Posts Tagged ‘Mortgage Payments’
Falling Home Equity Spurs Fear of Strategic Default
Yesterday a lot of folks, including myself, were slightly incensed at the announcement by mortgage insurer PMI that it is launching a pilot program offering cash bonuses to borrowers who stay current on their mortgage payments.
Mortgage Delinquencies ‘Turn a Corner’
Fewer Americans are falling behind on their mortgage payments; in fact, the fewest in two years. Mortgages just one payment past due (30 days) fell to their lowest level since just before the recession began.
Feds approve additional housing aid for Florida
Floridians who are struggling to make mortgage payments are getting additional help from the federal government’s Innovation Fund for the Hardest Hit Housing Markets. The Treasury Department this week approved a plan by the Florida Housing Finance Corp. to redirect $239 million in previously approved foreclosure-prevention assistance expand options for unemployed workers. Treasury also announced the state housing agency is getting $401 million more in Hardest Hit money to expand the reach of its programs. Assistant Treasury Secretary Herb Allison said the aid is being targeted to areas and states such as Florida, where unemployment and steep home price declines have been concentrated. AP Logo Copyright 2010 The Associated Press.
BEST EXIT STRATEGY: SHORT SALE
Economic problems in United States have forced many citizens to face financial dilemmas like making mortgage payments when cash is tight. When somebody undergoes mortgage problems, a solution to always consider is letting the house go into foreclosure. Unfortunately, this kind of strategy won't just leave the house owners homeless but also affects credit scores. For this reason, I believe foreclosure is not a good option since a foreclosure sticks on one's credit record for at least 4 years. I believe, most people are better off doing a short sale. In a short sale, the lender allows the property to be sold for less than the total amount due on the loan. First you should consult a real estate attorney to look over your mortgage note... in some cases, the lender forgives the remaining debt if the attorney finds discrepancies. If the lawyer is unable to find any discrepancies (which is the majority of the time) you then hire a real estate agent to find a buyer for the house, you sell the house for a loss, and with the bank’s blessing, they agree to eat the loss. When the housing market was booming and real estate values were appreciating in the near double digits, short selling was virtually unheard of. But with a slower market, more and more home owners are looking to this practice as a way to avoid foreclosure. The benefits of short selling over foreclosure are obvious. A foreclosure puts a long-lasting black mark on your credit history and the process can be long and costly. Short selling can be much faster and less expensive, and it doesn’t look as bad on your credit report as a foreclosure. Of course, the better option is to find some way to stay in the house—by first, seeing if the lender is willing to restructure the loan, or forgo a couple of monthly payments to help you get back on your feet. More and more lenders are willing to make accommodations to avoid taking the property back. Banks hate to take over homes, especially in a declining market, so you shouldn’t underestimate the willingness of a bank to make concessions.
Tips to help owners spot foreclosure scams
Last year, the U.S. Federal Trade Commission identified 71 companies running suspicious foreclosure rescue ads. This year, the Better Business Bureau named foreclosure rescue rip-offs among its top 10 scams. Here are just two common scams identified in the September “Foreclosure Resource Guide” now available at the National Association of Realtors® (NAR) Realtor Content Resource: • A representative of a so-called foreclosure rescue company promises to negotiate a deal with your lender, instructing you not to contact your lender, lawyer or credit counselor during the supposed negotiations. After you pay an up-front fee or a few months of mortgage payments, the scam artist disappears. • A scam artist promises to fend off foreclosure in exchange for an up-front fee. Instead of getting you legitimate relief, the fraudster pockets the fee and secretly files a bankruptcy case in your name. Also covered in the “Foreclosure Resource Guide” are free tips on what to do immediately if you’re facing foreclosure, five foreclosure pros you need on your team, what foreclosure counselors can and can’t do, and website resources for foreclosure help. NAR’s Realtor Content Resource is an exclusive member benefit that entitles Realtors to download free homeownership content from HouseLogic to your consumer website, blog, or e-newsletter. HouseLogic is NAR’s consumer website geared to helping homeowners make smart decisions to enhance, maintain and protect the value of their home.
Loan modification snags spark suits
Anthony and April Soper’s financial troubles were only starting last October when they applied for a mortgage adjustment through the Obama administration’s Home Affordable Modification Program. Bank of America, their mortgage servicer, put them on a HAMP trial payment plan in December that cut their monthly payment by more than half from almost $4,000 to about $1,826. They say they made their reduced monthly payments early and did everything else that was asked of them. But they didn’t get a permanent modification, and they say they don’t know why. Instead, according to a lawsuit they’ve brought against Bank of America, they are now more than $8,000 behind on a mortgage that had been current 12 months ago. Each of their credit scores has dropped by nearly 100 points. And, they allege, Bank of America has threatened them with foreclosure. “We jumped through all their hoops, and they did nothing but cause us heartache,” says April, 41. Whether the Lake Stevens, Wash., couple keep their home may hinge on the outcome of a legal strategy that aims to join struggling homeowners with similar experiences in the HAMP program in a class-action lawsuit against the nation’s largest bank. On Sept. 30 in Nashville, a federal court hearing is scheduled to consider consolidating the Sopers’ case with more than a dozen others against Bank of America. Similar lawsuits, also seeking class-action status, are pending against other major servicers such as JPMorgan Chase and Wells Fargo. Taken together, the cases threaten to amplify a growing public frustration with mortgage servicers’ treatment of HAMP borrowers and HAMP’s modest results. Permanent modifications, which lower mortgage payments to 31 percent of a borrower’s pretax monthly income for five years, have been given to only about a third of the 1.3 million borrowers in trial plans since the program’s launch in April 2009. Most of the lawsuits allege that the three- or four-month trial payment plans are contracts, and that Bank of America and other servicers broke them by not giving permanent modifications to homeowners who made their trial payments on time and provided the necessary documentation. Servicers have asked courts to dismiss some of the cases, saying the trial plans are not contracts. Bank of America, which says it plans to seek dismissal of the Soper case, argues in a court filing in a similar case that it must consider borrowers for a HAMP modification, but that it has discretion in granting permanent modifications. The bank also argues that homeowners have no case because courts have dismissed earlier HAMP-related lawsuits against mortgage servicers. Those cases claimed that in denying some homeowners modifications, the servicers had breached the contracts they made with the Treasury Department when they agreed to participate in HAMP. Courts said homeowners could not sue on those grounds because they weren’t parties to the contracts between the government and the servicers. Lawyers for homeowners say they are now making a different legal argument: that Bank of America and others broke contracts made directly with homeowners. “Borrowers have said we should be able to enforce the contract between Treasury and mortgage servicers, and many courts have rejected that. Our cases are the first filed that touch on a contract between servicers and borrowers,” says Kevin Costello, a lawyer with Roddy Klein & Ryan in Boston, which represents homeowners in cases against Bank of America, JPMorgan Chase and Wells Fargo. “This litigation is spreading all across the country. People have been relying on a promise all along, and then they get a denial. Then they find themselves in that much worse of a hole,” he says. Many homeowners could be affected: Nearly 620,000 trial modifications since spring 2009 have been canceled, according to an Aug. 20 Treasury report. Chronicles of delays The lawsuits allege servicers are purposely denying permanent modifications and keeping loans in default so lenders can profit from heftier late fees and other charges. Court filings provide detailed chronologies of borrowers who allege that over periods of months, they repeatedly sent banks requested documents that the banks said they didn’t receive, made inquiries that went unanswered, and received promises of help that were later contradicted or denied by other representatives. “Bank of America has serially strung out, delayed, and otherwise hindered the modification processes that it contractually undertook to facilitate when it accepted” billions of dollars in government bailout funds in 2008, the Sopers’ complaint alleges. By failing to live up to its obligations, according to the court filing, “Bank of America has left thousands of borrowers in a state of limbo – often worse off than they were before they sought a modification from Bank of America.” The Sopers’ complaint alleges that Bank of America customer service representatives are instructed to mislead homeowners who call to inquire about loan modifications they’ve applied for. The complaint, citing information provided by unnamed former employees, says “representatives regularly inform homeowners that modification documents were not received on time or not received at all when, in fact, all documents have been received.” When homeowners are denied permanent modifications, even those who were current before going on reduced-payment trials are considered in default, and servicers tell them they must immediately pay the difference between their trial payments and their higher former payments to avoid foreclosure, according to the Sopers’ complaint and others. Borrowers’ mortgage debt in default rises further the longer they stay in trial plans. By making trial payments during and after the plan’s scheduled end, the Sopers’ complaint alleges, they “forgo other remedies that might be pursued to save their homes” such as restructuring their debt by filing for bankruptcy, or pursuing other ways to deal with their default, such as selling their homes. Foreclosure proceedings have started against some borrowers while they were on trial plans, violating a Treasury directive, according to the lawsuits. Homeowners’ credit scores have also been damaged when servicers cancel trial plans, then report the amounts in default to credit bureaus. Some court filings claim bank employees have demanded upfront fees to start consideration of a modification – in violation of HAMP rules – or told homeowners to stop paying mortgages in order to start a trial modification. The Sopers’ complaint alleges an unnamed homeowner was illegally asked to pay $1,400 upfront to Bank of America to be considered for a modification. In another case, Alex Lam of New York alleges he was told he could only be considered for a HAMP trial modification if he stopped paying his mortgage for several months, according to a lawsuit filed in U.S. District Court in Brooklyn against JPMorgan. He skipped two months of payments in 2009 and says he was denied a permanent modification. JPMorgan declined to comment. Homeowners’ lawyers say there is no effective way to appeal mortgage servicers’ decisions because Treasury has no ability to overturn a decision. Watchdogs’ criticisms Government watchdogs, too, have raised similar criticisms about the HAMP program, as well as about servicers’ performance and Treasury’s oversight. The Congressional Oversight Panel, which oversees the government fund that pays for HAMP, said in an April report it “is deeply concerned about the unacceptable quality of the denial and cancellation reasons, and strongly urges Treasury to take swift action.” A Government Accountability Office report in June found servicers were erroneously denying permanent modifications to some homeowners because servicers were inaccurately applying a formula used to determine if the value of modifying the mortgage was greater than the proceeds from foreclosing. The number of homeowners who had been wrongly denied could “range from a handful to thousands.” When errors have been found, Treasury says, it has made servicers go back and fix problems, and re-do their work as a check on their decision-making. It also says that 45 percent of those who started trials but were ineligible for permanent adjustments received an alternative modification through their servicer. Fewer than 2 percent have gone to foreclosure sale, according to Treasury. Some homeowners say they’ve already lost their homes to foreclosure because a permanent HAMP modification was denied to them. Jennifer Voltaire, 33, of Medford, Mass., alleges Wells Fargo approved her for a trial HAMP modification, which lowered her payments starting in December 2009, according to court filings in U.S. District Court in Massachusetts. Voltaire is a co-plaintiff in the case. But after making regular payments, Voltaire was told in May that she was being taken out of the HAMP program and was $40,000 in default, the lawsuit alleges. After she protested, Wells Fargo agreed to reconsider her for a HAMP modification, according to the complaint, but in July, the bank took possession of the home. “I was literally crying my eyes out,” Voltaire says. “I put everything I have into this house, into getting my kids out of the projects. That’s the part that really hurts. My kids could look at me like I failed.” Wells Fargo agreed not to sell her house pending further court action. Voltaire is still staying there and making her trial plan payments. In its motion to dismiss the lawsuit brought by Voltaire and others, Wells Fargo said the plaintiffs have not adequately shown that their trial modifications were contracts to enter into permanent modifications. It says homeowners benefited from being able to make reduced monthly payments while [...]
How Can I Save My House?
The possibility of losing your home because you can’t make the mortgage payments can be terrifying. Perhaps you’re having trouble making ends meet because of job loss, death, divorce or other financial problems. Or maybe you’re one of the many consumers who took out a mortgage that had a fixed rate for the first two or three years and then had an adjustable rate – and now you can’t afford the new, higher payments. Here are the scenarios you will face and solutions to them. Renegotiate If you wait it out, all mortgage lenders are eventually going to be in very difficult positions especially if you owe close to or more than the current value of the house. Eventually your lender will be forced to do whatever they can to keep you in the home, even if it means forgiving 50% of your loan value. Life is not fair, and it’s not going to be fair when the guy next to you gets his mortgage cut in half while you paid full price. If your lender will not budge, then ask to refinance at a lower fixed rate. If your lender still will not budge, as most lenders are only negotiating with delinquent borrowers, try stop paying your mortgage for a month and then ask again. Rent If the house is your primary residence, consider renting a room to a college student. If there is a college in your area, just put up flyers on the college bulletin boards advertising your room for rent – emphasizing the many advantages of living in a house vs. a dorm room. College exchange students are students from other countries that visit the US by attending a US college. They usually prefer to stay in a house close to the college in order to take full advantage of their stay by learning everything they can about our culture by living with a family. You can also ask friends and family if they or someone they know of needs a cheap place to live. You can also market the benefits of living in a house to apartment renters, by posting flyers on apartments in your area. You can offer benefits like, a garage, a yard with a nearby park, a private entry or allowing pets. There are a lot of people in apartments that would love to enjoy some of the benefits of home owners. Double Up Find another family to live with you and share the costs of your home. This works great if you have a house that has a mother in law suite or a finished basement because it gives each family the privacy they need. Children will love the idea of more kids to play with and if you’re lucky you can cut babysitting costs for both families from time to time. This idea can also cut the chores in half as both families help to maintain the house. To find a great family to double up with, just ask around your friends, family, church or other social groups that you’re involved in. Start a Home Business Leverage your home as office space to start a home business. Use an extra room for your home office. Your home business wouldn’t have to consume all your free time, just enough to help you pay your mortgage. I suggest that you start small and develop a plan. The Internet is one of the best places to look for home businesses. You could try selling things on eBay.com or recruiting people for Monster.com or affiliate marketing for Amazon.com or any number of things. You could also call a few local businesses and ask if there is anything you can help them with from your home office, like accounting, data entry, virtual assistant, letter writing or dictation. Foreclosure If you bought your house with little or nothing down and it’s worth less than your mortgage loan, your best option may be foreclosure. You have nothing to lose but your credit – which will be restored with time anyway. But, if you have a significant amount of equity (money) in your house, then foreclosure or letting the bank or mortgage company take it back is a much harder choice- and in this case you need to look at your long term financial outlook. If you have poor job security, then you should consider foreclosure now rather than sometime in the future. There are lots of houses for rent and the cost of renting is low because of the many houses that are not selling. If you are planning to let you house be foreclosed, call your lender after a few months of missing payments and ask for a non-recourse foreclosure, which means the bank accepts the house as full payment and gives up their right to try to get any more money from you in the future. You should consult a licensed professional before making any of these decisions. For more information regarding this topic, contact the article’s writer Lindsey Huntington lindsey_huntington@yahoo.com or www.CentralFloridaRealEstateDeals.com
Re-defaults on modified mortgage loans falling
Homeowners who had mortgages modified recently are faring better than those who did so earlier in the housing crisis, according to a report released Tuesday, possibly debunking predictions of a huge wave of defaults to come. The State Foreclosure Prevention Working Group warned of other troubling signs, however, on the same day that a separate industry report showed the most severe July sales drop-off for previously occupied homes in 15 years. The group of 12 state attorneys general and state banking regulators said Tuesday that foreclosures still easily outpace the number of loan modifications. Modifications lower monthly payments and reduce the odds of losing a home. Nearly three years into the foreclosure crisis, the group of state officials also found that nearly 63 percent of homeowners who are at least 60 days behind on their mortgage payments aren’t taking part in either government or private foreclosure prevention programs. Banking officials warned that lenders must aggressively seek out homeowners who are teetering on the edge, even if it means short-term pain for banks. “There is still a tremendous amount of work to be done to prevent unnecessary foreclosures,” said Neil Milner, president and CEO of the Conference of State Bank Supervisors, which is part of the working group. “Servicers must continue to perform meaningful outreach to those homeowners who are seriously delinquent and to perform modifications with significant principal reduction.” The working group compared delinquencies for mortgages modified last year with those revised in 2008, and whether borrowers were keeping up with payments six months after terms were changed. Borrowers getting modifications in 2009 were nearly 50 percent less likely to end up at least 60 days behind than those with modifications in 2008. About 15 percent among the 2009 group ended up becoming seriously delinquent six months after modification, versus nearly 31 percent for the 2008 group. The reduction “suggests that dire predictions of high re-default rates may not come true,” the report said, noting some analysts have predicted re-default rates as high as 75 percent. The report said recent modifications that reduce principal balances on loans have a lower default rate than those that merely cut the interest component of monthly payments. But most banks don’t trim the overall balance when they modify loans, according to the report. Only one in five modifications reduced the loan amount, with 70 percent of those studied in this year’s first quarter actually increasing the total by adding service charges and late payments to the loan balance, the report said. However, through adjustments of interest rates, about 89 percent of first-quarter modifications involved some reduction in monthly payments, the report said. Nearly 78 percent cut payments 10 percent or more. But the absence of loan balance reduction in most modifications will hamper future foreclosure prevention efforts, the report said. The authors noted that home prices have declined more than 30 percent from their 2006 peak, and nearly one-quarter of homeowners owe more than their homes are worth. The group said it “anticipates hundreds of thousands of foreclosures will occur later this year absent additional improvements in foreclosure prevention efforts.” Michael Fratantoni, vice president of research and economics with the Mortgage Bankers Association, said modifications must strike a balance between helping borrowers stay in their homes, and enabling lenders and investors to avoid taking big losses. Reducing a loan amount in a mortgage modification “can be the tool to get you there to that balance, but sometimes it isn’t,” Fratantoni said. He said a key reason many at-risk borrowers don’t take part in foreclosure prevention programs is they simply don’t pick up their phone or otherwise respond when lenders contact them about mortgage modification. “It really is a bit of a two-way street,” he said. The state officials’ report examined mortgage modification trends at nine nonbank mortgage companies servicing 4.6 million loans nationwide as of March. Since the group of state officials began collecting data in October 2007, those nine companies have completed more than 2.3 million foreclosures. That’s about three times greater than the 760,000 loan modifications they completed. As of March 31, the nine servicers reported 778,000 borrowers were late at least 60 days on their payments. On Friday, the Treasury Department said nearly half of the 1.3 million homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out. Economists said the report suggests the $75 billion government effort is failing to slow the tide of foreclosures, which are expected to grow well into next year. Copyright © 2010 The Associated Press, Mark Jewell, AP business writer.
$656.8 million to help struggling homeowners on hold
Florida has $656.8 million to help struggling homeowners, but distribution of the federal aid is likely on hold statewide until early 2011. The money, awarded through the Obama administration’s “Hardest Hit” program will pay the mortgage of unemployed or underemployed borrowers for up to 18 months as they seek new jobs or training. Originally announced in February, Florida got another infusion of hardest hit money last week that will increase those helped from 12,000 to 20,000. The Florida Housing Finance Corporation is now working to amend its plan for the money and hopes to submit it to the Treasury Department for approval by Sept. 1. The original plan had relied on lenders to waive or delay nine months of mortgage payments if a homeowner received nine payments from Florida’s hardest hit money. On Thursday, Florida housing officials said they could not get lenders to sign on for the state program. A federal plan that requires banks to forgive, temporarily or permanently, 90 days worth of mortgage payments for unemployed homeowners who seek a loan modification was announced after Florida had developed its plan. Banks didn’t want to agree to both mortgage forgiveness plans. “With that intervening federal program, we were unable to get the match from the lenders we were looking for,” said David Westcott, director of homeownership programs for the Florida Housing Finance Corporation. Florida’s new plan will pay up to the full 18 months for eligible borrowers, but the delay to get approval means a required 90-day trial program is also being pushed back. That trial, expected to begin this fall, will be held in Lee County, with only Lee County residents eligible. Despite the holdups, Westcott said the state is happy to have the money. “This means more money to help more people for a longer period of time,” he said. For information on the hardest hit fund, go to www.floridahousing.org. Copyright © 2010 The Palm Beach Post, Fla., Kimberly Miller. Distributed by McClatchy-Tribune Information Services.
The Housing Markets: Supply, Demand, and Current Issues
Every month the press is filled with commentary on the latest housing market figures. Some of the stories would benefit from additional perspective. In this month's “Behind the Numbers,” we focus on some of the housing market problems in the news: supply, demand, and the outlook. Of course, all housing is local, so the information needs to be considered in conjunction with knowledge of local market conditions Distressed Property and Shadow Inventories In the past year approximately 33 percent of existing home sales at the national level have involved distressed properties (foreclosures, short sales) selling at discounts of 15 to 20 percent from non-distressed market prices—exerting a major negative impact on overall market prices. There has also been concern over a potential shadow inventory of distressed properties: as of the first quarter of 2010 over 6.5 million homes were in foreclosure or had overdue mortgage payments. Possibly as much as 75 percent of the shadow inventory will ultimately be sold as distressed. However, given the ongoing time delays for problem resolution it appears that distressed properties will enter the market at approximately the current or a slightly increased rate for the next few years. Foreclosures are a major negative market influence in terms of price, consumer confidence, and expectations; however, a tsunami of shadow inventory appears unlikely. Potential Pent-Up Demand: Possible Longer Run Impact There are a variety of techniques for measuring expected housing sales based on economic factors, demographics, financial markets, etc. A simple trending of the existing home sales market based on sales rates during 1988-2000, a time period before the recent market run-up/de-leveraging/decline/recession situations, suggests a pent-up demand in the neighborhood of 15 percent relative to today’s sales. That is, existing home sales could be expected to be possibly 15 percent higher in a normal market. We are, however, far from a normal market, given that we have been through major financial de-leveraging, the Great Recession, and that consumer mood is at best shaky. A number of homeowners who have deferred listing their homes due to market conditions may also now reenter the market, resulting in increased home inventories as the economy recovers. Once the employment numbers improve, pent-up demand may help to increase sales. In the short run, however, we may actually see additional inventory on the market as a result of listings by deferred sellers. Housing Starts: Construction Rate Appears to be Below the Long Run Demand The supply of all types of new housing units has been reaching new lows, declining from single family starts at over 1.7 million per year in late 2004 to 454 thousand in June 2010. The demand for new housing units ultimately depends on family formations, sales for vacation homes, and replacements for units demolished or destroyed. Based on assumptions about demolitions and second homes, the graph indicates that in recent years, the projected demand for new homes has actually exceeded supply. Decreased new construction obviously makes major headlines in the short run; in the longer run it should help to bring the overall housing market into balance. Market Data Shows How Housing Inventory Impacts Prices There will always be an inventory of unsold homes on the market. An increase in the inventory of unsold homes indicates that there is an excess supply relative to demand. The graph shows how prices tend to rise as supply falls. During the first part of 2010 the months’ supply of inventory decreased from earlier highs—accompanied by stabilizing prices. In June, month’s supply increased to 8.9 months from the previous 8.3 months. If the increase proves to be a temporary adjustment due to pent-up listing of homes, then prices should continue to stabilize, particularly if employment increases. If inventory supply continues to increase without adequate job increases, the housing market will be subject to additional pricing pressures. Conclusions/Implications for REALTORS® The above comments provide a perspective on how the housing market is positioned to resolve its problems: First, the level of distressed sales is likely to continue for the next several years, negatively impacting prices and the new construction market at entry level. However, a tsunami of additional distressed property sales appears to be unlikely. Second, the existing home sales market appears to be below normal projected growth, apparently held back by employment problems and mediocre consumer mood. The data suggest that there is pent-up demand, but a greater economic recovery, particularly in jobs, appears to be necessary before the demand is unleashed. Third, new home construction appears to be below long-run demand. In the longer run this will reduce the total supply of homes on the market, working to firm up prices. Fourth, the inventory of existing homes on the market in June was approximately 8.9 months, an increase in housing inventory, possibly due to additional listings developing as the market starts to recover. An increased inventory at this point could become a negative for prices unless an expanded economic recovery releases some pent-up demand. Assuming that the economy is not hit with a “double dip” recession, all of the data seem to indicate favorable prospects for sales—unlikely to decrease in the short run, positioned to increase once the economy adds additional jobs. In the case of prices, there are no indicators of major changes either way unless the inventory of unsold homes increases significantly. At the local level, areas with stronger job recovery, improving economies leading to fewer foreclosures, and local economies able to unleash additional pent-up demand should experience somewhat greater improvement. The comparison of local numbers (jobs, foreclosures, short sales, inventories, etc.) with national numbers provides a context for the evaluation of specific markets.
