him while he "negotiates"
4. At some point, he disappears with your money.

Mortgage Loan Modification - Red Flags To Watch Out For

If you have received a foreclosure notice or are having problems paying your mortgage contact your lender and / or attorney immediately. There are many con artists who prey on customers facing foreclosure. Avoid any person / company that does any of the following:

* guarantees to stop the foreclosure process – no matter what your circumstances
* instructs you not to contact your lender, lawyer, or credit or housing counselor
* collects a fee before providing you with any services
* accepts payment only by cashier’s check or wire transfer
* encourages you to lease your home so you can buy it back over time
* tells you to make your mortgage payments directly to it, rather than your lender
* tells you to transfer your property deed or title to it
* offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
* offers to fill out paperwork for you
* pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

Another View About Mortgage Loan Modification

Bill Schmick, writing on www.iberkshires.com makes an interesting argument that mortgage loan modifications may be doing little more than postponing inevitable foreclosures and exacerbating the mortgage crisis. He sees the real problem being lenders' refusal to agree to principal reductions.

Plans whereby lenders reduce payment amounts for a period of time or tack missed payments onto the end of the loan may not be helpful because the borrowers have a reduced amount of time to pay back the loan after the reduced payment period has lapsed. Also, everyone involved, is betting that housing prices will rebound to a higher price than the borrower originally paid for the house.

Half of the modified loans eventually go back into default.

Finally, the National Association for the Self-Employed (NASE) estimates that 1,279,800 small-business owners have missed one to three mortgage payments by mid-November of last year. That was before a wave of resets on their mortgages was about to begin in the fourth quarter of 2008. At the same time, the economy has taken a nosedive that has really walloped the small-business owner.

When a small business fails, it affects not only the business owner but the 5-20 employees who lose their jobs. Since small business is the engine that powers our economic growth, a crisis in that part of the economy could greatly eclipse the damage caused by the subprime crisis.

Mortgage Loan Modification - Here is why it is so hard to modify a mortgage

President Obama, congressional leaders and various regulators, lenders and community groups are proposing more aggressive measures to try to stop the rising pace of home foreclosures.


No matter what measures are enacted, these programs will likely encounter the same financial and legal hurdles that have slowed public and private foreclosure preventions for the past year.


Here are some of the roadblocks lenders and homeowners have faced as they try to work out more affordable loans that will slow the foreclosure rate and keep more people in their homes:

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Mortgage Loan Modification For Chase, Washington Mutual, and EMC Customers

Chase announced on January 17, that they plan to modify $1.1 Trillion dollars worth of mortgages which are currently tied up in mortgage backed securities or investor owned loans. They estimate that the modifications may stop up to $70 Billion in mortgages and 400,000 homes from going into foreclosure.

Chase will also offer the same programs for WAMU and EMC customers. Chase owns EMC, the former mortgage arm of Bear Sterns and purchased Washington Mutual (WAMU) in December 2008.

Here are some numbers to call for help:

Chase (800) 548-7912
Loss Mitigation (877) 838-1882 ext 52195.
The Number you will be directed to after you give your loan number: (866) 665-7629 (business hours are 11AM-8PM M-TH, 8AM-12PM F)
Chase Home Finance (800) 848-9136 (customer service) (858) 605-2181 (delinquency customer service)
Chase Home Finance-New Jersey(800) 446-8939*Chevy Chase Bank(800) 933-9100*
Web: https://chaseonline.chase.com/chaseonline/logon/sso_logon.jsp?fromLoc=ALL&LOB=COLLogon
For SUBPRIME ONLY (877) 838-1882 ext 52195. The Number you will be directed to after you give your loan number: (866) 665-7629 (business hours are 11AM-8PM M-TH, 8AM-12PM F)
Subprime Letter of Authorizations Fax: 1-877-287-7559.
Subprime Workout Packages Fax: 1-888-219-7813.
For Prime Loans: 1800-446-8939
Prime Letter of Authorization & w/o packages Fax: 614-422-7259
Chase Home Finance (800) 848-9136 (customer service)
(858) 605-2181 (delinquency customer service)
Chase Home Finance-New Jersey(800) 446-8939*
Chase Manhattan Mortgage
(800) 446-8939 (Ohio Servicing Center)
(800) 526-0072 (Florida Servicing Center)
(800) 527-3040 x533 (Florida Servicing Center)
Chevy Chase Bank (800) 933-9100
Web: https://www.chevychasebank.com/htm/payment.html

Mortgage Loan Modification - Fixes for Common Credit Problems

Homeowners with financial trouble wanting to refinance their mortgages to better rates may be pleased to know there are still options out there for them. There are strategies available to help overcome challenges such as inadequate income, excessive debt, negative equity or poor credit.

Inadequate income and excessive debt are two sides to the same coin. Lenders consider a borrower's Debt to Income (DTI) ratio.to make sure that a borrower can pay back the loan. If you've suffered a loss of income, overstated your income on your original loan application, are self-employed or have taken on additional debts, you're most likely to be among the many homeowners who face this type of problem. You can change this ratio by earning more money with a second job, or, by paying down other debts such as credit card or other consumer debts. When you are in the process of getting or refinancing a loan, do not borrow more money as this can damage your DTI ratio. Lenders normally look for a DTI ratio no greater than 38%.

Negative equity means that you owe more on your house than it is worth. Lenders consider your loan to value ratio (LTV). Most lenders require an 80% LTV. You can try to lower the amount of your loan through a lump-sum payment, or by gradually making extra principal payments.

You can use funds from a savings or retirement account, sale of another asset, income tax refund or bonus to make your lump sum payment. You can also achieve a gradual reduction in principal by making bi-weekly payments or by making extra payments to principal. If you are going to make extra principal payments, you must indicate that the payment is to be applied to principal by writing that instruction on your check. Most mortgage agreements provide that unless you specify that a payment is for principal, it will be first applied to interest.

If your mortgage is insured by the Federal Housing Administration, or FHA, you might be able to qualify for a so-called "streamlined" refinance that doesn't require an appraisal. Mortgage insurance, which protects the lender from loss if you default on your loan, also may be a way to overcome insufficient equity.

If you have a second loan and the lender refuses to subordinate, you might want to combine both of your loans into one new loan. If you obtained your second loan through the same lender as your first and as part of your purchase-money financing, you may be in a better position to combine the two loans than if you obtained your second loan later on. In that case, you'll be subject to more strict guidelines because your refinance will be considered a cash-out, rather than a conventional rate-and-term refinance.

Mortgage Loan Modification -Is now the Best Time To Refinance?

Mortgage rates are now at a 51 year low. The treasury department plans to make more money available for mortgage loans. This video shows why you might want to consider refinancing now.

Mortgage Loan Modification Companies -- Saviors or Scam Artists?

In a recent CNBC website posting, Diana Olick says the following about mortgage loan modification companies "[They] have sprung up like crabgrass in the midst of the foreclosure crisis, many of them run by former subprime mortgage brokers or real estate brokers who don’t have much work these days."

These companies charge an upfront fee to help cash-strapped borrowers navigate the red-tape of lender / servicer loan modification program, to get a payment that they can afford. Some companies are legitimate, while others are scams.

How can you tell the difference? You need to exercise due dilligence.

First, find out who is running the company. State Real Estate Commissions in California, Colorado, and a host of other states allow only those companies run by licensed mortgage brokers or attorneys to charge in advance for their services. You can find out both your states regulations, and whether a provider is permitted perform loan modification services by contacting your real estate commission.

Also, find out if the person with whom you are working is a licensed mortgage broker, or attorney. You can do this by contacting the mortgage broker licensing authority in your state for mortgage brokers, and your state supreme court for attorneys.

See if there is any State or Federal actions pending against a company. In California alone, there are over 250 active investigations of mortgage loan modification companies and several have already been shut down.

Before signing any contract, make sure that all of the fees, charges and services to be provided are clearly spelled out. If you don't fully understand the contract, don't sign it.

Mortgage Loan Modification With The FHA Hope For Homeowners' Program

The Housing and Economic Recovery Act of 2008 created a new, Federal Housing Administration (FHA) mortgage insurance program called the HOPE for Homeowners Program (also referred to as the H4H Program). Under the Program, a borrower facing difficulty paying his or her mortgage will be eligible to refinance into an affordable FHA-insured mortgage.
Here is how it works. You are eligible if you have not intentionally defaulted on your mortgage or any other debt; you have not been convicted in State or Federal Court of fraud within the past 10 years; you did not willfully or knowingly furnish materially false information to get your current mortgage.
There are some special conditions that you must agree to in order to get the FHA loan. You must agree to share the equity and future appreciation with the FHA; That you cannot take out a second mortgage, home equity loan or home equity line of credit for five years except under special circumstances to make emergency repairs; and, that you will pay a 3% up-front mortgage insurance premium and a 1.5% annual mortgage premium on your current principal balance of the new mortgage. The annual premium is included in your monthly payments. Here is an example of how the program will work.
This is an example of how the unique equity and appreciation sharing elements of this program work. Keep in mind that this is only one example, and your actual experience will depend on many things, including how much your home increases or decreases in value. Additional examples and details about how the equity and appreciation in your home is calculated can be found at www.hud.gov.
Suppose that your home, at the time you refinance into an FHA mortgage is worth $200,000. You owe $180,000 and have $20,000 in equity. You and FHA would share this $20,000. The way it would be split depends on how long you stay in the house.
If you sold during Year 1, FHA would keep 100% or $20,000 and you would get nothing.
During year 2, FHA would keep 90% or $18,000 and you would get $2,000.
During year 3, FHA would keep 80% or $16,000 and you would get $4,000.
During year 4, FHA would keep 70% or $14,000 and you would get $6,000.
During year 5 FHA would keep 60% or $12,000 and you would get $8,000.
After year 5, FHA would keep 50% or $10,000 and you would get $10,000.
In addition to this equity sharing, you will have to share any future home price appreciation with the FHA. This means that, if your home has gone up in value between the time you receive your FHA mortgage and the time of your home sale (or other disposition), you will share the amount of this increase with the FHA (less closing costs and a portion of any improvements you have made).