Mortgage modification future

CoreLogic’s (corlogic.com) latest monthly foreclosure report indicated a continued downward trend.  In fact, July’s national foreclosure inventory rate of 0.91% was the 57th consecutive month (almost 5 years) with a lower number of foreclosures nationwide.  Even the current 2.9% national rate of home owners considered “seriously delinquent” is also lower from last July.  (Maryland’s foreclosure inventory and seriously delinquent rates are higher than the national average at 1.2% and 4.1% respectively.) All thanks to mortgage modification and foreclosure alternatives.

Frank Nothaft, chief economist at CoreLogic, contributed the decline of foreclosure inventory to a combination of loan modification, foreclosures, and a strong housing market.  Additionally, he stated that “The U.S. Treasury’s making home affordable program has contributed to the decline through permanent modifications, forbearance and foreclosure alternatives which have assisted 2.5 million home owners with first mortgages at risk since 2009.”

In the immediate aftershock of the foreclosure and subsequent financial crises, which began almost nine years ago, the government stepped in to help out at risk home owners.  The rollout of HAFA, HARP, and HAMP was bumpy and it took time for the programs to work efficiently.  Of course, these programs were not intended to continue on forever, and in fact were supposed to end several years ago.  Fortunately, Congress, the Treasury and the FHFA have recognized the need for continued assistance and extended the programs.  Providing foreclosure alternatives and mortgage modification reduces vacant homes, bolsters communities, and helps maintain a healthy housing market.

Although these mortgage assistance programs were intended to be temporary, it’s clear that a permanent solution is necessary.  The notion that a foreclosure crisis won’t or can’t happen again is naïve.  Historically, housing downturns and recessions are cyclical.  And when an economic decline occurs, a home owner assistance program should be available to provide borrowers with alternatives to foreclosure.

The Federal Housing Finance Agency (FHFA.gov) announced in an August 25th press release that HARP will be extended through September 2017.  But that will be the end of Home Affordable Refinance Program (HARP) as we know it, because a new program is slated to begin October 2017.  The new program is to be a streamlined version that will also allow those whose mortgages exceed Fannie and Freddie’s loan limits to refinance.

FHFA stated that specifics for the HARP replacement will be released as the rollout date approaches.  However, it is anticipated that the program will not require a minimum credit score; will not place limits on the borrower’s debt-to-income ratio; nor will it limit the mortgage to a maximum loan-to-value.  And unlike many refinance programs, an appraisal may not be required.  And improving from the HARP program, there won’t be cut off dates, and borrowers can use the program multiple times.

The Home Affordable Modification Program (HAMP) unfortunately is slated to conclude at the end of the year without a viable replacement.  However, the Mortgage Bankers Association have stepped in to create a streamlined solution to fill the gap.  A September 23rd press release (MBA.org) announced its successor to HAMP: “One Mod: Principles for Post-HAMP Loan Modifications.”

J. David Motley, CMB Vice-Chairman of the Mortgage Bankers Association, stated, “With Treasury’s HAMP program soon coming to an end, we all recognized that investors, borrowers, and servicers need a replacement program that provides clarity and simplicity to homeowners experiencing difficulty maintaining their mortgage paymentsOne Mod could meet that challenge by providing affordable and sustainable payment structures that improve the likelihood of success for participating borrowers.

Original published at https://dankrell.com/blog/2016/09/30/mortgage-modification-future/

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

A new wrinkle for eminent domain

Dan Krell, Realtor®
DanKrell.com
© 2012

eminent domainWhen the housing market began its decent in 2007, foreclosures seemed to occur with the frequency not seen since the S&L crisis of the late 1980’s. Since then, negotiating a lower mortgage payment by modifying the mortgage interest rate and/or reducing the principal continues to be difficult for many home owners.

One of the reasons why modifying a mortgage can be difficult is because of the complicated structure of the Real Estate Mortgage Investment Conduits (REMIC). A REMIC, is a financial instrument that may have stimulated the wide use of “100% financing” and other high risk mortgages through securitization of mortgages on the secondary market. Although a highly complex structure, a very basic explanation is that the REMIC purchases large pools of mortgages and acts as the trustee for those who own the bonds to which the loans are securitized (mortgage backed securities). Bond holders could be individuals or corporations that may also sell ownership to the bonds as well (e.g., funds, annuities, pension plans). Mortgage modifications in the REMIC environment can be legally complex. Additionally, the inherent complex structure of the REMIC as well as its fiduciary responsibility to its bond holders, makes decisions move at a snail’s pace.

In an effort to assist home owners in their local communities, a few municipalities (most notably San Bernardino County) have considered restructuring mortgages via eminent domain. Eminent domain is the power that government exercises to take private property for public use and pay the owner a “just compensation.” And although eminent domain cases typically involve real property (e.g., land), it may also involve other types of personal property.

Considering that eminent domain is often a contentious topic, you might imagine that there might be some resistance to the condemnation of mortgages by municipalities. The Federal Housing Finance Agency (the FHFA oversees Fannie Mae and Freddie Mac) entered a note in the Federal Register on August 9th (“Use of Eminent Domain To Restructure Performing Loans”). The note listed concerns for such practice of eminent domain, among which is a concern that tax payers could ultimately bear the losses incurred from restructuring mortgages through eminent domain. As a result, the FHFA may take action to “avoid a risk to safe and sound operations and to avoid taxpayer expense.”

eminent domainThe Wall Street Journal reported on August 8th (“New Roadblock for Eminent Domain Bid: Housing Regulator”; by Al Yoon) that banking and other related groups are concerned that “stripping loans from investors would create unnecessary losses and reduce the availability of credit.” And, “… the Securities Industry and Financial Markets Association, or Sifma, has proposed prohibiting loans originated in areas using eminent domain from a key part of the $5 trillion mortgage-backed securities market that is a backbone for U.S. housing finance.”

An article by Rep Brad Miller published in the American Banker on July 11th (No Wonder Eminent Domain Mortgage Seizures Scare Wall Street) discussed the impact of eminent domain of mortgages on Wall Street, specifically the four largest banks. Congressman Miller pointed out that there is a cost to lenders holding second mortgages when mortgages are restructured. In particular, the four largest banks, which “hold $363 billion in second liens, very commonly on the same property as first mortgages they service.”

Regardless of the outcome, there is sure to be plenty of posturing; the result may add a new wrinkle in the eminent domain debate.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of August 13 , 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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Foreclosures and mortgage mod scam artists

by Dan Krell © 2010

Foreclosures continue to be a national issue; however, a tiny glimpse of light from the end of the tunnel may be peering through for the local market. According to the April 2010 report Property Foreclosures In Maryland First Quarter 2010 by the Maryland Department of Housing and Community Development (which can be viewed on mdhope.org), the number of national foreclosure filings (which includes notices of default, notices of foreclosure sales and lender purchases of foreclosed properties) increased the first quarter of 2010 (7.2% compared to the fourth quarter of 2009 and 16% compared to the first quarter of 2009). It is estimated that 1 in 138 households in the United Sates received a foreclosure filing during the first quarter of this year.

The news for Maryland, however, seems somewhat better. The report indicated a reduction of foreclosure filings in the first quarter of 2010 compared to the fourth quarter of 2009 (-11.5%) but increased compared to the first quarter of 2009 (+59.9%). Montgomery County fared much better such that the total number of foreclosure filings decreased in the first quarter of 2010 compared to the fourth quarter of 2009 (-24.2%) and the first quarter of 2009 (-14%).

Along with the ongoing problem of foreclosure come the continued attempts from home owners to save their homes. As the real estate market deteriorated, many home owners found themselves in a negative equity situation and unable to refinance their mortgages. Mortgage modification became the prevalent means of foreclosure relief as home values decreased during the market decline; home owners facing financial challenges seek to modify their mortgage terms to make their mortgage payments more affordable.

Since the beginning of the foreclosure crisis, foreclosure rescue scams have taken advantage of desperate home owners trying to save their homes. As the prevalence of mortgage modifications grew, so did mortgage modification scams. Although legitimate mortgage modification information is readily available from HUD, Fannie Mae, Freddie Mac, federal and local governments, non-profit organizations, etc. home owners continue to fall prey to scam artists.

Because scammers continue to confuse home owners searching for assistance by evolving their techniques to appear to be legitimate, the Loan Modification Scam Prevention Network was founded as a project of The Lawyers’ Committee for Civil Rights Under Law. The Loan Modification Scam Prevention Network (preventloanscams.org) is a coalition effort created to bolster ongoing government, law enforcement, and public education efforts to fight the scammers who are intent on defrauding distressed home owners.

To assist home owners, the preventloanscams.org website contains extensive information such as (but not limited to) housing counseling, tips for avoiding scams, state and local foreclosure resources, the means to report suspected scams, and a list of alleged scam artists! Additionally, the site lists state and local laws regulating businesses involved in foreclosure relief, as well as a statement about attorneys providing loan modifications.

If you are seeking a mortgage modification, the Loan Modification Prevention Network is one of the many resources available to you; the website has a comprehensive database. Additional resources are available through HUD certified counseling programs and the Maryland Hope Hotline (1-877-462-7555). Maryland home owners facing foreclosure have protections under the Protection of Homeowners in Foreclosure Act, such as prohibiting foreclosure consultants from collecting upfront fees. If you suspect you are being scammed, contact a local consumer protection agency and/or law enforcement.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 26, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

Benefits for delinquent home owners while reducing foreclosures

by Dan Krell © 2010

Additional assistance for financially challenged home owners was announced last Friday (March 26th) by the U. S. Treasury (ustreas.gov). To assist struggling home owners keep their homes and lessen the number of foreclosures, the expansion of the Home Affordable Modification Program (HAMP) will address unemployed home owners, negative equity, second mortgages, and “premature” foreclosures.

Unemployed home owners take heart. You may be afforded a mortgage forbearance period of at least three months (not to exceed six). Once you find employment you will be considered for a permanent HAMP mortgage modification if you stay current on your forbearance payments and your monthly mortgage payment is more than 31% of your monthly income. You will have to provide proof of income and the modification must meet the standard net present value (NPV) test (The NPV test compares the cash flow of a modified mortgage to the cash flow of an unmodified mortgage). However, if you do not find employment during the mortgage forbearance period, you will be considered for the Home Affordable Foreclosure Alternatives program.

If you are looking to regain some of your home’s equity, you may now have a vehicle to do so through a HAMP mortgage principal write down. Participating lenders will be offered additional incentives to provide onetime mortgage principal write downs when mortgage balances exceed 115% of the home’s value. An alternative principal reduction plan will be combined with a HAMP mortgage modification and may be permanent as long as modification payments are timely for three years.

If you’re seeking to refinance your HAMP eligible mortgage but your loan balance exceeds 115% of your home’s value, you may qualify for a FHA refinance in conjunction with a lender mortgage principal write down. The new loan may not exceed 97.5% of the value of the home (current FHA borrowers are not eligible). The refinance may also qualify to consolidate a first and a second loan under these circumstances.

If a second mortgage is giving you trouble, it may now be eligible for a modification if your first mortgage was already modified through HAMP and your lender participates in the Second Lien Modification Program.

Finally, further protections have been added to assist you if you are pursuing a HAMP modification or seeking bankruptcy protection. In an effort to prevent “premature” foreclosure sales while home owners are seeking modifications, lenders are advised to increase communication with home owners (through telephone and mail) as well as requiring a written certification that the home owner is not HAMP eligible prior to conducting a foreclosure sale. Additionally, home owners who have pursued bankruptcy protection will no longer be excluded from HAMP programs.

Although the HAMP enhancements will not be up and running immediately, the full program is expected to be available by the fall (with pieces implemented gradually). Additionally, mortgage principal write down programs may take some time to implement; however some lenders may already have similar programs in place.

To qualify for these new programs, home owners must be HAMP eligible (and meet other specific requirements). Unfortunately, reports of these programs on the internet and other media outlets are sometimes incomplete, incorrect and/or exaggerated; it is highly recommended that you check the fact sheets on the Making Home Affordable (www.makinghomeaffordable.gov) website as well as talking to a Making Home Affordable counselor.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of March 29, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

Options to lower mortgage payments

by Dan Krell © 2009
www.DanKrell.com


If selling your home is not in your near future, you may be indifferent to real estate market trends. But, would you be interested in lowering your mortgage payment?

Several months ago I told you about the government push to modify and refinance mortgages to assist home owners to keep their homes. The Obama Administration’s Making Home Affordable program (makinghomeaffordable.gov) is up and running and gaining momentum!

If you are facing financial challenges and need assistance to lower your mortgage payment, the Home Affordable Modification may be able to help you. To qualify, the mortgage must be on your principle residence, must not exceed $720,750, and must have been received prior to January 1, 2009. Additional requirements include having difficulty in paying the monthly payment due to: having increases in monthly payments, having a reduced income, experiencing hardships that increase your expenses; and/or your mortgage payment exceeds 31% of your gross income.

If you are current on your mortgage but find it difficult to refinance because the mortgage balance exceeds your home’s value, the Making Home Affordable Refinance may be for you. The Making Home Affordable Refinance program allows home owners to refinance mortgages up to 125% of the value of the home. To qualify you must be current on your mortgage, the mortgage must be on a residential building (up to four units) that was bought by Fannie Mae or Freddie Mac. To find out if your mortgage was sold to either Fannie Mae or Freddie Mac, you can either call your servicer or you can check on your own by going to their corresponding websites (loanlookup.fanniemae.com or freddiemac.com).

You can determine if you qualify for the Home Affordable programs through completing a brief questionnaire on the Making Home Affordable website (makinghomeaffordable.gov). If you qualify for these programs, you will need to contact your mortgage servicer and request one of the Home Affordable programs (refinance or modification). The servicer will need your income and asset information (hardship information is also required to process the Home Affordable Modification) to assist them in processing your request. The process will be slow, but making frequent calls to follow the progress is necessary to ensure you don’t miss a step.

What if your mortgage balance is less than your home’s value and your credit is excellent? If you haven’t yet taken advantage of recent mortgage interest rate lows, you might consider an automatic rate reduction loan (ARR mortgage). An ARR mortgage is a loan where the rate automatically lowers as mortgage rates fall. ARR mortgage programs have been around for some time, but haven’t received much press lately because mortgage rates have been relatively low.

Although not many lenders offer ARR mortgage programs, ARC Loan (arcloan.com) has been offering “mortgage management” since 1993. According to the ARC Loan website, the program seeks to take advantage of mortgage cycles to assist their clients in saving money and reducing debt. Because everyone’s needs and situations are different, ARC Loan consultants take the time to provide a personalized analysis to determine if you qualify and if an ARC Loan can improve your financial picture.

Many options now exist to lower mortgage payments for home owners in various financial situations. If you qualify, taking advantage of these programs may lower your monthly payments.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of August 31, 2009. Copyright © 2009 Dan Krell