Thursday, August 13, 2009

Tips For Borrowers Dealing With Loan Servicers

Many homeowners have experienced difficulties and frustration getting through to their loan servicer when trying to obtain a loan modification. To help alleviate some of the stress associated with this task, an attorney with the National Consumer Law Center in Boston is offering the following tips:

• Consumers should keep detailed written records of every contact they have with their servicer,
including logs of phone calls and copies of written correspondence.

• If the servicer makes a promise, such as crediting a payment, modifying the loan, or stopping a
foreclosure sale, for example, the homeowner must get it in writing.

• When seeking a loan modification, consumers should send a request in writing asking the servicer who owns the mortgage loan. Some banks and investors have policies on which loans they will modify.

• Consumers should beware of servicers advising them to stop making payments because they have applied for a loan modification. Instead, homeowners should continue making payments for as long as possible, even if they cannot make the payment in full. Otherwise, the loan will accrue
more interest, and will cost more in the long run.

• Borrowers who feel they cannot resolve their problem or those who think their servicer may be
violating their rights are advised to contact a non-profit housing counselor or seek legal help.
Housing counselors can help negotiate a loan modification for free.

• Consumers can visit the Treasury’s homeowners Web site to find out if they qualify for a loan modification under the Obama administration’s program Making Home Affordable.

California Association of Realtor Mortgage Update

Thursday, August 6, 2009

Treasury Announces Home Price Decline Protection Incentives

Press Release

July 28, 2009

WASHINGTON – As part of an ongoing effort to expand relief to struggling homeowners, Treasury released today the Supplemental Directive for its Home Price Decline Protection (HPDP) program, a component of the Home Affordable Modification Program (HAMP). HPDP provides additional incentive payments for modifications on properties located in areas where home prices have recently declined. The purpose of the program is to encourage additional lender participation and HAMP modifications in areas with recent price declines by helping to offset any incremental collateral loss on modifications that do not succeed. HPDP will help ensure that borrowers in areas with recent home price declines have the opportunity to stay in their homes, thereby minimizing foreclosures, which further depress home values.

“This is an important next step in our multi-faceted efforts to bring relief to struggling homeowners and stabilize the housing market,” said Assistant Secretary for Financial Institutions Michael Barr. “Home price decline protection can help homeowners who may not have been reached otherwise.”

All HAMP loan modifications begun after September 1st, 2009 are eligible for HPDP payments.

HAMP offers incentives to investors/lenders, servicers, and homeowners for successful mortgage modifications. The “pay-for-success” structure of HAMP provides incentives to create sustainable mortgage modifications in a manner most cost effective for taxpayers.

Treasury has allocated a total of up to $10 billion for the HPDP program, but the actual amount spent will depend on the home price trends. The funds available to individual servicers to pay HPDP and all other incentives on HAMP modifications will be capped according to the Program Participation Cap included in their Servicer Participation Agreement. Treasury will establish each servicer’s initial cap by estimating the number of modifications that servicer is expected to perform during the term of HAMP.

The Home Affordable Modification Program (HAMP) commits $75 billion dollars, including $50 billion of funds from the Troubled Asset Relief Program, to encourage loan modifications that will provide sustainably affordable mortgage payments for borrowers.

HAMP is one component of Making Home Affordable, the Administration’s comprehensive plan to stabilize the US housing market and offer assistance to millions of homeowners by reducing mortgage payments and preventing avoidable foreclosures. Making Home affordable includes: (1) the $75 billion HAMP program, (2) the Home Affordable Refinancing Program providing increased refinancing opportunities for borrowers with high loan-to-value ratios and (3) a $200 billion commitment to increase confidence in the GSEs and support increased refinancing generally.

Wednesday, August 5, 2009

From the Trenches - Credit Consequences of Foreclosures & Short Sales

The other day, I was contacted by a couple who wanted to purchase a home. The husband has a secure, long-term job with a substantial income. The husband received a promotion, but it required that he sell his home (which was held only in his name) and move. Because he was "underwater" on his loan (i.e. owed more than the house was now worth) he decided to do a short-sale.

Prior to the short-sale, the husband's credit score was well over 800. After the sale, it dropped about 50 points, still an excellent score. His wife's credit score remained over 800. With his secure, high-income job, great credit score, and almost 50% down payment, he thought they would be able to buy a new home.

He thought wrong. In trying to investigate this issue, I came across Fannie Mae guidelines which state that borrowers must wait four years after a short-sale, bankruptcy, or foreclosure before they can qualify for a new home loan. If they can prove hardship, then this waiting period may be reduced to two years.

Has anyone recently been through a short-sale, foreclosure or bankruptcy and then borrowed money to purchase a home? If so, I would appreciate hearing about your experiences. It could help a lot of people who may be trying to decide if one of these options makes sense for them.