With so many states strapped for cash the settlement will no doubt be a welcomed pay day. Similarly with the election year ahead the incumbent wants signs the economy is recovering well before November rolls around. External pressure aside the American people are ready to move on with their lives and get back to work.  It is unclear how resolving claims against the big banks will allow this to happen, but the link between the two is front and center in the media.

What the economy needs to move forward is trust and how the settlement will begin to rebuild the people’s trust in our economic system again is unclear.  While resolving disputes without litigation is beneficial I can’t help but think there is an opportunity in the settlement being overlooked.

The combination of filing for Ch 13 and working with a HUD counselor seems to be getting the best results. We send our clients to Surepath Financial for help dealing with their lender, but provide a list of others in the area as well.
When choosing someone to help with a loan modification it is important to go to a counselor approved by the U.S. Department of Housing and Urban Development for FREE assistance. You should NEVER be asked to pay for counseling or a loan modification.
Here are a number of HUD-Approved counseling services in and around Santa Clara County:
SUREPATH FINANCIAL SOLUTIONS

1190 South Bascom Avenue, Ste 208
San Jose, California 95128

PHONE: 877-615-7873
E-MAIL: clientservices@surepath.org
WEBSITE: www.surepath.org

- Counselors speak English and Spanish

AFFORDABLE HOUSING CENTERS OF AMERICA

395 E. Taylor St. Suite 230
San Jose, California 95112

PHONE: 408-297-3053
E-MAIL: jgaleano@ahcoa.org
WEBSITE: www.ahcoa.org

- Counselors speak English and Spanish

PROJECT SENTINEL

298 S. Sunnyvale Avenue, Suite 209
Sunnyvale, California 94086

PHONE: 408-720-9888 x 16
TOLL FREE: 888-331-3332
E-MAIL: mediate4us@housing.org
WEBSITE: www.housing.org

- Counselors speak English, Spanish, Chinese Mandarin, Hindi

PROJECT SENTINEL

7800 Arroyo Circle, Bldg A
Gilroy, California 95020

PHONE: 408-842-7740
TOLL FREE: 888-331-3332
E-MAIL: gilroy@housing.org
WEBSITE: www.housing.org

- Counselors speak English and Spanish
NEIGHBORHOOD HOUSING SERVICES SILICON VALLEY

1156 North Fourth Street
San Jose, California 95112

PHONE: 408-279-2600
WEBSITE: www.nhssv.org

- Counselors speak English, Spanish, Hmong and Vietnamese

NORTHERN CALIFORNIA URBAN DEVELOPMENT

Keisha Woods, Housing Program Manager
1836 Bay Road, Suite B
East Palo Alto, California 94303

PHONE: 650-328-1890×110
E-MAIL: keisha@norcaludc.org
WEBSITE: www.norcaludc.org

- Counselors speak English and Spanish
AVENIDAS

450 Bryant St
Palo Alto, California 94301

PHONE: 650-289-5433
E-MAIL: hlandsman@avenidas.org
WEBSITE: www.avenidas.org

– English Only

NATIONAL ASIAN AMERICAN COALITION

1535 Landess Avenue, Suite 146
Milpitas, California 95035

PHONE: 408-343-7701

- English Only

*** If you are outside Santa Clara County, the Department of Housing and Urban Development has a list of approved counseling agencies by State. You can access the list here.
Once you’ve set out on the path of seeking a mortgage modification consider the following tips.
• Do not let anyone pressure you into signing papers right away. Take your time to decide, and get more than one opinion on your situation.
• Do not sign your deed over to anyone if you are applying for a mortgage modification
• NEVER make a mortgage payment to anyone other than your mortgage servicer without its express approval

With uncertainty in title to real property, the market for foreclosed properties is sure to dive deeper before anything that even looks like a recovery comes into sight.

With all that has transpired over the past couple of years I am beginning to think that the corporations and leaders of our country have all but forgotten about the value of a job well done.  Somewhere along the line we traded quality for lower cost and simply lost sight of what is important.

Years before the Constitution was written our founding fathers put in place a system to track the ownership of property.  With the creation of MERS, finding out who has a secured interest in real property has become difficult, to say the least.

When title insurers refuse to stand behind title to property,  it is time to get back to basics to instill confidence in a system that is no longer working for the very people who need it most.

Growing up I was taught to leave things better than I found them and put a little bit of me into everything I do.  In doing so, I was taught that we live on, not in words, but in our deeds.  Without reliability in what we do, who among us will believe a word we have to say and how long will it take to re-build the reputation of a system that is vital to our society?

Enhancements to the Making Home Affordable (“MHA”) plan announced in late April were made, at least in part, because of complications second mortgages presented banks when attempting to modify or refinance a first mortgage. The new provisions, along with the integration of the Hope for Homeowners program, will assist even underwater borrowers by requiring write downs in order to increase homeowner equity, or at least subdue the urge to simply walk away.

Details of the Making Home Affordable Program Update spell out what can be done for amortizing loans as well as interest-only loans.

Amortizing Loans: (Loans on which borrowers make principal as well as interest payments)  Participating servicers are required to take specific steps when modifying amortizing liens in the second position.

1) Interest rate reduction down to 1 %,

2) Extension of the term to that of the modified first mortgage,

3) Principal forbearance on the first lien, with the option of extinguishing principal under what the MHA plan calls the Extingueshment Schedule.

Of course there is a catch, there is always a catch,

4) After five years, the interest rate on the lien in the second position will adjust to the current interest rate on the first mortgage,

5) The lien in the second position will then re-amortize over the remaining term at the higher interest rate, and

6) Investors receive an incentive payment from the U.S. Treasury equal to one half of the difference between the 1% interest rate floor and the modified interest rate on the first lien.

Interest-Only Loans: (Loans on which borrowers make only interest payments) In the case of an interest only loan, servicers are to

1) Reduce the interest rate down to 2%,

2) Forbear principal in the same proportion as forbearance on the first lien,

3) Extinguish principal under the Extinguishment Schedule, if any,

4) After five years the interest rate steps up to the interest rate on the modified first mortgage,

5) The lien in the second position amortizes either over the remaining term of the modified first loan or the originally scheduled amortization term, which ever is longer, and amortization begins at the time specified in the original contract,

6) Investors receive an incentive payment from the U.S. Treasury equal to one half of the difference between the 2% interest rate floor and the modified interest rate on the first lien.

There are also a pay-for-success structure for the second lien program similar to the first lien modification program.  Servicers can be paid $500 up-front for a successful modification and borrowers can receive up to $250 per year for as many as 5 years.  Payments made to the borrower are applied to the principal due on the first mortgage.

To give an incentive to lenders for extinguishing a second mortgage the MHA second lien program provides for an Extinguishment Price Schedule. The Extinguishment Schedule ranges from $.04 to $.12 for every dollar of debt extinguished for loans that are less than 180 days past due at the time of modification.  For loans more than 180 days past due at the time of modification there is no schedule and the lender/investor is paid $.03 for every dollar of debt extinguished.

Thus far the Obama Administration’s solution has been one of financial bargaining with banks, servicers and investors.  The money that borrowers receive in these plans amount to a reduction in loan principle, which is only another payment to the bank.

Time will tell if these changes are effective or whether the borrowers eventually end up in bankruptcy or foreclosure.  Not to mention having the banks and GSEs converting to property managers! For anyone who owns an investment property and can attest to what a headache it is, maybe there will be some sort of justice after all?