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MORTGAGE MODIFICATION U.S. GOVERNMENT STYLE and OTHER PRURIENT PLEASURES.

* * * * HARD CORE REAL ESTATE TALK * * * *

I KNEW IT, I KNEW IT, I KNEW IT! ! ! !

THE MORTGAGE MODIFICATION OFFERED BY FHA OVER THE PAST SEVERAL MONTHS WAS DESIGNED TO FAIL.

Read on Inman today. . . . .

"Many of the loan modifications tracked by federal banking regulators redefaulted because they were limited in nature, Guttentag said. Instead of reducing a borrower's principal to make payments more affordable, many consisted of "nothing more than taking the past dues, adding them to the balance, recalculating the payments, and making the borrower current" -- an approach that's likely to fail." More. .

* * * *

THE SO CALLED "LOAN MODIFICATION"was no more than the rather standard FHA-HUD forbearance type of manipulation of the home owner's mortgage. A program administered by HUD for decades in which the home owner in arrears and on the verge of foreclosure can apply to HUD for forbearance and the mortgage company will not be able to foreclose while HUD determines feasibility. In a former life as a bankruptcy trustee, I met home owners who were in the HUD forbearance program for 12 months or longer before HUD would approve or disapprove. During that time, the mortgage company can't foreclose. The home owner isn't making payments and the arrears AND accrued interest on the arrears are added to the balance owed.

If the home owners is approved, all of the arrears, plus accrued interest are added to the mortgagebalance and a new monthly mortgage payment will be computed. Since the mortgage balance has not been modified, the home owner's payment is higher than before the original arrears. The HUD forbearance program is a program designed to fail and it appears that the recent Congressional initiatives to help home owners in trouble works the same way. I'm glad to finally hear someone familiar with the program that admits it was "designed to fail".

The Draconian requirements of the mortgage companies and the government programs to help the home owner in trouble are . . . . at the least. . . not helping.

ANOTHER ARGUMENT IN FAVOR OF LETTING BANKRUPTCY JUDGES MODIFY MORTGAGE BALANCES.

Courtesy, Lenn Harley, Broker, Homefinders.com.

mortgage mess

"HONEY, THE LADY FROM THE GOVERNMENT IS ON THE PHONE"

"WONDERFUL, DEAR, I HOPE THEY CAN HELP"

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 01/09/2009 05:55 PM

Comments (19)

Mortgage Mess in the Mortgage / Finance Channel

mortgage mess, mortgage modification

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19 Comments on MORTGAGE MODIFICATION U.S. GOVERNMENT STYLE and OTHER PRURIENT PLEASURES.

JAN

Absolutely incredible. I fear for our entire nation in the year 2009. Our government simply does not have a handle on the economic issues, nor how to fix them.

OMG. And here I thought that one potential benefit would be the re-emergence of FHA, coupled with an ability on their part to mitigate a HOMEOWNERS issues. What misrepresentation is taking place- over, and over, and over...

...and over.

Tim. It is truly incredible, isn't it.

Laurie. I sort of figured this is what happened when we heard the news reports about the high failure rate of the "modifications". This confirms it.

Lenn, I very naively (vaguely) attributed the high failure rate to the notion that many homeowners, in the face of declining values, are electing to walk (job loss, etc.). It never occurred to me that the "modifications" force that decision- either up front, or a year of missed payments after the "FIX". This is too much.

I remember reading that something like 58% of modified loans were re-defaulting. I don't why they think if they couldn't afford it the first time, why they can afford it the second time.

Did you read the Op Ed piece in the NYT today?

One of my clients told me the story today. They have ARM which will be adjusted this spring. They called their bank and simply asked to fix their existing rate which is higher than today's 30 yrs fixed. Bank declined because: YOU ARE CURRENT ON PAYMENTS MR. AND MRS. BORROWERS. WHEN YOU MISS COUPLE PAYMENTS WE"LL SEE HOW WE CAN HELP YOU. Now I know that their help will probably be so called loan modification U.S. Government Style. Incredible!

Svetlana what you are talking about and Lenn posted about the other day is a true travesty in the system.

Lenn, they are just creating a smoke screen no real answers or help for consumers... I was in a model home, writing a contract with a client, the interest rate was 4.75% 30 years fixed... and the sales person writing the contract says..I'd love to refinance my house...but I am burried in it.. :) so I just have to work to struggle just to pay my mortgage...I hear this type of story every where I go.....rates are so good, lenders would have plenty of business if banks would let people who have never been late on their mortgage refinance.

Featured @ Club Chaos

You know I had a feeling this would be part of the end game because I was working with a pre-foreclosure that this happened with. Three months later, they were falling behind again... Their car had to go in the shop. People just don't get it...

JAN

Lenn, Seriously, I may have to take a break from your posts...the lump on my head is getting HUGE from continually hitting it on the wall...oh yeah, I still have some heavy-duty pain meds from my shoulder issue...Let me take some and I'll keep reading...

Amy. Isn't it the truth. Sometimes I just want to scream. Wait! Sometimes I do scream.

Carolyn. I'm just glad some DO get it.

Carolyn. Thanks for the feature. Let's spread this news. Since this type of news doesn't get featured, we need a "ground swell" to pass the word.

Konnie. Agreed. In fact, I'd be in line too.

Svetlana. That experience is repeated throughout the country every day. The American home owner has been thrown to the wolves.

Melina. Indeed. I've been writing about this for months. This is the first time I've read confirmation of what I believed to be useless government HELP.

Laurie. If the government is coming to help, protect yourself.

We paid the government for fire prevention (regulation of the mortgage and securities industries) by stopping the arsonists from setting fires. They FAILED.

Why are the Arsonists still running around free spending the money they earned from setting these fires?

We are currently paying the government to repair the fire damage. FAILING.

If you had an employee this incompetent would you keep them on the payroll or just let them drive your business into bankruptcy?

I'm still hopeful Obama will bring long overdue accountability and transparency to the government.

It's tough to remain hopefully in this tsunami of incompetence. BUT, what else do we have to hang on to?

I think Bernanke said it best when he said, "Traditional foreclosure avoidance strategies may not always work well in the current environment."

Mark. Doesn't it just make you want to scream????? What's left.

Hi Lenn, I have a strange underlying feeling that we will actually see some relief or at least some positive movement this year. Why it is strange is that if we look at all that has been said and done, there is certainly no real empirical evidence to substantiate any reason for optimism. Yet I feel it based on feedback coming from clients and the interest people have. Could it be that people this year " just want to believe" based on nothing more than wanting it to be so. But if people had been feeling that all along, I predict that at least a little of the mess would feel, more bearable. Of course it makes no sense, maybe it is me that wants to believe and some how am projecting it again on people and then hearing what I want to hear?

JAN

No loan modifications are going to work. Banks need to stop adjusting the loans, PERIOD. They still think they are going to bank on the interest that these loans were supposed to give them in the future, but instead, they continue to lose millions and millions when they are foreclosing and selling the asset at such a devalued price as what I'm seeing. Stop the bleeding at the source: force the banks to quit their own greed. The investors are going to have to realize that it was a bad loan, it's just not feasible and try to get some of their return. They're not going to get all of it.

FEB

The most common mortgage modifications are listed below: lowering the mortgage interest rate reducing the mortgage principal balance fixing adjustable interest rates within the mortgage increasing the loan term throughout the mortgage forgiveness of payment defaults and fees or any combination of the above Check out this public service site: http://mortgagemodificationinfo.org

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