Why are Loan Modifications FAILING?
Define 'modified'! $111 Billion in your Stimulus funds has gone to the Humongous Banks. Recently the $400 Billion cap was lifted. Our Major Banks now have an open ended blank check to draw upon!
Now get this: The HAMP and MHA guidelines apply primarily to Freddie Mac and Fannie Mae loans. Less than 50% of mortgages being funded today are Fannie or Freddie loans. So in effect, most VA, FHA, USDA and Portfolio Loans through non-TARP funded Banks, Savings & Loans and Credit Unions are not subject to the Making Home Affordable guidelines. How can this be? Loopholes, folks. It's their money and they make the rules. Since we are NOT funding them to help borrowers--unless they have very enlightened management (some do of course) then borrowers will lose their homes or be forced to sell, Meanwhile their neighbor with a Fannie or Freddie loan gets their payment cut in half. Is this fair? Of course not. I suspect this is one big reason the biggest banks are paying back their TARP funds as fast as they can so they can stop modifying loans.
What about the news of loan mod failures? We get releases from HUD and other media generated by official sources. These official sources are pretty much paid mouthpieces of the very companies taking our tax dollars. Now stop and think: why would Fannie/Freddie and our media want to point out that people are failing to meet their modified status? My guess is they are presenting numbers to hide their losses from their investors. They also have their own criteria: that is to FAIL the consumer. Meanwhile they get to appear blameless. If your mortgage was cut in half chances are you would do anything including move heaven and earth to pay it and keep your home. I doubt what we hear as 'statistics' on the news and so should every person in our industry.
So what can be done? I heard someone say he was hoping that Obama had shamed his bank into helping him. That will be the day. People who succeed at loan modification are able to present a water-tight case for hardship and recovery. Period. You absolutely have the right to request your loan be restructured. The HAMP guidelines are designed to give homeowners breathing room: lenders will work hard to insure they get their original terms back within five years. Not all lenders use HAMP guidelines. In fact, there are many kinds of agreements depending on the loan type and your situation. A professional negotiator will work hard to get longer fixed terms. Especially for folks with sub prime ARMS or negative amortization loans.
Emotion needs to be removed from your negotiation. Banks are not social services. They are businesses. I read about a loan modification expert who is selling a CD relating the "6 secrets of hardship letters". Actually writing your hardhip letter is the easy part. Backing up your letter with solid financials is what really matters. Making sense of the situation is why loan modification is so difficult for individuals. By the time a person has experienced sincere hardship and struggled for perhaps a year or more, most are too worn down to make a sensible business case and stick by it. That is why we recommend an advocate who can make the case for you and be a neutral reality check. Ask around and find a legitimate source in your state. Some bankruptcy attorneys handle modifications as part of their settlement plans. The State Bar Association would be a good starting place.
Endless Workouts? Unfortunately a very high percentage of the loan modifications started up to a year ago are still in their trial workout period five and six months later. The reasons vary bank to bank. Unless their loan is converted to a permanent modification or terms a homeowner can live with, then we have all failed. What transpires during that forbearance (or workout) period is a constant harassment for MORE paperwork proving they are still working, etc.
Endless Paperwork? Since when do you have to prove you are still making the same money you did as when you applied for a loan six months later? If the person is PAYING their mortgage as per the workout agreement I say they are meeting their obligations. There are many possible reasons Banks are NOT converting their temporary modifications to permanent status: #1 might be they don't want to show their actual loss (of higher interest projected) on their books. The workouts are a sham and should be investigated. The few sucessful modifications which have converted to permanent status are a tiny fraction of those still in limbo.
Please tell anyone you know who is experiencing extended workout issues to contact their congressional representatives for help. http://www.congress.org They may also make a complaint directly to their State Attorney General. most states have online complaint forms. They will investigate. In Washington, our State Attorney has successfully sued several large banks including Countrywide (now defunct) for predatory lending. http://www.atg.wa.gov
All the best in 2010!
An approved Conventional, FHA/VA/USDA, Reverse Mortgage and Commercial Mortgage Planner
© Copyright 2010 Loannetter
510-LO-31434 susan templeton licensed loan officer, washington and beyond
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