Latest Loan Mod Mortgage News- Foreclosures
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Important Update:
This week the White House and the Treasury Department are sending warnings to Lenders that unless they act with greater dedication modifying or negotiating short sales for troubled borrowers’ loans the consequence will be a public call out of those lenders who are uncooperative. The courts are getting frustrated also. Last week Suffolk County, NY Justice Jeffery A. Spinner, voided the loan of a Long Island couple and forbid the Lender from foreclosing because of what the judge called bad faith on the part of the bank in rebuffing every attempt of the homeowner to get the loan modified and for giving misinformation in court documents.
The Administration is concerned because the $75 billion foreclosure prevention plan is barely being tapped by the lenders. There will now be more monitoring of the largest mortgage companies by federal officials. Mortgage companies will be required to formulate a plan for increasing the number of loan modifications and short sales to prevent foreclosures, and these plans will be reported to the federal government. I personally had a Loan Modification working and the bank took 3 Months to tell me NO, we don’t do investor loans. Good luck fellow investors.
There are about 650,000 trial loan modifications in effect, but few of these have actually been turned into permanent modifications. Homeowners are reporting that Lenders are putting roadblocks in the way of getting authorizations for permanent changes, even when all requirements have been met.
I found this is also true for Short Sales – I have had one working for months and am now on my THIRD buyer for the property. These banks continue to be Stupid.
On with the news. The mortgage industry expects the permanent loan modification numbers to be between 25% and 35% of the total who have been accepted into the trial program. There are several reasons for the relatively low permanent change number. Sometimes the homeowner fails to submit all the required documentation. Sometimes there are discrepancies between what the homeowner claimed verbally and what is claimed on the application documents. Sometimes they fail the “net present value” test that shows whether the loan modification is less costly to the lender than a foreclosure. Meanwhile, more people continue to fall behind in their mortgages each month than are being helped by loan modifications, which sometimes even make things worse.
Ruth Simon’s Nov. 30 Wall Street Journal article on the loan modification program gives an example of a Pennsylvania family who received a 50% loan reduction by Litton Loan Servicing on a trial basis, but failed the net present value test and were told that they needed to pay back the portion that was not charged during the trial period or face foreclosure. Now the partial payments are showing up negatively on the family’s credit records. Based on the high failure rate on loan modifications, many of these people who fall through the cracks end up looking for Short Sales to get out of their situation.
Mortgage-servicing companies will now receive $1,000 for each completed short sale. This program is intended for borrowers who might be eligible for the government’s loan-mod program but don’t end up qualifying, or who request a short sale. With the White House putting the squeeze on Lenders, more people will be pushed through the loan mod process and many to the realization that they need to do a short sale. Plus many economists are forecasting another decline in housing prices and the commercial loans are just beginning. Coming in 2010 (with prices bottoming out in the third quarter of 2010 after a possible additional decline of 38%). Well as the saying goes, “Cash is King“, your opportunities keep coming!
More Info from Around the Web:
This article comes courtesy of my friend Bob Massey. Chief coach of the RE wealth, and developer of The Agent Magnet.
To your success,
Rose Quaranta
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