Tag Archives: Making Home Affordable Program

Banks Are Too Large And Failure Is Not An Option

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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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Treasury Department’s Loan Modifications

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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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Simple Short Sale Management – Web Based, 24/7 Access

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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Making Home Affordable Program (MHA)

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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.

Lender or Servicer… What’s the Difference

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Lender

The lender or the Investor actually owns the loan and will make the final decision as to your approval or denial of your Loan Modification or Short Sale.

Most homeowners don’t even realize the difference and because a typical loan is sold several times it’s no wonder. Most homeowner’s receive their statement every month and write a check out to the name of the company at the top of the page.

Lenders are often more responsive than servicers since they have the final word or say as to approval or denial of the deal.

We will generally close a loss mitigation or short sale case faster with the lender than we will with the servicer; however there are advantages and techniques that we use to get a quick response from the servicer that most companies are not familiar with and that gives us the advantage over most companies.

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Servicer

At the time the loan is originated chances are that it will be sold off to a third party. Without the proper infrastructure, employees and budget most lenders will make their money originating the loan and pay out a small fee to a third party company to service the loan with collection calls, billing and customer service.

It is not uncommon for a third party servicer to service loans from more than one lender. What you may not know is that servicer is required by law to provide full contact information for all lenders upon request and since few homeowners even know to ask it’s not surprising they have never been in contact with their lender.

Also true is the fact that most servicers will initiate the loan modification or short sale by sending out the required documents to be complete by the homeowner. We have these documents on file which gives us the advantage because we send these documents out to the homeowner at the time of our consultation and acceptance of our terms.

Over the years we have found that most homeowners will not even try to negotiate a workout plan with the lender.

My initial thought was that homeowners were in denial and that they were hoping something would change allowing them to avoid facing financial ruin and get out of this nightmare they were in.

Then one day after doing a three-way call with my client and the lender I realized it could also be the fear of intimidation and it’s not the lender who is the problem, it’s the collections department. Once you enter you account number into the system and you are behind in your payment, you are routed to the collections department. These people are ruthless and unless you know what to say and how to say it they will threaten you with foreclosure proceedings.

There is a secret to dealing with the collections department and we have the talent and the skill which has allowed us to master the art of negotiations.