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Archive for April, 2010|Monthly archive page

Now Delinquency in the Modified Loan–What Next?

In Loan Modification, Nevada Loan Modification attorney Malik Ahmad on 04/24/2010 at 5:25 am

It was not easy to get the trial loan modification under the HAMP. Borrower had to sent financial documents, that too repeatedly. The lenders was asking non stop pay stubs, 4506-T signed, hardship letter, tax return and bank statements. After resending these many times, the lender may qualify the borrower/homeowner for a trial loan modification. Now, folks who were happy with these trial and finally permanent loan modifications, are becoming delinquent again. Now, they are not sending their payments and either want to do a strategic default or just get rid of the home through any means. This is really bad for the economy and bad for all the contractual obligations. Homeowners reneged on their contractual obligations. The loan modification replaced their old contract. It is unfortunate that the homeowners are again becoming delinquent.

This is released into a new Treasury’s report stated goal is for the modification program to help as many as four million households, the oversight report said, “but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status.” The report continued: “Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem.”

The Treasury took issue with the report and said the pace of modifications was picking up. The number of active permanent modifications in March was 227,922, an increase of 35 percent from those in February. An additional 108,212 permanent modifications are awaiting borrower approval.

The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government’s modification program nearly doubled in March, continuing a trend that could undermine the entire program. More Fall Behind on Lower PaymentsData released Wednesday by the Treasury Department and the Housing and Urban Development Department showed that 2,879 modified loans had been ended since the program’s inception in the fall, up from 1,499 in February and 1,005 in January.

The Treasury Department said it could not explain the growing number of what it called cancellations, almost all of which were apparently prompted by the borrower’s being unable to make the new payment. A scant number — 37 — were because the loan had been paid off, presumably because the borrower sold the house. About seven million households are behind on their mortgage payments.

The Obama administration’s modification program has been widely criticized for doing little to help them. The program received another bad review on Wednesday with the release of a report from the Congressional Oversight Panel. The Treasury’s stated goal is for the modification program to help as many as four million households, the oversight report said, “but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status.”

The report continued: “Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem.”

The Treasury took issue with the report and said the pace of modifications was picking up. The number of active permanent modifications in March was 227,922, an increase of 35 percent from those in February. An additional 108,212 permanent modifications are awaiting borrower approval.

Shaun Donovan, secretary of Housing and Urban Development, said in an interview that those were the important numbers to focus on.

“One percent of these loans defaulting is a tiny fraction,” Mr. Donovan said. “Given how stressed these borrowers are, even in the best situation, there will be redefaults. But I don’t think there is any evidence that would cause us to worry at this point.”

Sixty percent of modifications undertaken by banks in late 2008 were in default a year later, according to the latest Mortgage Metrics Report compiled by the Office of Thrift Supervision and the comptroller of the currency

More Fall Behind on Lower PaymentsData released Wednesday by the Treasury Department and the Housing and Urban Development Department showed that 2,879 modified loans had been ended since the program’s inception in the fall, up from 1,499 in February and 1,005 in January.

The Obama administration’s modification program has been widely criticized for doing little to help them. The program received another bad review on Wednesday with the release of a report from the Congressional Oversight Panel.

The Treasury’s stated goal is for the modification program to help as many as four million households, the oversight report said, “but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status.”

The report continued: “Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem.”

The Treasury took issue with the report and said the pace of modifications was picking up. The number of active permanent modifications in March was 227,922, an increase of 35 percent from those in February. An additional 108,212 permanent modifications are awaiting borrower approval.

“One percent of these loans defaulting is a tiny fraction,” Mr. Donovan said. “Given how stressed these borrowers are, even in the best situation, there will be redefaults. But I don’t think there is any evidence that would cause us to worry at this point.”

Julia R. Gordon, senior policy counsel for the Center for Responsible Lending in Washington, said she expected the number of post-modification defaults to continue to rise.

“It’s definitely alarming to look at those statistics,” she said. “The current model for modifications doesn’t necessarily produce sustainable results.”

While the program is too new to predict its long-term success, the data on previous modification efforts is not encouraging.

Sixty percent of modifications undertaken by banks in late 2008 were in default a year later, according to the latest Mortgage Metrics Report compiled by the Office of Thrift Supervision and the comptroller of the currency.

Here is the full article published in NYTimes:

http://www.nytimes.com/2010/04/15/business/15mortgages.html?scp=13&sq=&st=nyt

New Rules for Short Sales Are Implemented Now

In Loan Modification on 04/07/2010 at 12:36 am

Provisions of Home Affordable Foreclosure Alternatives

■ Complements the Home Affordable Mortgage Program by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

■ Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

■ Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

■ Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

■ Uses standard processes, documents and time frames/deadlines.

■ Provides the following financial incentives: $3,000 for borrower relocation assistance; $1,500 for servicers to cover administrative and processing costs; up to $2,000 for investors who allow up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a 1-for-3 matching basis.

■ Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions and borrower motivation and cooperation.

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