The federal Office of the Comptroller of the Currency and the Office of Thrift Supervision released their Mortgage Metric Report for second quarter 2009.
It says, in part, of the homeowners who received loan modifications in the first half 2008, 50% of them were, one year later, more than 2 months late with their payments. But those who received the biggest modifications did better than those who did not.
For example, only a third of the borrowers whose monthly payments were reduced by 20% or more were likely to be late, as opposed to 60% of the borrowers who received smaller modifications.
The report covers 60% of all loans made on US residences. To read the report in its entirely, go to http://www.occ.treas.gov/ftp/release/2009-118a.pdf
Thursday, October 1, 2009
Tuesday, September 29, 2009
NACA Save the Dream Tour Continues
The Neighborhood Assistance Corporation of America (NACA) is out on tour.
NACA is a homeowner advocacy group that uses sometimes controversial tactics to keep people in their homes. Recently NACA decided to start a national tour. Meeting in cities across the US, NACA offers free counselling sessions for homeowners who are being threatened with the loss of their homes.
Armed with financial information, homeowners meet with counselors who help them figure out how much of a housing payment they really can afford. Then, on the spot, the homeowner meets with a bank representative who has the authority to permanently restructure the loan to make it more affordable.
Sometimes this means lowering the rate; sometimes the amount of the principal is decreased; sometimes both are done. But whatever the solution, it is for the life of the loan.
NACA cannot help everyone. But for those who have had their loans restructured, it has allowed them to keep their homes.
To see if NACA will be in your area or to get more information, go to www.naca.com.
NACA is a homeowner advocacy group that uses sometimes controversial tactics to keep people in their homes. Recently NACA decided to start a national tour. Meeting in cities across the US, NACA offers free counselling sessions for homeowners who are being threatened with the loss of their homes.
Armed with financial information, homeowners meet with counselors who help them figure out how much of a housing payment they really can afford. Then, on the spot, the homeowner meets with a bank representative who has the authority to permanently restructure the loan to make it more affordable.
Sometimes this means lowering the rate; sometimes the amount of the principal is decreased; sometimes both are done. But whatever the solution, it is for the life of the loan.
NACA cannot help everyone. But for those who have had their loans restructured, it has allowed them to keep their homes.
To see if NACA will be in your area or to get more information, go to www.naca.com.
Thursday, September 17, 2009
Mortgage Problems Are Walloping Borrowers' Credit Scores
Homeowners who find themselves struggling with mortgage payments and unsure how to handle the situation—short sale, foreclosure, or walk away—are advised to consider the impact of each on their credit scores.
Loan modifications that roll late payments and penalties into principal debt owed on the house can actually increase borrowers’ scores modestly, while refinancing underwater mortgages may have little or no negative effect on credit scores, according to Vantage Solutions, a scoring company created by the three national credit bureaus.
Short sales on the other hand can trigger large declines in credit scores, according to researchers. A homeowner with an excellent credit score might see a 120 to 130 point decline after a short sale.
Homeowners who choose to walk away from the home and stop payments altogether should expect their credit scores to fall 140 to 150 points, plus negative marks on their credit bureau files for up to seven years.
People filing for bankruptcy protection covering all their debts will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.
Homeowners facing financial stress can experience minimal declines to their scores if they contact their loan servicer or lender when they first discover that they may have trouble making their monthly payments. But good luck in getting them to respond in time to make a difference!
Loan modifications that roll late payments and penalties into principal debt owed on the house can actually increase borrowers’ scores modestly, while refinancing underwater mortgages may have little or no negative effect on credit scores, according to Vantage Solutions, a scoring company created by the three national credit bureaus.
Short sales on the other hand can trigger large declines in credit scores, according to researchers. A homeowner with an excellent credit score might see a 120 to 130 point decline after a short sale.
Homeowners who choose to walk away from the home and stop payments altogether should expect their credit scores to fall 140 to 150 points, plus negative marks on their credit bureau files for up to seven years.
People filing for bankruptcy protection covering all their debts will get hit with an average 355- to 365-point drop in their scores. Bankruptcies remain on borrowers’ credit bureau files for 10 years.
Homeowners facing financial stress can experience minimal declines to their scores if they contact their loan servicer or lender when they first discover that they may have trouble making their monthly payments. But good luck in getting them to respond in time to make a difference!
Don't Be a Sucker!
Yes, I know I keep harping on this issue. But the number of people getting ripped off by foreclosure scam artists keeps rising. So let's keep it simple.
Want to be CERTAIN that the company offering to help you avoid foreclosure is a scam? Here are three sure-fire signs. If the modification company does ANY of the following - RUN THE OTHER WAY!
If they guarantee that the lender won't foreclose - THEY ARE SCAMMING YOU!
If they ask for any money up-front - THEY ARE SCAMMING YOU!
If they tell you to send your mortgage payments to them instead of the bank - THEY ARE SCAMMING YOU!
I know we all want to hope for the impossible. But these are evil people taking advantage of us at our most vulnerable. Don't fall for their lies. All they can guarantee is that you will lose your home, as well as any money you give them.
Want to be CERTAIN that the company offering to help you avoid foreclosure is a scam? Here are three sure-fire signs. If the modification company does ANY of the following - RUN THE OTHER WAY!
If they guarantee that the lender won't foreclose - THEY ARE SCAMMING YOU!
If they ask for any money up-front - THEY ARE SCAMMING YOU!
If they tell you to send your mortgage payments to them instead of the bank - THEY ARE SCAMMING YOU!
I know we all want to hope for the impossible. But these are evil people taking advantage of us at our most vulnerable. Don't fall for their lies. All they can guarantee is that you will lose your home, as well as any money you give them.
Monday, September 14, 2009
The REAL People's Court
On December 5, 2008, Bank of America shareholders voted to approve a merger with the ailing Merrill Lynch. What both companies neglected to reveal was that, just prior to the merger, Merrill Lynch paid out $3.6 billion in bonuses. The Securities and Exchange Commission stepped in, claiming that Bank of America "materially lied" to its shareholders.
Bank of America agreed to settle with the SEC for a fine of $33 million. The settlement had to be approved by a federal district judge. No one anticipated a problem - Bank of America agreed to pay; the SEC agreed to the amount. All that was needed was the court's stamp of approval. But neither Bank of America nor the SEC anticipated Judge Jed S. Rakoff.
Today Judge Rakoff rejected the settlement, stating that "the proposed consent judgment is neither fair, nor reasonable, nor adequate" to protect the public interest. Judge Rakoff understood that Bank of America's shareholders would be the ones to pay the fine.Yet these are the same shareholders who were allegedly damage by the lack of disclosure! He writes that the settlement "does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the bank's alleged misconduct now pay the penalty for that misconduct."
He also takes the SEC to task for agreeing to such a settlement. The proposed settlement “suggests a rather cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger; the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth.”
The case will now go to trial. I can only hope the trial judge is as concerned about the "Average Joe" as Judge Rakoff.
Bank of America agreed to settle with the SEC for a fine of $33 million. The settlement had to be approved by a federal district judge. No one anticipated a problem - Bank of America agreed to pay; the SEC agreed to the amount. All that was needed was the court's stamp of approval. But neither Bank of America nor the SEC anticipated Judge Jed S. Rakoff.
Today Judge Rakoff rejected the settlement, stating that "the proposed consent judgment is neither fair, nor reasonable, nor adequate" to protect the public interest. Judge Rakoff understood that Bank of America's shareholders would be the ones to pay the fine.Yet these are the same shareholders who were allegedly damage by the lack of disclosure! He writes that the settlement "does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the bank's alleged misconduct now pay the penalty for that misconduct."
He also takes the SEC to task for agreeing to such a settlement. The proposed settlement “suggests a rather cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger; the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth.”
The case will now go to trial. I can only hope the trial judge is as concerned about the "Average Joe" as Judge Rakoff.
Thursday, September 10, 2009
Obama's Mortgage Relief Program Growing
By ALAN ZIBEL, AP Real Estate Writer
Wednesday, September 9, 2009
(09-09) 14:10 PDT WASHINGTON (AP) --
The Obama administration's $50 billion mortgage relief program is finally picking up speed after a sluggish and disappointing start: Nearly early one in five eligible homeowners have been offered help so far.
The "Making Home Affordable" plan was launched with great fanfare in March. As of last month, lenders had sent out more than 571,000 offers to reduce borrowers' monthly payments, the Treasury Department said Wednesday.
That's 19 percent of the nearly 3 million homeowners eligible for a loan modification under the plan, up from 15 percent at the end of July.
"There are signs the plan is working," said Michael Barr, assistant Treasury secretary for financial institutions. "But we can do better."
Much better, lawmakers and housing counselors say.
"We think that you're missing the mark," Rep. Maxine Waters, D-Calif., told a panel of mortgage industry executives at a House hearing Wednesday.
Of the modifications offered, about 360,000 borrowers, or 12 percent, have signed up for three-month trial modifications, which are supposed to be extended for five years if the homeowners make their payments on time.
To increase pressure on the industry, Waters and other lawmakers threatened to revive a failed proposal, opposed by banking lobbyists, to let bankruptcy judges rewrite the terms of a mortgage.
That change is necessary, consumer groups say, because getting a lender to do so voluntarily is still a time-consuming, bureaucratic nightmare. Many lenders are still scheduling foreclosure sales, and charging borrowers fees for participating in the Obama plan.
"The administration has got to put some teeth in this and really get some consequences for the lenders and servicers who are not cooperating," said Bonnie Mathias, a board member of the Association of Community Organizations for Reform Now, or ACORN.
But mortgage executives say they are racing to implement the program, hiring thousands of workers to handle an unprecedented flood of calls.
"We fully understand the urgency," Jack Shackett, Bank of America's head of credit loss prevention, told lawmakers. "We understand that we have a long way to go under very challenging circumstances."
Bank of America has doubled its number of trial modifications in two months to nearly 60,000. But it still lags its competitors, having enrolled about 7 percent of its 836,000 eligible loans, compared with 25 percent for JPMorgan Chase & Co.
The Treasury Department's decision to publish those numbers has clearly provided a powerful inventive for many in the industry.
Lenders are "concerned about the report card showing them in a worse light than their peers," said David Stevens, an assistant secretary at the Department of Housing and Urban Development. "Nobody wants to be a low performer on that score card."
Industry executives also say they are planning to work with Obama administration officials on a possible extension of the program to unemployed homeowners. Also under consideration is finding a way to help borrowers with "pick-a-payment" or option ARM loans, which gave borrowers the ability to defer some of their interest payments and add them to the principal.
Treasury says 48 mortgage companies are now involved in the program, up from 38 in July. The companies have requested financial information from almost two-thirds of eligible borrowers and say they are on track to have 500,000 loan modifications in place by Nov. 1.
The program is voluntary, relying on subsidies to encourage mortgage companies to participate. Lenders must agree to reduce the loan payments to 38 percent of a borrower's monthly pretax income. After that, the government and lender split the cost of bringing the payment down to 31 percent.
Borrowers can receive rates as low as 2 percent for five years. Eligible borrowers have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify.
But some borrowers are in such dire financial shape that they don't know if getting a modification will be the magic bullet.
Steve Rudolf, 62, a talent agent in Tampa, Fla., has managed to get a modification on his $124,000 home equity line, but has had no luck with his primary mortgage. While he has yet to miss a payment, his savings have nearly run out.
"Some of this I brought on myself," through bad investments, Rudolf said. "But I didn't know that the world's worst economic crisis for housing was going to happen.
Wednesday, September 9, 2009
(09-09) 14:10 PDT WASHINGTON (AP) --
The Obama administration's $50 billion mortgage relief program is finally picking up speed after a sluggish and disappointing start: Nearly early one in five eligible homeowners have been offered help so far.
The "Making Home Affordable" plan was launched with great fanfare in March. As of last month, lenders had sent out more than 571,000 offers to reduce borrowers' monthly payments, the Treasury Department said Wednesday.
That's 19 percent of the nearly 3 million homeowners eligible for a loan modification under the plan, up from 15 percent at the end of July.
"There are signs the plan is working," said Michael Barr, assistant Treasury secretary for financial institutions. "But we can do better."
Much better, lawmakers and housing counselors say.
"We think that you're missing the mark," Rep. Maxine Waters, D-Calif., told a panel of mortgage industry executives at a House hearing Wednesday.
Of the modifications offered, about 360,000 borrowers, or 12 percent, have signed up for three-month trial modifications, which are supposed to be extended for five years if the homeowners make their payments on time.
To increase pressure on the industry, Waters and other lawmakers threatened to revive a failed proposal, opposed by banking lobbyists, to let bankruptcy judges rewrite the terms of a mortgage.
That change is necessary, consumer groups say, because getting a lender to do so voluntarily is still a time-consuming, bureaucratic nightmare. Many lenders are still scheduling foreclosure sales, and charging borrowers fees for participating in the Obama plan.
"The administration has got to put some teeth in this and really get some consequences for the lenders and servicers who are not cooperating," said Bonnie Mathias, a board member of the Association of Community Organizations for Reform Now, or ACORN.
But mortgage executives say they are racing to implement the program, hiring thousands of workers to handle an unprecedented flood of calls.
"We fully understand the urgency," Jack Shackett, Bank of America's head of credit loss prevention, told lawmakers. "We understand that we have a long way to go under very challenging circumstances."
Bank of America has doubled its number of trial modifications in two months to nearly 60,000. But it still lags its competitors, having enrolled about 7 percent of its 836,000 eligible loans, compared with 25 percent for JPMorgan Chase & Co.
The Treasury Department's decision to publish those numbers has clearly provided a powerful inventive for many in the industry.
Lenders are "concerned about the report card showing them in a worse light than their peers," said David Stevens, an assistant secretary at the Department of Housing and Urban Development. "Nobody wants to be a low performer on that score card."
Industry executives also say they are planning to work with Obama administration officials on a possible extension of the program to unemployed homeowners. Also under consideration is finding a way to help borrowers with "pick-a-payment" or option ARM loans, which gave borrowers the ability to defer some of their interest payments and add them to the principal.
Treasury says 48 mortgage companies are now involved in the program, up from 38 in July. The companies have requested financial information from almost two-thirds of eligible borrowers and say they are on track to have 500,000 loan modifications in place by Nov. 1.
The program is voluntary, relying on subsidies to encourage mortgage companies to participate. Lenders must agree to reduce the loan payments to 38 percent of a borrower's monthly pretax income. After that, the government and lender split the cost of bringing the payment down to 31 percent.
Borrowers can receive rates as low as 2 percent for five years. Eligible borrowers have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify.
But some borrowers are in such dire financial shape that they don't know if getting a modification will be the magic bullet.
Steve Rudolf, 62, a talent agent in Tampa, Fla., has managed to get a modification on his $124,000 home equity line, but has had no luck with his primary mortgage. While he has yet to miss a payment, his savings have nearly run out.
"Some of this I brought on myself," through bad investments, Rudolf said. "But I didn't know that the world's worst economic crisis for housing was going to happen.
Tuesday, September 1, 2009
From the Trenches - Deadly Appraisals
Today I had three phone calls dealing with appraisal problems.
The first was from a broker who called me for help. His client was in contract to buy a home and the appraisal came in $150,000 under the contract price. Because I specialize in this area, he wanted to know if I could give him some comparables to justify the purchase price to the appraiser.
This same broker contacted me a few weeks earlier when his client first wanted to write an offer. Knowing I was familiar with the area, he asked if I thought the list price was appropriate. At that time I told him the property was overpriced. I pointed out that the listing agent did not price the property in line with other, similar, homes which had sold. I provided him with these addresses and sales prices. In essence, I "appraised" the property for him.
But his client wanted the home anyway and put in a high bid. When it came time for the bank appraisal, the appraiser used the same comparables I gave to the sales agent. Not surprisingly, the appraisal came in at a lower value, the one justified by the comparable sales.
The second call came from one of my clients. His lender had just informed him that the appraisal on the home he wants to buy came in $130,000 below the contract price. The third call was from another appraiser who had also been hired to appraise this same home. That appraisal came in $200,000 under the contract price!
When I looked at the comparables used in these last two appraisals, it became clear that these appraisers, neither of whom are local, were not familiar with the home they appraised. They used comparables that were located in different neighborhoods and did not have the same amenities as my client's property. And because they used inappropriate comparables, they wrote incorrect appraisals.
The saying "all real estate is local" is true, not just for Realtors, but for appraisers. The need for area specialists, people who are intimate with the details of a specific market segment, is more important now than ever. Unfortunately, the trend in the appraisal field has been to move away from local appraisers and towards large companies that cover big geographic areas. It's easier for the lender to schedule a series of appraisals- one phone call can cover a number of appraisal appointments. But it is worse for the client who sometimes gets an incorrect appraisal that can turn out to be a "deal killer".
The first was from a broker who called me for help. His client was in contract to buy a home and the appraisal came in $150,000 under the contract price. Because I specialize in this area, he wanted to know if I could give him some comparables to justify the purchase price to the appraiser.
This same broker contacted me a few weeks earlier when his client first wanted to write an offer. Knowing I was familiar with the area, he asked if I thought the list price was appropriate. At that time I told him the property was overpriced. I pointed out that the listing agent did not price the property in line with other, similar, homes which had sold. I provided him with these addresses and sales prices. In essence, I "appraised" the property for him.
But his client wanted the home anyway and put in a high bid. When it came time for the bank appraisal, the appraiser used the same comparables I gave to the sales agent. Not surprisingly, the appraisal came in at a lower value, the one justified by the comparable sales.
The second call came from one of my clients. His lender had just informed him that the appraisal on the home he wants to buy came in $130,000 below the contract price. The third call was from another appraiser who had also been hired to appraise this same home. That appraisal came in $200,000 under the contract price!
When I looked at the comparables used in these last two appraisals, it became clear that these appraisers, neither of whom are local, were not familiar with the home they appraised. They used comparables that were located in different neighborhoods and did not have the same amenities as my client's property. And because they used inappropriate comparables, they wrote incorrect appraisals.
The saying "all real estate is local" is true, not just for Realtors, but for appraisers. The need for area specialists, people who are intimate with the details of a specific market segment, is more important now than ever. Unfortunately, the trend in the appraisal field has been to move away from local appraisers and towards large companies that cover big geographic areas. It's easier for the lender to schedule a series of appraisals- one phone call can cover a number of appraisal appointments. But it is worse for the client who sometimes gets an incorrect appraisal that can turn out to be a "deal killer".
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 http://www.makinghomeaffordable.gov 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
• 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 http://www.makinghomeaffordable.gov 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.
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.
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.
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