Obsolete Litton Policy Hampers Family

Struggling to stay in their home of 18-years, a Windham, Ohio family is desperately trying to solve their crisis before a May 24th sheriff's sale.  Suffering from reduced income and an ever-escalating adjustable payment, the family contacted their servicer Litton Loan Servicing to obtain a loan modification, which was eventually denied. The family then contacted American Homeowner Preservation, who made an offer to purchase the home at the appraised value of $43,000. With AHP, the family would receive an affordable  5-year lease to stay in the home, plus a favorable 5-year option to repurchase. On average, AHP lease payments are 40% less than prior mortgage payments and option prices are 59% less than prior mortgage payments, and AHP provides counseling in order to prepare families to qualify for FHA financing to repurchase their homes.

Today, Litton indicated that they will approve the Windham, Ohio family's short sale, but only if the family vacates the home due to an internal policy which restricts short sales in which the purchaser provides leases and/or options to the selling families. These policies were appropriate in a normal marketplace in order to prevent “friendly” sales which may have limited sales prices and reduced recovery to Mortgage-Backed Securities investors. However, today’s marketplace is challenged and some MBS investors now recognize the value in keeping families in their homes through all potential resolutions. Thus, some MBS investors are supportive for programs such as AHP if the net recovery on the investment is sufficient in all other respects. AHP tries to pay what the homes would sell for as a REO, but saves the time of foreclosure and eviction in order to increase the investor's net recovery.

In the Windham, Ohio case, the family owes $105,000, but the property now appraises for $43,000 and the opening bid at the sheriff's sales is $45,300. Thus, the $43,000 offered by AHP will provide a greater net recovery to the MBS investors who Litton is servicing for, as the costs and time of completing the foreclosure, eviction, maintaining and marketing the home would be avoided. Also, the neighborhood would avoid the blight of yet another vacant bank owned home, of which there are over 150,000 in Ohio. Most importantly, the family will be able to remain in their home with an affordable lease and favorable option to repurchase, which provides them the incentive to stay, pay and repurchase.