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Modified Loans Defaulting Like Subprime Mortgages

Even some professionals in the lending industry are mystified at why so many companies are charging delinquent borrowers more in a modified loan when they clearly could not afford the original, lower amount.  “I don’t know why a mortgage lender would enter into that kind of agreement knowing what the outcome would be,” said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. “Why would it not go into foreclosure? Why would it not fail?” The new federal data did not distinguish among types of loan modifications. The OCC report indicated that of borrowers receiving loan modification plans earlier this year, 39% were thirty days in arrears after three months and 51% after six months.  Dugan said 60 days in arrears is a more reliable indicator of homeowners who will ultimately lose their homes. On that measure, the results were equally dismal: More than 35 % were 60 days past due on their home loan payments six months after getting help.

It’s clear the type of help can determine the outcome. Credit Suisse’s analysis revealed that 44 % of mortgage note modifications that included higher payments re-defaulted within eight months. Meanwhile, among those who had some of their principal permanently forgiven, 23 % had re-defaulted within eight months, while just 15 % of those with adjustable rates whose rates were decreased or frozen had defaulted.  Even an increasingly popular proposal floated by the head of the FDIC to refinance as many as 2.2 million distressed homeowners into affordable, fixed-rate mortgage loans estimates as many as a third, or about 700,000, could fall behind again by the end of 2009.

US Representative Barney Frank said that even with significant foreclosure default rates, the majority of those who are helped stay in their houses and slow the bleeding in neighborhoods struggling from abandonment and blight.  Frustrated with the pace of help to homeowners, the Newton Democrat yesterday threatened to tie up the remaining half of the $700 billion financial industry rescue money unless the Bush administration provided some of it for restructuring troubled subprime mortgage loans.

Other home preservation specialists said the problem is as much the homeowners. Paul Willen, an analyst for the Federal Reserve Bank of Boston, said too many borrowers simply cannot afford to own their homes.  “Many of the people in the foreclosure process are in deep, deep trouble. They are not a modified loan away from financial happiness,” said Willen. “Many people who are heading into foreclosure don’t need a modification, they need an exit strategy.” Article written by Jenifer McKim

Posted in Mortgage News, Published Article.

Foreclosure Crisis with Loan Modifications, Refinancing and More

The foreclosure crisis continues to ravage our economy with job shrinkage, reduced home equity from plummeting home sales and delinquent mortgage payments. Unfortunately, many people have the ability to make their loan payment on time but they jumped on the mortgage modification train with their neighbors and stopped paying their home loan in hopes of reducing their monthly payments through negotiations with the loss and mitigation department of their mortgage servicing company.

Clearly, there is nothing wrong with renegotiating your mortgage for a lower payment. Essentially that is what mortgage refinancing is all about. Loan modifications are different, because the terms are not fair for the bank because they take a loss. Banks who hold the mortgage note loose income from pre-payment penalties, loss of interest and in some cases loss of principal. The argument could be made that each time a bank agrees to a loan modification jobs are lost, because revenue is lost and expenses must be cut. However the reality is that we are in a serious financial crisis and if the mortgage lenders did not restructure their customer’s mortgage loans, then the banks would crash quickly as the liquidity problems would worsen.

Millions of homeowners are seeking mortgage refinancing or loan modifications in an effort to save their house or make their monthly payments more affordable. Unfortunately for mortgage brokers and lenders, mortgage refinance closings have slowed to very uncomfortable rate.

According to CFB Branch loan officer, Jeff Moran, most refinance loans are taking seven to eight weeks. Imagine owning a mortgage company that had to fund four staff payrolls to fund a loan. Imagine paying underwriters, processors and loan officers to work on home loans that likely would not actually close. The mortgage business has seen brighter days. Credit restrictions have tightened lending guidelines to the level that very few borrowers qualify for a mortgage. Moran continued, “FHA mortgage loans have been the only lending product we can count on and fortunately the government loans will consider the borrower’s compensating factors for approvals.”On the other hand loan modification companies have never has more business. With millions of have homeowners on the brink of foreclosure, people are lining up to help people modify their loan terms. With the recent $850 billion dollars from the Financial Bail-Out package, you can bet that loan modifications will only increase in 2009. Once we get past the foreclosure crisis most financial critics agree that home refinancing will resume back on its normal course.

 

On the other hand loan modification companies have never has more business. With millions of have homeowners on the brink of foreclosure, people are lining up to help people modify their loan terms. With the recent $850 billion dollars from the Financial Bail-Out package, you can bet that loan modifications will only increase in 2009. Once we get past the foreclosure crisis most financial critics agree that home refinancing will resume back on its normal course.

Mortgage lenders have started to negotiate with borrowers who are not delinquent with their mortgage. In most cases, you don’t have to be 60 days late to get a loan modification any more. The Chinese define crisis as danger and opportunity. Hopefully Americans will utilize this foreclosure crisis and seize the opportunity to move forward as a stronger more pragmatic country.

Bryan Dornan is an experienced mortgage banker who has publishes many articles about the sub-prime mortgage debacle and foreclosure related news. Mr. Dornan runs several companies like Nationwide, Lead Planet and Nationwide Marketing. He has experience and has worked with lending companies like City National Bank and Community First Bank. Bryan Dornan suggests visiting the following web-pages: Search Marketing Company and Loan Modification. Dornan is an experienced real estate consultant who publishes many interesting foreclosure prevention articles for many real estate blogs.  Read more real estate articles written by Bryan Dornan.  Article Source: http://EzineArticles.com/?expert=Bryan_Dornan

Posted in Home Financing Articles, Published Article. Tagged with , , .

Loan Modification Programs

As the American housing market continues to sink, the Federal government may implement another rescue plan to offer incentives and guarantees for loan modification programs. The new plan would serve as an inducement to home lenders to modify home loans for delinquent borrowers facing foreclosure. Foreclosure is time consuming and costly for banks, and continue to place downward pressure on the housing market.

FDIC Chairman Sheila Bair told a Senate panel that a proposed plan is in the works to offer federal loan guarantees and credit enhancements to encourage lenders to offer loan modification programs. The current voluntary program is not working and mortgage lenders are continuing to fall behind. Realty Trac announced that foreclosure filings in the third quarter were 71% higher than the same period last year.

Declining to mention any specific dollar figure for the program, it has been reported that somewhere around $40 billion was being considered for funding. Under the terms of the $700 billion banking bailout passed earlier, the Treasury Department can use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures. The government could establish standards for loan modifications and provide guarantees for home loans meeting those standards. The incentive is to provide long term, sustainable loans for homeowners to prevent future defaults.

The challenge has been that the loan servicers who work directly with the homeowners on behalf of the investors, have competing interests that impede loan workouts. Mortgage investors stand to lose money on loan modifications and have been reluctant to offer any wide ranging loan modification programs. Chairman Bair’s proposal of federal loan guarantees would provide incentives to overcome the aversion to loan modification programs by investors. These guarantees and incentives would increase the likelihood of lenders choosing loan modifications over foreclosures. Foreclosure is a costly and time consuming process that results in a continued downward pressure on the housing market values.

Loan modifications are currently voluntary and at the discretion of each lender. Distressed borrowers have complained that help has been slow in coming, with many lenders inundated with applications from homeowners seeking to modify their loan. Typically a loan modification program will employ one or more of these options to arrive at an affordable monthly payment:

  • Mortgage Rates reduced to as low as 2%
  • Loan Payments featuring interest only options
  • Principal reduction to 95% of the homes current market value
  • Extending or fixing the initial “teaser rate”
  • Late fees waived
  • Waive prepayment penalties

Main Street balked at the billion dollar bailout for Wall Street, however using some of those funds to directly help homeowners is a policy that most Americans would support. Sheila Bair has stated that the Federal government is working with the Treasury Department to reduce the number of foreclosures and keep people in their homes. She believes the government needs to get involved to create a streamlined process to modify troubled home loans. The Treasury Department has confirmed that loan guarantees were possible but would not say when a plan would be ready.

You can learn more about loan modification programs by ordering and downloading The Complete Loan Modification Guide. This is a low cost, easy to read handbook that will provide you with everything you need to prepare a professional and acceptable loan modification application. Not every borrower will qualify for a mortgage modification, so before you contact your lender make sure you have all the information you need. Be prepared so you will be able to meet your lender’s guidelines. The Complete Loan Modification Guide takes you step by step thru the application process – you can get the help you need to get back on track. Order and download The Complete Loan Modification Guide today.  Please visit : http://www.myloanmodificationcenter.com  Article Source: http://EzineArticles.com/?expert=Susan_V._Gregory

Posted in Published Article. Tagged with , , .

Foreclosure Watch 2009 as Option ARM’s Reset

Option ARM homeowners are waiting for Foreclosure. An Option ARM is a Negative Amortization Loan. With these so called Neg-Am mortgages, the borrower owes more at the end of each month if you make the minimum payment. 70 to 80% of people who got one of these loans make only the minimum payment each month. All of this has been reported in the mainstream media and in the blog-o-sphere. Most of these sub-prime mortgage loans were originated in California, Nevada and Florida. Most of the mortgage loans don’t recast (read Explode) until 2010/2011/2012 – so how can housing bottom in 2009 ? By the way, the updated the reset chart based on updated Recast dates (not the dates originally used). Looks like foreclosures continue through 2009, getting worse and worse from option ARM home owners. 

These homeowners – sorry – home debtors – sorry – transient renters are literally waiting for foreclosure. They can’t refinance – Negative Equity and they can’t make more than the minimum option ARM payment – which doesn’t even cover the interest.

Home prices continue to drop. Realtors, Government, Banks and Debtors can’t stop it. No one can. It has to happen. The whole system became corrupt and rotten. This is the reckoning. Remember too dear readers, Foreclosures lag defaults – by a minimum of ninety days but sometimes up to a year or more.   The Red Army will crush the hastily arranged liquidity defenses and mortgage loan modifications obstacles. No amount of propaganda from the National Association of Realtor’s can prevent foreclosures for millions. On the bright side – those Partisans behind the lines with caches of cash will be able to buy cheap houses – when the time is right.  > Read the original Motley Fool Article.

Posted in Mortgage News, Published Article. Tagged with , , .

Mortgage Crisis Hits Home in North Carolina

North Carolina Governor Mike Easley continues to promote foreclosure prevention solutions as he gets another opportunity to expand his influence before leaving office next month. From the Housing Crisis to the Credit Crunch, many people are anxious to promote fiscally responsible solutions, but as our economy staggers, Is now the time? 

In a recent article, Gary Robertson considers the impact that President-elect Barack Obama had when joining the governors and governors-elect last week in Philadelphia to talk about an economic stimulus package, Easley gave a brief talk about a mortgage foreclosure reduction program he persuaded the Legislature to approve last summer.  Two days later, Easley was in Florida at a conference of his old attorney general friends nationwide about the mortgage refinancing plan that already is trying to help thousands of homeowners with subprime mortgage loans threatened with losing their homes.  “Almost everyone has come through that they have been able to restructure mortgages with reduced interest rates or an extended term in which to pay back the home loan,” Easley said in a recent interview about the Home Foreclosure Prevention Program. “Loan modifications can be a good deal for the banks, as well as for homeowners, and it helps our economy. All states need to be doing these type of things.”  The Associated Press reported that there is nothing unusual about North Carolina governors emphasizing their accomplishments as they leave office or highlighting items that have been or could be imitated elsewhere.   Learn more about the > Sub-Prime Mortgage Debacle. 

Posted in Home Financing Articles, Mortgage News. Tagged with , , , , .