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This is an excellent question and a huge part of the problem. The Loss Mitigation Department does not speak to or correspond with the Collections Department and they seem to be working from two different systems because the conversations I have with the loss mitigation department are not coped into the notes from the collections department.

And the collections department has no idea you are working on a loan modification unless you tell them and I would guess they don’t want to know because their job is to collect the outstanding balance or late payment. By the way, if you haven’t figured it out, they get paid a commission on what they are able to collect from the homeowner.

However, the problem is not new and goes beyond the paperwork snafus and staffing shortages at lenders and mortgage servicers that have created massive bottlenecks for the millions at risk of losing their homes. When the Government introduced the Hope Now Alliance in 2007 it was also riddled with problems of inconsistency and constant guideline changes.

It is the Treasury Department that writes these programs and they should learn from their past mistakes about what doesn’t work and avoid repeating them. Instead, the problems, issues and inconsistencies are passed on from administration to administration and so is the blame when the programs don’t work.

Homeowners face numerous hurdles trying to get their mortgage modified and that is why they call National Foreclosure Prevention Services, because we consult with our clients to determine the need and then we strategize a plan of attack that would best meet the needs of our clients. And we will always give our clients several options to choose from - the more options they have the better educated decision they can make.

For a more detailed step by step pre-foreclosure process and a 30 minute presentation on the past and present foreclosure problem facing homeowners visit us at Avoid Foreclosures.

Millions of Americans who are struggling to save their homes from foreclosure are trapped in a minefield of disappointment and misinformation and the banks, lenders, and servicing companies are all to blame.

Instead of trying to help the homeowner they actually make it more difficult and I know this to be true from firsthand experience. I sometimes pretend to be the homeowner calling the bank for general information on what to do next (and yes this is with my clients consent) and their form of communication is to scare you into submission.

We have seen the fourth revision of the current program and this is the third program the government has put out to help homeowners avoid foreclosure. Homeowners, housing counselors, consumer advocates and attorneys working with borrowers report that the latest effort is falling far short of its original goal.

In some cases, lenders are moving to foreclose even after homeowners get approved for loan modifications. I know this be fact and the reason is simple, but also avoidable. While the loan is being reviewed the collection process continues. The loss mitigation department will tell you that while in review the auction date will be postponed, but not delayed so if you don’t stay on top of your case you will become one of those unfortunate statistics. Click on this link to read our previous post and a great 60 page article titled “Why do lenders foreclose when then can modify”.

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In December of 2009 we had the most significant drop in home sales in more than 40 years, but to end 2009 we had the first annual gain in four years. The reducing in the median home value of about $175 had a lot to do with it and the primary culprit to that end was the foreclosure market.

If not for the REO’s and Short Sales this past year, home sales could have been drastically reduced and the economy would have suffered even more than it has. Total sales for 2009 were almost 5.2 million, which was up from 2008 by about 5%.

In March the Federal Reserve is expected to end its program of buying mortgage securities and the extended homebuyer tax credit is expected to end in April. These two factors could have a significant effect on the housing market and could weaken it even further, but stay tuned to our post because I believe the government will extend one or two of these programs.

Unfortunately foreclosure will continue to rise and homeowners need to know their options - Homeowners need to have a place to turn and they need to know that there are options to foreclosure. National Foreclosure Prevention Service offers free confidential consultations; even if we are unable to help at least we can give honest advice to the homeowner about the different options available to them.

It is also clear that the number of people being helped in this recessionary time have been those who are able to take advantage of the many government programs. The tax credit that was sent to expire in November was extended by Congress to allow up to $8,000 for first-time homeowners and a new $6,500 credit for existing homeowners who move.

It remains unknown what will happen when these government programs come to an end before the economy can start to show significant sustainable grown on its own because as most analyst will agree, a healthy real estate market is needed to help the economy continue recovering from recession.

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While taming the monster we have allowed it to grow.

Bank of American buys Countrywide and Merrill Lynch while Wells Fargo buys Wachovia and we allowed it to happen under the pretense that if the government didn’t help these institutions there would have been a collapse of the financial sector.

The Obama administration this month has extended the $700 billion financial bailout program until October 2010, setting up a struggle between Democrats who favor using some of the leftover money to help generate jobs and Republicans who say it should be used to shrink soaring budget deficits.

I personally have mixed emotions about this, but I will hold my rant until another time and focus on the two statements made here.

First, we need to get more control over the financial sector with restrictions and oversight on the big picture and not just the immediate problem. Ask the questions smart questions about how we help the unemployed pay their mortgage or should we pay the bank before or after the permanent loan modification.

Keep in mind that we allowed the banks to borrow money from the government at an interest rate of 1 percent to stay solvent and we allowed them to charge the consumer an interest rate anywhere from 18 to 30 percent on your credit cards. What we should have done was added a stipulation preventing the banks from paying bonuses two or three years from paying back the loans.

With the sale of stock options and some other creative financial maneuvering it is no wonder they were able to pay back the money they owed - and by doing so they have freed themselves of the restrictions the government has placed on them regarding bonuses and other perks.

Second, the administration insists the bailout funds are still needed to prevent further turmoil in the banking system. In announcing the decision Wednesday, Treasury Secretary Timothy Geithner said extending the program also will help homeowners struggling to avoid losing homes to foreclosures and small businesses having trouble getting loans.

My feeling is that these funds will only help struggling homeowners avoid foreclosure if the government has learned anything from this past year. Don’t pay these banks until they have completed the permanent loan modification and somehow get more or have more control over the program and how it is being implemented. In other words help more people faster!

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The Government’s Attempt To Lean On Mortgage Companies

The $50 billion plan got off to a slow start, but government officials say that in hopes of trying to convert more troubled home loans to lower monthly payments, they are pressing the industry hard to improve their performance. One of those ways is not to pay the bank until a permanent modification is in place as opposed to the trial started. Still, many housing advocates have been disappointed with the plan’s progress and say that getting a loan modification is still a battle.

There are some that are saying it is more cost effective for the lender to foreclose on the property rather than offering a loan modification. The National Consumer Law Center put together a great article on that very subject.

CLICK ON THE LINK BELOW “TO FORECLOSE OR TO MODIFY” AND DOWNLOAD YOUR FREE COPY OF THIS 60 PAGE REPORT

To Foreclose or to Modify

Why Servicers Foreclose When They Should Modify

Economists doubt the Obama administration will reach its broad goal of helping 3 to 4 million borrowers within three years and I can agree with that statement because of the shear scope of the problem.

There are not enough qualified loss mitigation negotiators in place at the banks to handle this problem and I’m sure there is an internal shuffle of staff to address the issue. Traditionally mortgage servicers were low-cost operations, with workers in collections departments trying to collect payments from tardy borrowers.

Those workers, and thousands of new ones, are now engaged in a far different job - figuring out whether thousands of borrowers qualify for help or not and while the banks are trying to get to as many cases as possible the collections department is also in full swing calling H/O’s and pressuring them to make a payment “or else”.

We will discuss the different collection tactics lenders use with what to say to them and how to overcome their questions in another article.

For the most part banks have been slow to adapt to an unfamiliar climate of sinking home prices and soaring unemployment resulting in people not being able to pay their mortgage on time and people not refinancing to a lower interest rate to pay down other debt.

Even as foreclosures and delinquencies were soaring, everybody underestimated how ugly the housing picture was and how bad it was going to get. And with rising foreclosures and depress home prices there is still a threat to the sustainability of the fledgling economic recovery.

A recent report from the Mortgage Bankers Association found that 14 percent of homeowners with mortgages were either behind on payments or in foreclosure and as long as unemployment continues to rise more and more families will be threatened.

The Congressional Oversight Panel, a committee that monitors spending under Treasury’s bailout program, concluded in a report last month that foreclosures are now threatening families who took out conventional, fixed-rate mortgages and put down payments of 10 to 20 percent on homes that would have been within their means in a normal market.

Treasury’s program, known as the Home Affordable Modification Program, “is targeted at the housing crisis as it existed six months ago, rather than as it exists right now,” the report said.

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National Foreclosure Prevention Services has been very successful with the cases we have recently modified and we are always working hard to maintain the highest level of customer satisfaction. Here are some of the Loan Modification approvals we did this year for your review. Click on the links below.

Ocwen - Wells Fargo - HSBC - Vericrest Financial - Select Loan Servicing - HomEQ Servicing - American Home Mortgage Servicing

We manage several Loss Mitigation and Short Sale cases in many different states and it is important to maintain a constant line of communication with our clients. The Homeowner, the Realtor and the Attorney all have to be notified of any changes and our management system helps us keep in touch with everyone at one time.

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In June we wrote about the mortgage relief programs the government had established to help homeowners facing foreclosures. Well every month for the last six months we have heard many different stories about the success and failures of these programs and I can say from experience that these programs are not helping enough people.

After a slow start, the Obama Administration’s mortgage relief program has reached one in five eligible homeowners and more than 650,000 borrowers, or 20 percent of those eligible, have signed up for trials lasting up to five months, the Treasury Department said Tuesday.

The trials are a verbal assessment of the homeowners financial situation and they are an attempt to allow the homeowner to make reduced mortgage payments while they review the documents submitted by the homeowner and I have several issues with the way the program is being implemented.

Most of the borrowers enrolled so far have been signed up for preliminary trial modifications for up to five months. To make the change permanent, though, they must complete a big stack of paperwork and show they can make their payments on time. The government expects to release details in the coming weeks on permanent modifications.

…And these are my issue with the program and its implementation.

>> First, while the banks review the documents submitted by the homeowner they go through several stages to verify the information. One of those stages is a BPO which by the way is charged to the H/O at any “reasonable” rate they want, but if that BPO comes back showing equity in the home the modification can be denied regardless of the borrowers hardship -IE loss job or reduction of hours.
>> Second, the program guidelines are based on a 31% income ratio which only accounts for the mortgage in question and not the other household bills. They don’t even factor in the second mortgage payments if one exist
>> Third, if the borrower does not qualify, the discounted mortgage payments are then converted to make a complete mortgage payment and the difference is then considered outstanding. For example-if the mortgage payment is $2,000 and the trial payment is $1,000 for 6 months and the modification is denied then the bank will take the $6,000 in trail payments make and convert them to three months paid leaving the H/O with an outstanding balance of $6,000 or three months.

This is not explained clearly and because of the homeowners lack of experience and knowledge regarding loan modifications the lender will generally get away with this deceptive practice. It is important to hire a qualified loss mitigation consultant to help navigate these complicated, difficult and sometimes exhausting negotiations.

Meanwhile the bank has been paid by the government for satisfying their requirements by offering the trial modification under the Home Affordable Modification Program (HAMP).

Click on this link to read how the banks are being paid to modify your mortgage and why some in government are not pleased at all.

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I read a report recently indicating that lenders such as Bank of America Corp. and Wells Fargo and Co. have lagged behind government expectations in offering loan modifications to those homeowners in need and both banks have received billions in federal bailout money.

And we all know that while the banks drag their feet getting homeowners approved for loan modifications their Collections Department is actively and aggressively calling the homeowner in an attempt to collect the mortgage payment.

According to our experience in working with these lenders they have adopted a policy that requires 60 to 90 to review your documents and get back to you with an answer regarding the approval or denial of your loan modification. However it takes the collections department days or weeks to repeatedly call the homeowner demanding payment or else.

And let us not mention that the banks are borrowing money from the government at an interest rate of 1 percent to stay solvent and charging you an interest rate anywhere from 18 to 30 percent on your credit cards. With the sale of stock options and some other creative financial maneuvering it is no wonder they were able to pay back the money they owed - and by doing so they have freed themselves of the restrictions the government has placed on them regarding bonuses and other perks.

Making Home Affordable (MHA) was created to help an estimated 3 million to 4 million borrowers over a three year period avoid foreclosure, but the government program will not meet those goals as long as the banks and lenders continue to drag their feet.

The Congressional Oversight Panel, charged with making regular assessments of the $700 billion financial rescue fund enacted last year, said the Treasury Department should consider whether to improve the current $50 billion program or adopt new programs to meet an expected rise in foreclosures fed by increased unemployment.

I feel they should not look at adopting new programs, but instead work on fixing the current program. The government moves too slow and to adopt a new program would result in major setbacks, but if they make the necessary changes to the current program based on the obvious mistakes of the last six months they could actually have a working program in place.

So instead of only helping approximately 650,000 homeowners they might actually be able to help the 3 to 4 million people they set out to assist- 3 million or even half of that number would be a tremendous benefit to so many people and would be considered a successful campaign.

National Foreclosure Prevention Services is committed to helping as many homeowners as we possibly can stay in their home by offering Loss Mitigation Services and if the government takes a common sense approach to the problem we will be able to help many more people.

Click here for help with your Loan Modifications and Short Sales.

Will it Get Better Before It Gets Worse?

The answer to that question is NO! I hate to be the one to break it to you, but from all market indications that I am studying it will not get any better anytime soon.

There are a couple of very real indications that things have not turned around and one indication is that there is a second wave of loans that are about to adjust and they are going to really have a negative impact on the financial market.

The other indicator is the unemployment rate that no one seemed to notice was and has continued to climb resulting in even more foreclosures in the coming months.

Click on this link to read about how the government failed to recognize this problem.

Option Arm Mortgages

Option Arm Adjustable Rate Mortgages are about to go through major resets, sending federal and state regulators scurrying to withstand a new wave of defaults and foreclosures.

National Foreclosure Prevention Services has had some success modifying Option Arm Mortgages, but there are several problems with these mortgages.

1.    Most loan modifications will be a principle and interest payment, where the H/O usually paid the minimum payment - not even the interest only payment.

2.    When the loan is modified chances are the payment will be higher than what the H/O is currently paying making it imposable to qualify.

3.    And because the H/O was paying the minimum and with the reduction of home values, chances are there is no equity and they owe more on the mortgage then they did when they purchased the home.

Most homeowners in an Option Arm Mortgage will either do a Short Sale or walk away from the house - there is very little up side to the picture. However, we do recommend having a conversation with your lender to see what they are willing to do to help.

Despite positive signs of a housing recovery - increasing home prices and sales in most markets nationwide - foreclosures have been continuing to rise, even before option ARMs become an area of concern.

I was reading a great article in Active Rain published by Jeff Geoghan that reinforces my position regarding loan modifications at The Coming Storm. I give props where props are due…he touched base on loan modifications as well and I know from actively doing them the banks/lenders are under staffed and inadequately prepared to handle this crisis.

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