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June, 2009:

Look! Look! a modification

Jun 30th, 2009
by Cathy Moran.
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I actually met a client yesterday who had negotiated the modification of her loan .  Interest rate reduced to 2% for 2 years; 4% for 2 years; and 6% thereafter.  Arrearages added to principal.

If that’s all you knew you might think that lenders were serious about making modification work.  The remaining fact is that the client now has an $839,000 debt on a house now worth $575,000.

The modification did nothing to make it economically rational to keep paying on this loan.  The house must gain a quarter of a million dollars in value before the house could be sold simply to pay off the mortgage.  The payments go up and, for reasons personal to this client, her income is unlikely to increase at the same rate.

So, in my cynical view, all the lender had done here is postpone the train wreck  for a couple of years, perhaps when the market isn’t so depressed with a flood of foreclosures.  And in the meantime, it can congratulate itself on its “successful” loan modification program.  Or, when this deal craters, it can say that modifications are doomed anyway.

Certainly, superficial loan modifications are doomed.  That I will agree with.

Waiting for mortgage modification

Jun 29th, 2009
by Cathy Moran.
1 comment

Does the Obama Administration read the New York Times?  Then perhaps today’s paper will point out that voluntary loan modification isn’t working. Papers lost, hours on hold, arbitrary denials, the litany goes on.  The Administration can’t tell us how many loans have been modified.

The mere existence of a “program” such as the Times shows in action gets lenders a pass on the extended period for California foreclosures. Yet you have to think a “program” that can’t even track the applications, much less consider them is only window dressing.

Changes to bankruptcy law to allow the modification of home mortgages through Chapter 13 were defeated in Congress this spring.  Opponents  touted the sanctity of contract.  Banking interests  (who made the crisis possible with rotten lending practices) promised to voluntarily help the “deserving”, with sweeteners from the Obama HAMP and HARP plans.

Economists tell us that the recession won’t end til the housing market stabilizes.  Santa Clara County experiences 67 new foreclosure proceedings a day.

Voluntarism, a marvelous thing in the life of our communities, isn’t cutting it in staunching the torrent of housing loss.  It remains time for judicial mortgage modification.

New California Law Extends Time Periods For Foreclosures

Jun 16th, 2009
by Doug Jacobs.
1 comment

An additional 90 days has been added, is some cases, to the length of time for a homeowner to cure a default in mortgage payments. The California Foreclosure Prevention Act went into effect on June 15, 2009. This bill extends the current 90 day period between notice of default and notice of sale to 180 days.

Unfortunately, the law is limited in its application to a principal residence occupied by the borrower at the time of the default and only if the loan is the first lien against the residence and was recorded between January 1, 2003 and January 1, 2008.

A mortgage loan servicer can apply to the California Real Estate Commissioner for an exemption to this law (reducing the time period for cure back to 90 days) if they have implemented a loan modification program with specified features. Once the Real Estate Commissioner concludes that the program meets the necessary requirements, the mortgage loan servicer will receive a permanent exemption.

What this means for homeowners is that, under the above circumstances, and if the holder of their first deed of trust hasn’t received an exemption, the homeowner has 6 months from the notice of default to modify the loan, refinance, sell the home or otherwise cure the default.

Mortgage Modification: What’s the Hold-Up?

Jun 15th, 2009
by John Mlnarik.
1 comment

Borrowers have reportedly been on the phone for a countless number of hours waiting to talk to someone about refinancing or modifying their home loans.  So, what’s the hold-up?

Have the banks not staffed their modification programs with enough people?  Are they simply using the Obama Administration’s plan as some kind of collection tactic to squeeze homeowners afraid of foreclosure?

While no one knows for sure what is causing the long wait times, experts in the area have come up with logical explanations and the American Bar Association released a free web seminar earlier this month discussing these issues and how the real estate crisis developed.

The 60 minute pod cast features Jamie Lathrop, Marc S. Stern and O. Max Gardner, III who all agree that without a motivating factor banks will continue to drag their feet.  O. Max Gardner, III calls modification in a Chapter 13 bankruptcy the hammer that is missing from the Obama Plan.  Having failed to pass the Senate earlier this year, Max predicts that a bankruptcy modification bill will be before Congress again by September.

The threat of foreclosing and having to write down their balance sheet should motivate banks, but as pointed out in the seminar, servicers have an incentive to allow a troubled property to sit on their balance sheet as it collects penalties and fees.  After all, when the property is foreclosed on, the servicer or a related third party will be paid for liquidating the troubled asset while the investor and the homeowner take the hit.

O. Max Gardner, III compared the securitization of mortgage loans to an expanded mortgage flipping scheme, pointing out that those borrowers with ARM loans are forced, by a scheduled increase in their interest rate, to refinance and again pay fees associated with doing so.

The experts also discussed limitations placed on servicers by the pooling and service agreements they have with investors.  Some of these agreements do not allow for any modifications and others only allow for a handful.

While it may not be entirely clear what is taking so long, it is clear that things are unlikely to change until a new kind of motivation presents itself.

Share your loan modification experience

Jun 13th, 2009
by Cathy Moran.
6 comments

Between the Obama plan and the loan modification ads on TV, you’d assume that everyone who need a loan modification can get one.  Is that your experience?

If you’ve tried to get a mortgage modification in the past three months, please share your experience with us.  Were you offered a modification?  What were the terms?  Did it reduce the amount you owed?  Were there conditions on qualifying?  Did you have to pay money in the process?

If you were unsuccessful, what prevented a modification?  Were you facing foreclosure?   Did the foreclosure go forward anyway?  Were you treated politely?  Knowledgeably?

Please report your experiences as a comment to this blog.

Mortgage trouble? Call your Congressman

Jun 8th, 2009
by Cathy Moran.
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MoneyNews.com reports on the efforts of two member of Congress to help consituents find help with  loan modification.   It’s telling that one representative made no headway until she called the chief executive officers of Wells Fargo and Bank of America.  Homeowners without that Congressional clout languish on hold listening to canned music and are shuffled from department to department.

A majority in the Senate rejected empowering banrkuptcy courts to effect mortgage modification.  Put in the best light, they apparently assume that the banks are motivated and capable of providing voluntary resolution of the mortgage crisis. [The alternative explanation came from Senator Dick Durbin: "The banks own this place (the Senate)".]

Having trouble resolving mortgage troubles with your lender?  Facing forecloure?  Call your representatives in Congress: enlist their help with keeping your home.

Fatigue in the war on foreclosure

Jun 7th, 2009
by Cathy Moran.
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The Mercury News’ story on community resources in the South Bay for those facing foreclosure was wrapped in the tale of a woman worn out by two years of counseling those at risk of losing their homes.

Congress and, to some degree the press, has moved on from the foreclosure crisis, while the statistics report that something like 12% of the home mortgages in the US are behind at least one payment.  Those in the trenches know that there seems no end in sight and voluntary loan modification programs aren’t in place or yet effective.

Bay Area organizations offering free assistance to those facing foreclosure include:

  • Project Sentinel  408 720 9888 press 3
  • Neighborhood Housing Services   408 279 2600
  • SurePath Financial Services  1 800 540 2227
  • EPA Can Do  650 473 9838
  • San Jose Foreclosure Help Center  408 794 1241

If you know of other free services, please add your comments.