Tuesday, December 29, 2009
Campbell, California Loan Modification Company Shut Down
The Department of Real Estate is finally taking a tough stance on loan modification companies that have popped up over the last couple years like a bad rash. Please read the Silicon Valley Business Journal article on this new closure. One major regulation that was passed: no up front fees may be collected by a loan mod company from a consumer. This hopefully will eliminate the companies that just pocketed the $3,000+ fees and then did no work. The opposite of this and the unintended affect is: loan mod companies will no longer exist! - and the home owner will only have a few non-profit companies to rely on or battle their banks by themselves. Neither is a good solution. Pendulum - please swing somewhere in the middle!
Friday, October 23, 2009
Advance Fees for Loan Modification Now Illegal in California
Governor Schwarzenegger signed a bill making the collection of advance fees for loan modifications illegal in the State of California as of October 11, 2009. For the full press release please go to the following link at the Department of Real Estate.
Thursday, October 22, 2009
Loan Modification or Short Sale?
With loan mods having little success, some home owners are having better success with short selling their homes. The statistics are ugly for the amount of loan mods actually offered to home owners, even with the government pressure to do so. Approximately 25% of applications are granted a loan mod. Some 50% of those are accepted by the borrowers and a good 50% of those default immediately. Yes - you should try and see what the bank offers. Make the right decision, take a loan mod that will work for the long term and not just a temporary fix. The other solution is a short sale - and banks have been giving higher approvals on short sales than on loan mods. This having to do with the tax breaks given to banks for this process compared to little tax benefit on a loan mod.
Wednesday, September 23, 2009
Short Sale - Foreclosure or Stick It Out?
The American psyche is to pay your debts on time and be good responsible financial citizens. A very good method of operation for sure.
There is also room for discussion when financial situations aren't reasonable to continue making payments on a home. I just saw a simple scenario which can be applied to many homeowners today.
A home was bought for $500,000 with 10% down payment 3 years ago. The home is now worth 35% less. If you continue making payments on this home and the home appreciates 7% per year (a hugely hopeful percentage) it will take 7 years to get to a break even equity position.
Your home payments are also significantly higher that what a rental payment would be.
The alternative would be to sell through a short sale and then re-enter the market 3 years from now.
That strategy - while not ideal or easy by any means - will give the new homeowner $130,000 in equity at the end of the same 7 years!
What do you think?
There is also room for discussion when financial situations aren't reasonable to continue making payments on a home. I just saw a simple scenario which can be applied to many homeowners today.
A home was bought for $500,000 with 10% down payment 3 years ago. The home is now worth 35% less. If you continue making payments on this home and the home appreciates 7% per year (a hugely hopeful percentage) it will take 7 years to get to a break even equity position.
Your home payments are also significantly higher that what a rental payment would be.
The alternative would be to sell through a short sale and then re-enter the market 3 years from now.
That strategy - while not ideal or easy by any means - will give the new homeowner $130,000 in equity at the end of the same 7 years!
What do you think?
Tuesday, July 14, 2009
Loan Modification - Wachovia Bank's new streamlined loan modification & short sale process
Wachovia is taking a leading step to fix their looming bad loan portfolio. They are giving short sale replies within two weeks of receiving a very simple application. Also, the short sale approval process that they have in place is an industry leading best practice. From making an offer on a home with a Wachovia first loan, I am seeing close of escrows in 45 days which includes the 5-7 business day turn arounds on short sale decisions. If you have a Wachovia loan, talk to me - there are solutions!
Friday, April 3, 2009
Few Loan Modifications Actually Cut Principal
Very good article by Alan Zibel:
By Alan Zibel
Associated Press
Posted: 04/03/2009 02:25:45 PM PDT
Updated: 04/03/2009 04:37:53 PM PDT
WASHINGTON — Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released Friday show.
The report, based on an analysis of nearly 35 million loans worth more than $6 trillion, was published by the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision. It provides the most detailed and broad analysis to date of efforts to stem the foreclosure crisis, which President Barack Obama is trying to combat with a $75 billion plan to promote loan modifications.
The report helps explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry aren't very generous, despite more than a year of public prodding from regulators.
For instance, nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments. That situation can happen when lenders add fees or past-due interest to a loan and spread those payments out over the 30- or 40-year period.
Perhaps unsurprisingly, the report found that loans were far less likely to fall back into default if a borrower's monthly payment is reduced by a healthy amount.
Nine months after modification, about 26 percent of loans in which payments had dropped by 10 percent or more had fallen back into default. That compares with about half of loans in which the payment was unchanged or increased.
"This new data shows that, in the current stressful environment, modification strategies that result in unchanged or increased mortgage payments run the risk of unacceptably high re-default rates," Comptroller of the Currency John Dugan said in a statement.
But regulators said they saw a positive trend in the data, collected from mortgage companies including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc.
Traditionally, lenders have seen loan workouts as a way to get a borrower back on track after a temporary disruption in income. Now, with the economy sinking fast and foreclosures soaring, they are increasingly coming around to the idea to that more permanent changes are needed.
Among loan modifications made in the October-December quarter, about 37 percent resulted in a drop in payments of more than 10 percent, compared with about one-fourth in the first nine months of the year. Regulators saw that growth as a positive sign.
"The trend toward lowering payments to make home mortgages more affordable is moving in the right direction," John Bowman, acting director of the Office of Thrift Supervision, said in a prepared statement.
The Obama administration is aiming to help up to 9 million borrowers stay in their homes through refinanced mortgages or modified loans. Still, the faltering economy, driven down by the collapse of the housing bubble, is causing the housing crisis to spread.
Among the loans surveyed in the report, just over 10 percent were delinquent or in foreclosure, compared with 7 percent at the end of September, the report said. Delinquencies are increasing the most among prime loans made to borrowers with strong credit, it said.
A broader study of the mortgage market last month found a higher percentage of problem loans.
The Mortgage Bankers Association reported that nearly 12 percent of all Americans with a mortgage — a record 5.4 million homeowners — were at least one month late or in foreclosure at the end of last year. That's up from 10 percent at the end of the third quarter, and from 8 percent at the end of 2007.
The trade group's study includes more than 45 million loans, 10 million more than the government report.
By Alan Zibel
Associated Press
Posted: 04/03/2009 02:25:45 PM PDT
Updated: 04/03/2009 04:37:53 PM PDT
WASHINGTON — Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released Friday show.
The report, based on an analysis of nearly 35 million loans worth more than $6 trillion, was published by the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision. It provides the most detailed and broad analysis to date of efforts to stem the foreclosure crisis, which President Barack Obama is trying to combat with a $75 billion plan to promote loan modifications.
The report helps explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry aren't very generous, despite more than a year of public prodding from regulators.
For instance, nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments. That situation can happen when lenders add fees or past-due interest to a loan and spread those payments out over the 30- or 40-year period.
Perhaps unsurprisingly, the report found that loans were far less likely to fall back into default if a borrower's monthly payment is reduced by a healthy amount.
Nine months after modification, about 26 percent of loans in which payments had dropped by 10 percent or more had fallen back into default. That compares with about half of loans in which the payment was unchanged or increased.
"This new data shows that, in the current stressful environment, modification strategies that result in unchanged or increased mortgage payments run the risk of unacceptably high re-default rates," Comptroller of the Currency John Dugan said in a statement.
But regulators said they saw a positive trend in the data, collected from mortgage companies including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc.
Traditionally, lenders have seen loan workouts as a way to get a borrower back on track after a temporary disruption in income. Now, with the economy sinking fast and foreclosures soaring, they are increasingly coming around to the idea to that more permanent changes are needed.
Among loan modifications made in the October-December quarter, about 37 percent resulted in a drop in payments of more than 10 percent, compared with about one-fourth in the first nine months of the year. Regulators saw that growth as a positive sign.
"The trend toward lowering payments to make home mortgages more affordable is moving in the right direction," John Bowman, acting director of the Office of Thrift Supervision, said in a prepared statement.
The Obama administration is aiming to help up to 9 million borrowers stay in their homes through refinanced mortgages or modified loans. Still, the faltering economy, driven down by the collapse of the housing bubble, is causing the housing crisis to spread.
Among the loans surveyed in the report, just over 10 percent were delinquent or in foreclosure, compared with 7 percent at the end of September, the report said. Delinquencies are increasing the most among prime loans made to borrowers with strong credit, it said.
A broader study of the mortgage market last month found a higher percentage of problem loans.
The Mortgage Bankers Association reported that nearly 12 percent of all Americans with a mortgage — a record 5.4 million homeowners — were at least one month late or in foreclosure at the end of last year. That's up from 10 percent at the end of the third quarter, and from 8 percent at the end of 2007.
The trade group's study includes more than 45 million loans, 10 million more than the government report.
Thursday, April 2, 2009
Loan Modification - Home Loan Preservation National Convention
I am on a very early flight to Las Vegas this morning to attend the national convention for Home Loan Preservation. Slated to present are the attorneys who are processing loan modifications for HLP. They are geared up to transact over 1,000,000 loan modifications in 2009. One of the hot topics is the recent Department of Real Estate guidelines that just came down in the last few weeks. These guidelines closed many loan modification companies who were illegally practicing. HLP has been working directly with the DRE to make sure their methods of operation are in strict compliance. I will post updates as I hear what they have to say.
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