Ben Franklin, one of our esteemed forefathers, was famous in his time for a few things.
One of those things was using a simple "balance sheet" as a decision making tool.
He'd draw a vertical line down the middle of a sheet of paper and write the "pros" of the decision on one side, and the "cons" on the other.
If the Pro's outweighed the Con's his decision was made.
In the world of real estate finance in todays market lenders have adopted this philosophy.
If the decision to modify a loan is more beneficial financially than a foreclosure, they will decide to modify.
Yes - it is that simple. I have seen lenders modify loans on high value (over 1 million) properties as well as average properties. Commercial and residential, owner occupied and investments.
When it comes to loan modification the only consideration for lenders and servicers is the bottom line.
So if you or someone you know is looking for relief from high mortgage payments and a hardship that can be documented, in todays market Ben Franklin may rule the day.
When a lender looks at loan modification, make no mistake they are making a financial decision based on comparing the returns between a modification and foreclosure. If the loan modification returns outweigh the foreclosure returns they will modify EVERY time.
Recently there have been warnings by many in the government and the media regardiing the services of loan modification companies.
I for one agree that the newest mortgage meltdown crisis has given way to a new group of would be predators. But I differ greatly on how to handle this problem.
It is my opinion that the Federal Government should enact legislation governing the operation of these companies with regards to their ethical and fiduciary responbsibilities, as well as the ability to collect fees.
Instead of restricting the operation of loan modification companies, I believe their work should be encouraged, regulated and monitored.
Due to the stalling and uncooperative nature of MOST lenders and servicers there is a tremendous need and many benefits to having these companies available in the market place today.
Consumers have always benefited from having as many choices as possible in the market when it comes to service providers and I don't believe that this industry should be any different.
Many loan modification companies are run ethically and employ highly experienced finance and real estate professionals with years of banking, loss mitigation and loan workout experience.
If the government is going to get involved in oversight of this new business model, it should do so with an eye towards opening up competition and protecting the consumer simultaneously.
The current RUSH to curtail the operation of such companies will hurt consumers in the long run.
For example the State of Washington DFI has put rules in place as follows: "The Department of Financial Institutions (DFI) has received a number of inquiries regarding the legality of providing this service in this state. While there is nothing inherently illegal about this business, those providing this service in the State of Washington must be licensed as loan originators, mortgage brokers, or consumer loan companies and be overseen by the Department of Financial Institutions."
In other words, you MUST use the services of the same guys who put you in the loan in the 1st place.
Didn't "The Department" have oversight responsibilities on this same group that should have prevented the mortgage meltdown in the 1st place?
Is it me? Or do you also want to climb the mountain and SCREAM - ARE YOU PEOPLE OUT OF YOUR MINDS?
I have a GREAT idea, why don't we have some hearings on the hill that matter. Call in some of the more prominant loan modification, loss mitigation, finance, and real estate experts and figure out how to craft meaningful legislation that will allow loan modification companies to help consumers under the law, with strict oversight.
It's time to put the squeeze on the banks whove taken TAARP money and still want to sock it to the homeowners in distress. The government sold us a bill of good when they told us the $750 billion dollar bailout was to help the toxic mortgage crisis.
Now the lenders who took the government money even have the nerve to tell congress that they don't want to reveal what they did with the money.
Prior to the election many politicians echoed the call for a moratorium on foreclosures.
Now that these politicians have taken their positions on the hill legislation can be enacted to help homeowners in distress.
Democratic House leadership now looks poised to pass such a bill.
The legislative calendar shows that third on the list is the "Homeowner Protection and Wall Street Accountability Act of 2009, which along with a moratorium on foreclosures and new regulations for the financial industry includes Sen. Dick Durbin's plan to aid struggling homeowners by allowing the terms of their mortgages to be revised in bankruptcy court.
Sen. Durbin formally introduced the Helping Families Save Their Homes in Bankruptcy Act, which will allow at-risk homeowners facing foreclosures to modify the terms of their mortgages in bakruptcy proceedings.
From Durbin's press release:
"For nearly two years, we've heard dire predictions about the housing crisis and its effects on the economy. Sadly, they have not only come true, but have been far worse than anyone imagined," Durbin said. "The question that faces us now is this: after committing over one trillion dollars in taxpayer money to address the financial crisis, why don't we take a step that would indisputably reduce foreclosures and that would cost taxpayers nothing?" Durbin asked.
I have experienced many lenders and servicers who put up every road block to slow down homeowners in search of help in the form of a loan modification.
If you have the same experience, please post the names of the lenders here so we can publicize their activities
Article excerpt: As lawmakers and housing advocates push the federal government to help cut the foreclosure rate, Comptroller of the Currency John Dugan offers this sobering statistic: More than half of loans modified in the first quarter of 2008 still fell delinquent within six months.
Dugan based his statement on data collected in a survey of institutions that service more than 60 percent of all first mortgages, or 35 million loans worth $6 trillion.
Experts say one possibility is that the modifications might not have lowered monthly payments enough to be truly affordable.
"The loan modifications I have seen demonstrate that the lenders are only agreeing to the smallest-possible changes that have provided only temporary relief for the borrowers," said Bruce Sattin, a lawyer in Lawrenceville, N.J., who handles foreclosure cases.
"The salient issue is not the efficacy of loan modification as a loss mitigation tool, but whether mods are properly designed," said Ocwen CEO William Erbey. "Our loan approach achieves the twin objectives of keeping homeowners in their homes and maximizing the net present value of the mortgages to the investors who own the loans."
My Opinion
I am in the camp that believes loan modifications have not been done in a substantial enough manner to make meaningful sustainable long term changes.
Most homeowners have been forced into a loan modification that does not make enough of a difference in payment reductions to be sustainable.
Most lenders and servicers are still trying to maximize their returns and minimize their losses without the ability to see the long term effects of their puny concessions. This outlook on the negotiation of loan mods is extremely short sighted on the part of those in the mortgage industry, to the detriment of all. Loan modifications done with this mentality have begun to re-default at rates above 50%.
Under the leadership of William Erby, Ocwen has proven that a true modification will in fact solve the re-default problem.
I am curious about the "real motives" of some bloggers out there in cyber space. The information to follow has raised my suspicions.
I have been following a BLOG called the Rainy City Guide for a while now and have become a frequent commenter.
Recently because of a difference in views my posts have been put on moderation and many have been blocked from public view.
The theme of this particular BLOG was geared towards protecting consumers from predatory practices of many in the loan modification business today.
Below is a post from an at risk borrower who is obviously in distress. Rather than allow my comment to be posted, the moderator has delayed / blocked it.(I am not sure yet which one).
The poor homeowner who found this particular blog and cried out for help has been prevented from having the FREE information provided that could very well help save her home.
As you can see from the time stamp the blog moderator actually commented well after my post and decided to play cat & mouse with the homeowner rather than actually help her.
If you go to the blog you will not see my comment.
327.Comment from marypat Time January 2, 2009 at 8:22 pm
Ihave a loan with indy mac, , i also have a second with citi mortg. Called indy mac in nov, sent paper work to me , it been over a month , i have called and usually on hold for a hour to hour and half. All i want to know if they recieved all my paper work. Citi morg the same way they never return your calls. I am in such turmoil do not know what to do. I found a web site for loan mod and i filled out form and they have come out of the wood work. Do i got to an attorney , should i go into default. It seems like everyone i talk to is so disappointed that we are not behind on our payments. I just need help, it is a big hardship every month, i just wish someone could direct me to someone or someplace to get some real honest answers. Do i go to a real estate attorney or to a bankruptcy att, any guidance you can give me would be greatly, greatly appreciated.
This was my post desinged to give much needed info to Marypat, it has not been posted!
328.Comment from Dan Harris Time January 2, 2009 at 9:19 pm
Hi Marypat,
Indymac under the FDIC supervision of Sheila Bair has been very co-operative with loan modifications.
Citi's Office Of Homeownership preservation is also extremely co-operative in helping homeowners stay in their homes.
Without knowing your particulars it is hard to know whether or not you would qualify for modification.
However, you absolutely DO NOT have to be behind on payments to seek help if you have a hardship.
Gather all of your financial information and put together a financial statement that lays out EVERY monthly expense, along with all of your net income.
Depending on what your net monthly surplus or shortfall is you may or may not be able to qualify for assistance.
With this information at the ready, along with 1 months most recent paystubs, 2 months bank statements, 2 years tax returns and a hardship explanation letter you can make application.
I have provided some contact info that I hope will help below:
INDYMAC CONTACTS
FDIC - Media Contact Andrew Gray (202) 898-7192, Cell: 202-494-1049 angray@fdic.gov
Under RESPA section 6 any servicing complaints or issues addressed to your lender / servicer must be addressed and resolved within a certain time frame.
Those time frames can be found on the HUD site here: HUD RESPA
An at risk borrower should always utilize this section of RESPA to begin the loan modification process.
It will give you the opportunity to gather all of the documents in the possession of your loan servicer.
Once you have these documents in your possession you may be able to identify problems with your loan, misrepresentations made to you, missing documents and more.
I can't tell you how many times I have found that the lender does not have the signed note, or under disclosed APR's, improperly constructed TIL's, HUD 1's that don't match the TIL, Un signed altered HUD 1's, wrong names on documents, notary information missing, etc.
If you are unsure of what to do with these documents it may be worth paying someone to do a forensic audit on your file.
To begin the process of negotiating a modification I recommend you tailor the letter below to your situation and fax it to your lender as well as sending it by certified mail.
Below is a sample of a Qualified Written Request.
Impossible Lender 12345 SW Any Street Anywhere, US 12345
Re: Loan # 1122334455 Borrower: John & Jane Doe Property Address: 123 Any Street Anywhere, USA 12345
This is a "Qualified Written Request" under Section 6 of the Real Estate Settlement Procedures Act (RESPA).
We are writing to request:
(1) Copies of all documents pertaining to the origination of our mortgage including our loan application, Right to Cancel, Deed of Trust, note, adjustable rate note, addendum to the note for the interest only payment period, Truth in Lending statements, Good Faith Estimate (GFE), HUD 1, appraisal, and all required disclosures and rate sheets associated with this transaction for the above referenced loan. The copies should be legible and all documents shall be copied in their entirety.
(2) A copy of the loan history including all payments made, all fees incurred, what has been paid out of the escrow account, and how all payments were applied. This information should cover the entire life of the loan.
(3) Please forward ALL of the requested documents to us at: John & Jane Doe 123 Any Street Anywhere, USA 12345
We have reason to believe that the loan terms were misrepresented to us at the time of application and further obscured and possibly modified prior to signing. We believe that our income may have been inflated on the application. We also have reason to believe that certain statements were not provided for our approval prior to closing, and that signatures may have been forged on various documents. It is also our belief that certain documents may have not been presented at all.
As you are aware we have fallen behind in payments.
Our home is currently valued at less than we owe your bank, making it impossible to refinance or sell.
We started the process of trying to renegotiate this loan in January 2008 when we spoke with your loss mitigation department. On 1/03/08, we faxed a letter of hardship, along with bank statements and pay stubs as requested. I was advised that someone would contact me within 7-10 working days and there would be no problem getting assistance to bring the account current and capitalize the arrears and negative escrow. On 2/10/08, I called back, as I hadn't heard from anyone. I was told my payment was going to be $2,300.00. I hung up the phone in despair and in tears. If we could make a payment of $2,300.00 we would not be delinquent. Since January I have again spoken to the loss mitigation department, Home Retention, Work Out Department, and any one else who would listen. I have involved 995HOPE as well as a number of other not for profit agencies.
The situation is urgent. YOUR BANK can not continue to drag there feet in this process. We do not want to see our home going into foreclosure we want to find a solution pleasing to YOUR BANK, ourselves, as well as the investors that hold the loan. It would behoove all parties to come to amicable solution today!!!
We are very proactive in keeping our family home. We do not want to loose it, nor do we have to, we can make a reasonable payment.
We have been given the runaround by the voice recognition call routing system on numerous occasions. We have talked to various agents with different versions of what the loan modification process really entails. The customer service provided to us to date has been less than adequate.
We want copies of EVERY document we have ever signed with your company along with a full accounting of our loan from it's inception.
Let this letter serve to document our request to have my communications responded to in a timely manner.
I can be reached at 555-1212 whenever YOUR BANK wishes to contact us. If we are not available we will call you back promptly if a message is left with the phone number and extension that we can actually call and get thru on. Our email address is Modify Our Loan@EMail.com, and this is probably the quickest way to contact us.
We understand that under Section 6 of RESPA you are required to acknowledge our request within 20 business days and must try to resolve the issue within 60 business days.
In closing we are not trying to get out of paying anything only having the loan modified and the interest rate lowered. We are not looking for a short term band-aid. We want a payment we know we can live with, one that will not get us into trouble again.
If you are behind on your mortgage your bank might call and try to discuss your situation with you. If after an analysis of your finances, they feel that you will be able to make your payments in the future they are going to offer you a short term payment plan disguised as a loan modification solution.
DO NOT TAKE IT!!!
Your lender is not going to offer you something that is designed with your best interest in mind. They are going to offer you a solution that will get every dime out of you both short and long term.
A plan designed with their best interest in mind. If you are lucky you will barely be able to survive, if you aren't you'll be back in trouble again in the future. The fact that loan modifications are re-defaulting at a rate of 58 percent is no coincidence.
PRINCIPLE BALANCE REDUCTIONS
Principal balance reductions are not the norm and no bank is going to volunteer to reduce the amount you owe them. Loss mitigation managers have a responsibility to upper management and their performance is monitored for loss percentages.
Remember any losses have to be reported to stock holders. A principal reduction is a loss. If you owe more than your home is worth you have negative equity. If you have negative equity there is a good chance that you may be able to convince them to lower your principal balance in addition to lowering your interest rate.
Most banks and lenders will initially offer to defer your past due balance, temporarily reduce your interest rate and give you a few months off of making payments. This might be a good loan modification for you.
Be firm when you negotiate. Simply tell them that this is not enough. Explaining that this is a short term fix that will only delay the inevitable will help to convince them to do more.
Tell them that you need your interest rate lowered and fixed permanently, your loan re-amortized (stretched back out over a longer term) 30, 40 or 50 years.
Tell them you want your PRINCIPAL BALANCE REDUCED.
Many lenders have predatory loans on their books. Over 80 percent of loans closed from 2000 -- 2007 contain predatory terms. These predatory provisions can help you to negotiate a principal balance reduction.
Having a good attorney who has experience with RESPA & TIL violations analyze your loan documents might cost a few dollars but it could help you with your negotiations. If the attorney finds a violation you could wind up saving hundreds of thousands of dollars over the life of your loan.
You must avoid the urge to jump at the first offer your lender makes. Ask professionals what they think of what you are being offered.
Perhaps the attorney who reviewed your documents could look at the offer. Remember you can pay a professional to fight for you against your lender. If you do most of the leg work you should be able to negotiate a small fee for reviewing your file and rendering an opinion or some coaching.
One need only review the cast of characters below to get some insight into who is behind the "free" help out there'
It appears that the same banks and lenders that put you in the toxic loan that has caused you problems, are now posing as Hope Now "do gooders" by giving millions of dollars to fund this national campaign to help homeowners fix their loans and save their homes.
I certainly don't think that an organization that obtains it's funding from banks and lenders is truly looking out for the consumers best interests.
These "free" counselors are not interested in identifying predatory lending and mortgage fraud.
They aren't examining their clients loans to see if they are legal and not predatory or fraudulent.
They most definetly do not have the mortgage and legal skills to combat and remedy these predatory lending situations.
My thought is that finding violations and predatory issues with these loans would be biting the hand that feeds them.
So much for the "free" help being provided by The Hope Now Alliance.
Servicers/Lenders/Mortgage Market Participants
Acqura Loan Services American Home Mortgage Servicing Inc. (formerly Option One) Assurant, Inc. Aurora Loan Service Bank of America Carrington Mortgage Services Chase Citigroup, Inc. Countrywide Financial Corporation EMC Mortgage Corporation Fannie Mae First Horizon Home Loans and First Tennessee Home Loans Freddie Mac GMAC ResCap Home Loan Services, Inc. (d/b/a First Franklin Loan Services & NationPoint Loan Services) HomEq Servicing HSBC Finance
IndyMac Federal Bank LandAmerica Financial Group, Inc./LoanCare Servicing Center Litton Loan Servicing MERS National City Mortgage Corporation Nationstar Mortgage, LLC.
Ocwen Loan Servicing, LLC. PMI Mortgage Insurance Co. Radian Guaranty Inc. Saxon Mortgage Services Select Portfolio Servicing, Inc. State Farm Insurance Companies SunTrust Mortgage, Inc. Washington Mutual, Inc. Wells Fargo & Company Wilshire Credit Corporation Trade Associations
American Bankers Association American Financial Services Association American Securitization Forum Consumer Bankers Association Consumer Mortgage Coalition The Financial Services Roundtable The Housing Policy Council Mortgage Bankers Association Securities Industry and Financial Markets Association
If these are the players offering "free" help, I for one recommend watching your wallets and heading for the hills.
Groups Funded By The Hope Now Alliance offering "free" help.
The "Free" Counselors
ACORN Housing Corporation Catholic Charities USA Citizens' Housing and Planning Association, Inc. Consumer Credit Counseling Service of Atlanta HomeFree- USA Homeownership Preservation Foundation Housing Partnership Network Mission of Peace Mississippi Homebuyer Education Center- Initiative Mon Valley Initiative Money Management International, Inc. National Association of Real Estate Brokers- Investment Division, Inc. National Community Reinvestment Coalition National Council of La Raza National Credit Union Foundation National Foundation for Credit Counseling, Inc. National Urban League NeighborWorks America Neighborhood Assistance Corporation of America Rural Community Assistance Co. Structured Employment Economic Development Co. West Tennessee Legal Services, Inc.
Is it really "free help" or more akin to the YSP & SRP paid to brokers and bankers for locking their clients in at a higher interest rate?
Isn't this akin to when someone sues you and you offer to have your brother-in-law the attorney represent them for "free"?
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
Now that these politicians have taken their positions on the hill legislation can be enacted to help homeowners in distress.
;)
;)
