CALIFORNIA FORECLOSURE JUMP 21%!!!!!!
Foreclosure Sales Jump by 21 PercentDespite increase sales are still well below record levels
Discovery Bay, CA, November 12, 2009 - ForeclosureRadar (http://www.foreclosureradar.com/), the only websitethat tracks every California foreclosure and provides daily auction updates, issued its monthly CaliforniaForeclosure Report for October 2009.
After 3 months of consecutive declines the number of foreclosuresales taken back by banks rose by 22.24 percent from September and 20.95 percent from October 2008.Despite these dramatic increases, the number of foreclosures taken back by banks remains 42.56 percentbelow the peak reached in July 2008, from which time the inventory of scheduled foreclosures has grown by131.36 percent.
“While we continue to see a steady stream of properties entering foreclosure, relatively few are completingthe process and being sold at auction despite the increase this month,” says Sean O’Toole, Founder andCEO of ForeclosureRadar.com. “The bigger picture is that more and more homeowners are findingthemselves upside down in foreclosure limbo, some hoping for a loan modification or short sale, whileothers are just waiting for a knock on the door”.
Posted by
Salem
http://www.loansmodification.com/
Monday, November 23, 2009
Monday, August 24, 2009
National HPI for June- Home Prices Down 7.8% vs. 2008
Year-Over-Year and Seasonal Comparisons Seen as Positives
National housing prices fell 7.8 percent in June 2009 compared to June 2008 representing the smallest year-over-year decline recorded to date in 2009, according to newly released data from First American CoreLogic and its LoanPerformance Home Price Index (HPI). June’s decline was a 0.7-percent improvement over the 8.5 percent decline in May*.
Month-over-month declines have been moderating in the first half of 2009. Between January and June 2009 home prices improved by 3.3 percent. This is the first time in four years that the spring and summer seasonal price trend exhibited its normal pattern.
The seasonal improvement in home prices in the first half of 2009 is a positive sign, but it is important to note that a decline in distressed sales, rather than an increase in traditional home sales prices, was responsible for the uptick.
Nevada (-25.4 percent) remained the top-ranked state for annual price depreciation barely edging out Florida (-25.1 percent), which, unlike other hard hit states, is experiencing worsening price declines in 2009. California (-17.0 percent) continued to improve in June and its depreciation rate is the lowest since October 2007. Arizona (-16.2 percent) and Illinois (-14.8 percent) round out the top five states for price declines. More than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 2009. June’s negative equity share was slightly lower than the 32.5 percent as of the end of March 2009, and it reflects the recent stabilization of home prices. The aggregate property value for loans in a negative equity position was $3.4 trillion, which represents the total property value at risk of default. Full negative equity data is available at http://www.loanperformance.com/loanperformance_hpi.aspx#NegEqReport
Salem
www.loansmodification.com
updated 8/24/09
Year-Over-Year and Seasonal Comparisons Seen as Positives
National housing prices fell 7.8 percent in June 2009 compared to June 2008 representing the smallest year-over-year decline recorded to date in 2009, according to newly released data from First American CoreLogic and its LoanPerformance Home Price Index (HPI). June’s decline was a 0.7-percent improvement over the 8.5 percent decline in May*.
Month-over-month declines have been moderating in the first half of 2009. Between January and June 2009 home prices improved by 3.3 percent. This is the first time in four years that the spring and summer seasonal price trend exhibited its normal pattern.
The seasonal improvement in home prices in the first half of 2009 is a positive sign, but it is important to note that a decline in distressed sales, rather than an increase in traditional home sales prices, was responsible for the uptick.
Nevada (-25.4 percent) remained the top-ranked state for annual price depreciation barely edging out Florida (-25.1 percent), which, unlike other hard hit states, is experiencing worsening price declines in 2009. California (-17.0 percent) continued to improve in June and its depreciation rate is the lowest since October 2007. Arizona (-16.2 percent) and Illinois (-14.8 percent) round out the top five states for price declines. More than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 2009. June’s negative equity share was slightly lower than the 32.5 percent as of the end of March 2009, and it reflects the recent stabilization of home prices. The aggregate property value for loans in a negative equity position was $3.4 trillion, which represents the total property value at risk of default. Full negative equity data is available at http://www.loanperformance.com/loanperformance_hpi.aspx#NegEqReport
Salem
www.loansmodification.com
updated 8/24/09
Thursday, August 13, 2009
A lot of my clients ask me of my opinion about the market and economy... So I try to give them an overview of what they should prepare for, so once in a while I post some of the articles that I think is relevant and importantSalemhttp://www.loansmodification.com/Today I am posting the following information. 8/13/09
About half of homeowners to have negative equity by 2011Analysts at Deutsche Bank say that the number of homeowners whose home value is less than what they owe on mortgage loans will double to 48% by 2011; currently 26% of homeowners have negative home equity. "We project the next phase of the housing decline will have a far greater impact on prime borrowers," said Karen Weaver and Ying Shen, analysts at Deutsche Bank. Among prime loans - which conform to underwriting and size guidelines of Fannie Mae and Freddie Mac - about 41% will be "underwater" by the first quarter of 2011 from 6% at the end of the first quarter of 2009. As for prime Jumbo loans, about 26% will be underwater by 2011. "The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," said the Deutsche Bank analysts. Among subprime loans, 61% will be underwater by 2011. The drop in home prices is leading to negative home equity and incentivizing borrowers to walk away from their mortgage commitments. In regions such as Las Vegas and parts of Florida and California about 90% of homeowners are likely to see negative home equity by 2011. "For many, the home has morphed from piggy bank to albatross," the analysts said.
If you have any Question... Feel free to call me @
949-200-4959 xt: 2
http://www.loansmodification.com/
About half of homeowners to have negative equity by 2011Analysts at Deutsche Bank say that the number of homeowners whose home value is less than what they owe on mortgage loans will double to 48% by 2011; currently 26% of homeowners have negative home equity. "We project the next phase of the housing decline will have a far greater impact on prime borrowers," said Karen Weaver and Ying Shen, analysts at Deutsche Bank. Among prime loans - which conform to underwriting and size guidelines of Fannie Mae and Freddie Mac - about 41% will be "underwater" by the first quarter of 2011 from 6% at the end of the first quarter of 2009. As for prime Jumbo loans, about 26% will be underwater by 2011. "The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," said the Deutsche Bank analysts. Among subprime loans, 61% will be underwater by 2011. The drop in home prices is leading to negative home equity and incentivizing borrowers to walk away from their mortgage commitments. In regions such as Las Vegas and parts of Florida and California about 90% of homeowners are likely to see negative home equity by 2011. "For many, the home has morphed from piggy bank to albatross," the analysts said.
If you have any Question... Feel free to call me @
949-200-4959 xt: 2
http://www.loansmodification.com/
Friday, March 13, 2009
A lot of my clients ask me of my opinion about the market and economy... So I try to give them an overview of what they should prepare for, so once in a while I post some of the articles that I think is relevant and important
Salem
http://www.loansmodification.com/
Today I am posting the following artickle from " Money and Market" newsletter. 3/13/09
Eureka! The Banking Industry's Problems Are Solved!
by Mike Larson
Dear Salem,
Who knew it would be so easy? Who knew we could solve the banking industry's collapse by simply changing how we account for assets. Eureka! Problem solved!
That seems to be the conclusion Wall Street came to earlier this week, judging by the reaction to Fed Chairman Ben Bernanke's comments at the Council on Foreign Relations on Tuesday. During that speech, Bernanke weighed in on "mark to market" accounting, saying the following:
"The ongoing move by those who set accounting standards toward requirements for improved disclosure and greater transparency is a positive development that deserves full support. However, determining appropriate valuation methods for illiquid or idiosyncratic assets can be very difficult, to put it mildly. Similarly, there is considerable uncertainty regarding the appropriate levels of loan loss reserves over the cycle.
"As a result, further review of accounting standards governing valuation and loss provisioning would be useful, and might result in modifications to the accounting rules that reduce their procyclical effects without compromising the goals of disclosure and transparency. Indeed, work is underway on these issues through the Financial Stability Forum, and the results of that work may prove useful for U.S. policymakers."
Fed Chairman Ben Bernanke's recent comments suggest "modifying" accounting rules might help the banking system.
What Bernanke did is shift ever so slightly toward the position of the banking industry's apologists. These lobbyists, assorted policymakers, and pundits (including folks like Steve Forbes, who wrote an Op-Ed in the Wall Street Journal the other day), are arguing — once you cut to the chase — the following ...
The problem with the banks isn't all the crappy securities and loans they're loaded up with.
It's not that they took on too much excessive risk, lending against assets whose value is plunging.
It's not that they funded asinine private equity deals, stupid commercial construction deals, and dumb home purchases.
It's that they have to mark their book of securities made up of these bundled loans to market. And they argue that the prices they could get for those securities in the markets are "artificially" low — or in some cases, that there is NO market for them.
If only they could avoid marking those assets to market, or use their super- duper net present value and cash flow MODELS — which, surprise, surprise, say the "real" value of those securities is higher — then the banking system would be fine. We could all go back to the wonderful world of yesteryear.
There's just one problem ...
Pretending Something's Worth More Than It Is Doesn't Change Reality!Look, the problem isn't that there's NO market for these bad securities. The problem isn't that the prices are "artificially" low. The problem isn't how we account for these assets. The problem is that the industry doesn't want to acknowledge that today's prices are the REAL prices.
There are tons of bidders out there for this crappy paper ... at the RIGHT price. Vulture funds, hedge funds, private equity investors: They're all raising billions and billions of dollars to scoop up cheap real estate, inexpensive bundles of mortgage backed securities, and distressed buyout loans.
But sellers don't want to admit reality. They're not hitting the buyer's bids. They're hanging on to the garbage securities, hoping against hope that they won't have to sell at the true market prices. And the government is busy trying to figure out ways to prop up the price of the garbage rather than forcing banks to take their medicine now, even if it means the result is that they have to temporarily be nationalized or put into receivership.
There are plenty of buyers for bad paper — but too few sellers willing to hit buyers' bids.
I understand why this is occurring: Policymakers are afraid of mass insolvencies. So they're trying to figure out how to do something akin to the early 1980s use of Regulatory Accounting Principles (RAP), which papered over insolvencies in the Savings & Loan industry.Of course, papering over the problem didn't mean it went away. No surprise, then, that the unofficial nickname for RAP used to be Creative Regulatory Accounting Principles; you can figure out the acronym yourself.
Worse, many of the S&Ls that were granted forbearance were also allowed to try to grow their way out of insolvency. They increasingly gambled on new ventures, especially commercial real estate, to do so. Result: They eventually blew up anyway — at a much LARGER cost to U.S. taxpayers.
This strategy of delay, stall, and hope has another more recent analog: It's exactly what we saw in the early days of the housing market downturn. Sales VOLUME dried up, while the SUPPLY of homes for sale surged.
Yet reported median prices didn't decline. I lost count of how many people asked me: If the market is so bad, why aren't prices falling? I answered that fewer and fewer buyers were paying inflated prices, holding up the median.
But the huge build up in supply and dramatic fall off in the sales pace meant it was just a matter of time. The TRUE, underlying market value of U.S. homes was declining; it just wasn't being acknowledged by most sellers yet. Sure enough, the numbers eventually took a dramatic turn for the worse. It's kind of like those old Road Runner cartoons, where the coyote runs over the cliff but doesn't start plunging until he looks down.
It was just a matter of time before the true, underlying market value of U.S. homes sharply declined.
My Prescription: Deal with the Problem Head On!
The longer the industry tries to push out the day of reckoning ... and the longer Washington pretends the problem is accounting rules (or even worse, short sellers, who also were cast as the latest bogeyman for the banking sector) ... the longer this recession is going to drag on. It also increases the chance we end up like Japan, with zombie institutions consuming more and more government dollars even as the economy stagnates.
Think I'm crazy? Then consider this: If institutions just bit the bullet a year or two ago, and unloaded all this crappy paper at the then-available prices, they would be in clover today. They would have gotten much higher prices for these assets.
But they followed the delay, stall, and hope doctrine — and instead of learning from that mistake and changing course, they're STILL making the same mistake today. They're still saying their modeled prices are the "real" prices and that anyone who suggests otherwise doesn't know what he's talking about. They say if the accounting procedures are modified, and the regulators forebear, everything will be fine down the road.
That strategy didn't work for the S&Ls in the 1980s. It didn't work in Japan in the 1990s. It hasn't worked so far this time around. And I don't think it will work in the future.
Until next time,
Mike
Salem
http://www.loansmodification.com/
Today I am posting the following artickle from " Money and Market" newsletter. 3/13/09
Eureka! The Banking Industry's Problems Are Solved!
by Mike Larson
Dear Salem,
Who knew it would be so easy? Who knew we could solve the banking industry's collapse by simply changing how we account for assets. Eureka! Problem solved!
That seems to be the conclusion Wall Street came to earlier this week, judging by the reaction to Fed Chairman Ben Bernanke's comments at the Council on Foreign Relations on Tuesday. During that speech, Bernanke weighed in on "mark to market" accounting, saying the following:
"The ongoing move by those who set accounting standards toward requirements for improved disclosure and greater transparency is a positive development that deserves full support. However, determining appropriate valuation methods for illiquid or idiosyncratic assets can be very difficult, to put it mildly. Similarly, there is considerable uncertainty regarding the appropriate levels of loan loss reserves over the cycle.
"As a result, further review of accounting standards governing valuation and loss provisioning would be useful, and might result in modifications to the accounting rules that reduce their procyclical effects without compromising the goals of disclosure and transparency. Indeed, work is underway on these issues through the Financial Stability Forum, and the results of that work may prove useful for U.S. policymakers."
Fed Chairman Ben Bernanke's recent comments suggest "modifying" accounting rules might help the banking system.
What Bernanke did is shift ever so slightly toward the position of the banking industry's apologists. These lobbyists, assorted policymakers, and pundits (including folks like Steve Forbes, who wrote an Op-Ed in the Wall Street Journal the other day), are arguing — once you cut to the chase — the following ...
The problem with the banks isn't all the crappy securities and loans they're loaded up with.
It's not that they took on too much excessive risk, lending against assets whose value is plunging.
It's not that they funded asinine private equity deals, stupid commercial construction deals, and dumb home purchases.
It's that they have to mark their book of securities made up of these bundled loans to market. And they argue that the prices they could get for those securities in the markets are "artificially" low — or in some cases, that there is NO market for them.
If only they could avoid marking those assets to market, or use their super- duper net present value and cash flow MODELS — which, surprise, surprise, say the "real" value of those securities is higher — then the banking system would be fine. We could all go back to the wonderful world of yesteryear.
There's just one problem ...
Pretending Something's Worth More Than It Is Doesn't Change Reality!Look, the problem isn't that there's NO market for these bad securities. The problem isn't that the prices are "artificially" low. The problem isn't how we account for these assets. The problem is that the industry doesn't want to acknowledge that today's prices are the REAL prices.
There are tons of bidders out there for this crappy paper ... at the RIGHT price. Vulture funds, hedge funds, private equity investors: They're all raising billions and billions of dollars to scoop up cheap real estate, inexpensive bundles of mortgage backed securities, and distressed buyout loans.
But sellers don't want to admit reality. They're not hitting the buyer's bids. They're hanging on to the garbage securities, hoping against hope that they won't have to sell at the true market prices. And the government is busy trying to figure out ways to prop up the price of the garbage rather than forcing banks to take their medicine now, even if it means the result is that they have to temporarily be nationalized or put into receivership.
There are plenty of buyers for bad paper — but too few sellers willing to hit buyers' bids.
I understand why this is occurring: Policymakers are afraid of mass insolvencies. So they're trying to figure out how to do something akin to the early 1980s use of Regulatory Accounting Principles (RAP), which papered over insolvencies in the Savings & Loan industry.Of course, papering over the problem didn't mean it went away. No surprise, then, that the unofficial nickname for RAP used to be Creative Regulatory Accounting Principles; you can figure out the acronym yourself.
Worse, many of the S&Ls that were granted forbearance were also allowed to try to grow their way out of insolvency. They increasingly gambled on new ventures, especially commercial real estate, to do so. Result: They eventually blew up anyway — at a much LARGER cost to U.S. taxpayers.
This strategy of delay, stall, and hope has another more recent analog: It's exactly what we saw in the early days of the housing market downturn. Sales VOLUME dried up, while the SUPPLY of homes for sale surged.
Yet reported median prices didn't decline. I lost count of how many people asked me: If the market is so bad, why aren't prices falling? I answered that fewer and fewer buyers were paying inflated prices, holding up the median.
But the huge build up in supply and dramatic fall off in the sales pace meant it was just a matter of time. The TRUE, underlying market value of U.S. homes was declining; it just wasn't being acknowledged by most sellers yet. Sure enough, the numbers eventually took a dramatic turn for the worse. It's kind of like those old Road Runner cartoons, where the coyote runs over the cliff but doesn't start plunging until he looks down.
It was just a matter of time before the true, underlying market value of U.S. homes sharply declined.
My Prescription: Deal with the Problem Head On!
The longer the industry tries to push out the day of reckoning ... and the longer Washington pretends the problem is accounting rules (or even worse, short sellers, who also were cast as the latest bogeyman for the banking sector) ... the longer this recession is going to drag on. It also increases the chance we end up like Japan, with zombie institutions consuming more and more government dollars even as the economy stagnates.
Think I'm crazy? Then consider this: If institutions just bit the bullet a year or two ago, and unloaded all this crappy paper at the then-available prices, they would be in clover today. They would have gotten much higher prices for these assets.
But they followed the delay, stall, and hope doctrine — and instead of learning from that mistake and changing course, they're STILL making the same mistake today. They're still saying their modeled prices are the "real" prices and that anyone who suggests otherwise doesn't know what he's talking about. They say if the accounting procedures are modified, and the regulators forebear, everything will be fine down the road.
That strategy didn't work for the S&Ls in the 1980s. It didn't work in Japan in the 1990s. It hasn't worked so far this time around. And I don't think it will work in the future.
Until next time,
Mike
Wednesday, March 11, 2009
Continued Bankruptcies, Late Payments, Mortgage Delinquencies Kick Off 2009
March 9, 2009
The deteriorating economy is evident in recent consumer credit woes as bankruptcies, past-due credit card payments and delinquent mortgages are beginning to pile up according to a new report.
The latest Credit Trends Monitor Report from Equifax shows that last month consumers continued to drop behind in their credit card payments, the number of mortgage holders who were 30-days-past due was up by 50 percent since January 2008, and personal bankruptcies also increased significantly year-over-year.
To add to the economic woes, home equity line of credit 30-day delinquency rates also saw an accelerated month-to-month increase, rising 3.39 percent from December 2008 to January, the largest jump in 10 years.
Consumer bankruptcies continued to rise, with January 2009 figures 25 percent higher than January 2008. Most of the increase is in Chapter 7 filings, which is 37 percent higher than the same period last year. Those filing Chapter 13 increased only six percent. Chapter 7 is a liquidation proceeding in which a debtor receives a discharge of all debts while Chapter 13 is a reorganization bankruptcy enabling filers to pay off debt over a set period of years.
Projections indicate that 30-day mortgage delinquencies, which have continued to increase, will result in even more 60- and 90-day delinquencies.
Other highlights from the Credit Trends Report:
· Credit scores continue to decline indicating that future credit card use and payment capability could be negatively impacted.
· Home equity delinquencies (30-days past due) accelerated in January, increasing more than 48 percent from January 2008. Approximately 65 percent of the home equity delinquencies are in the South Atlantic and Pacific regions, reflecting two states - Florida and California—where the housing bubble was the greatest.
Data for the Credit Trends Monitor Report is sourced from Equifax's nearly 200 million files of U.S. consumers using credit.
March 9, 2009
The deteriorating economy is evident in recent consumer credit woes as bankruptcies, past-due credit card payments and delinquent mortgages are beginning to pile up according to a new report.
The latest Credit Trends Monitor Report from Equifax shows that last month consumers continued to drop behind in their credit card payments, the number of mortgage holders who were 30-days-past due was up by 50 percent since January 2008, and personal bankruptcies also increased significantly year-over-year.
To add to the economic woes, home equity line of credit 30-day delinquency rates also saw an accelerated month-to-month increase, rising 3.39 percent from December 2008 to January, the largest jump in 10 years.
Consumer bankruptcies continued to rise, with January 2009 figures 25 percent higher than January 2008. Most of the increase is in Chapter 7 filings, which is 37 percent higher than the same period last year. Those filing Chapter 13 increased only six percent. Chapter 7 is a liquidation proceeding in which a debtor receives a discharge of all debts while Chapter 13 is a reorganization bankruptcy enabling filers to pay off debt over a set period of years.
Projections indicate that 30-day mortgage delinquencies, which have continued to increase, will result in even more 60- and 90-day delinquencies.
Other highlights from the Credit Trends Report:
· Credit scores continue to decline indicating that future credit card use and payment capability could be negatively impacted.
· Home equity delinquencies (30-days past due) accelerated in January, increasing more than 48 percent from January 2008. Approximately 65 percent of the home equity delinquencies are in the South Atlantic and Pacific regions, reflecting two states - Florida and California—where the housing bubble was the greatest.
Data for the Credit Trends Monitor Report is sourced from Equifax's nearly 200 million files of U.S. consumers using credit.
Thursday, March 5, 2009
Answers to questions about
Obama's foreclosure relief plan
The Obama administration thinks that its Making Home Affordable plan will help 9 million homeowners refinance problem mortgages or modify them in order to avoid foreclosure. Who qualifies for help of what kind? Here are some answers.
Q: How do I know if I qualify?
A: Your mortgage must predate the start of 2009, you must live in the home and you'll have to provide proof of income. Then ask two questions. First, are you already behind on payments or even in the foreclosure process? If the answer is no, then ask yourself whether your current mortgage rate is high enough to make it worth your while to refinance to take advantage of today's low rates for 15-year and 30-year fixed-rate mortgages.
Q: That's it?
A: No. If you think it's advantageous to refinance, you must find out who owns your loan. Most mortgages are bundled together and sold into a secondary market, where investors technically own them. If Fannie Mae or Freddie Mac placed your loan into the secondary market, you can contact the company that sends your monthly mortgage statement to discuss the new program. If your mortgage is in the portion of the secondary market where the private sector issued the mortgage-backed securities, you don't qualify.
Q: How do I know who owns my loan?
A: You'll have to ask the company that sends your monthly statement. These companies are sure to be swamped with calls this week, so be patient. And be warned: Borrowers have found in the past that mortgage-bill collectors - called servicers - often are less than forthcoming with answers as to who owns the loans.
Q: What if my loan is owned by Fannie or Freddie but I have negative equity?
A: You're not alone. Researcher First American CoreLogic reported Wednesday that one in five homeowners nationwide now owes more than his or her home is worth. To qualify under the refinance portion of the Obama plan, you can owe up to 5 percent more than your home is now worth. Thus, many homeowners in California, Florida, Arizona and Nevada, where home prices have plunged, won't qualify.
Homeowners in 250 high-cost U.S. counties can seek help under either track, however, provided that they qualify, even if the mortgage is worth up to $729,750. This could help high-income homeowners in Middle America and the Northeast, where home prices haven't fallen as much.
Q: What about those of us who are about to lose our homes?
A: A lot will depend on whether the mortgage bill collectors, the servicers, think that they have leeway from investors to modify the loans. They're being offered an upfront fee of $1,000 and will get "pay for success" fees for three years if a borrower's modified loan remains in good standing. They're being offered even more fees if they get homeowners into this program before they fall behind on payments.
Q: What happens if the servicer agrees to modify my mortgage?
A: First, the servicer has to get your monthly payment down to 38 percent of your monthly after-tax income. It can do this by taking a loss on the loan or stretching a 30-year loan into a 40-year, for example. It's allowed to reduce interest rates as low as 2 percent.
Once the 38 percent threshold is met, the government matches lenders dollar for dollar to get the payment even lower, to 31 percent of monthly after-tax income.
This percentage is calculated on the value of a first-lien mortgage. If a home carries a second lien - often called a second, or junior, lien - the servicer will get another $250 if it extinguishes the second mortgage.
Q: Is the modification a permanent fix?
A: The new interest rate would be valid for five years. Afterward, it can rise 1 percent a year until the lending rate hits the conforming loan survey rate at the time of the modification. Given that mortgage rates today are low by historical standards, the loan survey rate is likely to be well below the punishing adjustable rates that are at the heart of many distressed mortgages.
Q: Do lenders have to participate in Making Home Affordable?
A: If they're getting Wall Street bailout money and hope to get any more, then they have to play ball. Many mortgage servicers are outside this realm, however, and their trade group, the American Securitization Forum, gave only lukewarm, qualified support to the Obama administration's plan.
Q: Is there any way to force servicers to help homeowners?
A: The House of Representatives is expected to pass legislation this week that would allow bankruptcy judges to modify mortgages. This measure, which seems to have support in the Senate, too, would let judges shave off of mortgages the difference between what homeowners owe and what their homes are now worth. This would give homeowners some leverage in negotiations.
Q: But don't these homeowners deserve what they get for overextending themselves?
A: Some think so. There are two parties to a bad deal, however - people who bought too much home and lenders who let their underwriting standards fail in lending to them. Somebody has to lose. The Obama administration is betting that keeping owners in their homes helps set a floor under prices. Critics think that only the marketplace can find a floor for home prices.
ON THE WEB
-Mortgage modification guidelines: http://tinyurl.com/bhkwf3
-"Making Home Affordable" summary: http://tinyurl.com/cj7udh
-"Making Home Affordable" fact sheet: http://tinyurl.com/btgrkr
By KEVIN G. HALL
McClatchy Newspapers
Related:
http://tinyurl.com/cj7udh
http://tinyurl.com/btgrkr
http://tinyurl.com/bhkwf3
Obama's foreclosure relief plan
The Obama administration thinks that its Making Home Affordable plan will help 9 million homeowners refinance problem mortgages or modify them in order to avoid foreclosure. Who qualifies for help of what kind? Here are some answers.
Q: How do I know if I qualify?
A: Your mortgage must predate the start of 2009, you must live in the home and you'll have to provide proof of income. Then ask two questions. First, are you already behind on payments or even in the foreclosure process? If the answer is no, then ask yourself whether your current mortgage rate is high enough to make it worth your while to refinance to take advantage of today's low rates for 15-year and 30-year fixed-rate mortgages.
Q: That's it?
A: No. If you think it's advantageous to refinance, you must find out who owns your loan. Most mortgages are bundled together and sold into a secondary market, where investors technically own them. If Fannie Mae or Freddie Mac placed your loan into the secondary market, you can contact the company that sends your monthly mortgage statement to discuss the new program. If your mortgage is in the portion of the secondary market where the private sector issued the mortgage-backed securities, you don't qualify.
Q: How do I know who owns my loan?
A: You'll have to ask the company that sends your monthly statement. These companies are sure to be swamped with calls this week, so be patient. And be warned: Borrowers have found in the past that mortgage-bill collectors - called servicers - often are less than forthcoming with answers as to who owns the loans.
Q: What if my loan is owned by Fannie or Freddie but I have negative equity?
A: You're not alone. Researcher First American CoreLogic reported Wednesday that one in five homeowners nationwide now owes more than his or her home is worth. To qualify under the refinance portion of the Obama plan, you can owe up to 5 percent more than your home is now worth. Thus, many homeowners in California, Florida, Arizona and Nevada, where home prices have plunged, won't qualify.
Homeowners in 250 high-cost U.S. counties can seek help under either track, however, provided that they qualify, even if the mortgage is worth up to $729,750. This could help high-income homeowners in Middle America and the Northeast, where home prices haven't fallen as much.
Q: What about those of us who are about to lose our homes?
A: A lot will depend on whether the mortgage bill collectors, the servicers, think that they have leeway from investors to modify the loans. They're being offered an upfront fee of $1,000 and will get "pay for success" fees for three years if a borrower's modified loan remains in good standing. They're being offered even more fees if they get homeowners into this program before they fall behind on payments.
Q: What happens if the servicer agrees to modify my mortgage?
A: First, the servicer has to get your monthly payment down to 38 percent of your monthly after-tax income. It can do this by taking a loss on the loan or stretching a 30-year loan into a 40-year, for example. It's allowed to reduce interest rates as low as 2 percent.
Once the 38 percent threshold is met, the government matches lenders dollar for dollar to get the payment even lower, to 31 percent of monthly after-tax income.
This percentage is calculated on the value of a first-lien mortgage. If a home carries a second lien - often called a second, or junior, lien - the servicer will get another $250 if it extinguishes the second mortgage.
Q: Is the modification a permanent fix?
A: The new interest rate would be valid for five years. Afterward, it can rise 1 percent a year until the lending rate hits the conforming loan survey rate at the time of the modification. Given that mortgage rates today are low by historical standards, the loan survey rate is likely to be well below the punishing adjustable rates that are at the heart of many distressed mortgages.
Q: Do lenders have to participate in Making Home Affordable?
A: If they're getting Wall Street bailout money and hope to get any more, then they have to play ball. Many mortgage servicers are outside this realm, however, and their trade group, the American Securitization Forum, gave only lukewarm, qualified support to the Obama administration's plan.
Q: Is there any way to force servicers to help homeowners?
A: The House of Representatives is expected to pass legislation this week that would allow bankruptcy judges to modify mortgages. This measure, which seems to have support in the Senate, too, would let judges shave off of mortgages the difference between what homeowners owe and what their homes are now worth. This would give homeowners some leverage in negotiations.
Q: But don't these homeowners deserve what they get for overextending themselves?
A: Some think so. There are two parties to a bad deal, however - people who bought too much home and lenders who let their underwriting standards fail in lending to them. Somebody has to lose. The Obama administration is betting that keeping owners in their homes helps set a floor under prices. Critics think that only the marketplace can find a floor for home prices.
ON THE WEB
-Mortgage modification guidelines: http://tinyurl.com/bhkwf3
-"Making Home Affordable" summary: http://tinyurl.com/cj7udh
-"Making Home Affordable" fact sheet: http://tinyurl.com/btgrkr
By KEVIN G. HALL
McClatchy Newspapers
Related:
http://tinyurl.com/cj7udh
http://tinyurl.com/btgrkr
http://tinyurl.com/bhkwf3
Wednesday, March 4, 2009
Need a Loan Modification?
There's currently a ton of confusion about the mortgage industry and the concept of "loan modification". If you are late on your mortgage, if you know you will become late on your mortgage, or if you are struggling to pay your mortgage every month this blog is the resource to be on.
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