Housing Wire – The Making Home Affordable Modification Program (HAMP) adds another layer of uncertainty for private label securitization investors, making it more difficult to predict cash flows, according to a report by analysts at Amherst Securities Group, who added they expect relatively few HAMP workouts to be successful.

Additionally, it’s taking longer for bad mortgages to move from last payment to liquidation, and the pace varies by servicer: “The trial modification period essentially holds the loan in a suspended state for 90 days, making it difficult to assess what is happening with modifications,” the report said, resulting in relatively little cash reaching investors.

Contributing to the delay in liquidation is the growth of re-performing loans — those that were 60 or more days delinquent that now aren’t because the borrower receives a modification or other loss mitigation action is taken — in mortgage backed securitization (MBS) pools.

Of the $1,583bn in private label securitizations, $991bn are always performing, $474.8bn are non-performing (60+ days delinquent), and $117.5bn are re-performing. While the re-performing bucket is growing, it is also unstable, Amherst said. In September, $13.6bn (11.3%) of the re-performing loans transitioned to non-performing, and a roughly equal amount of the non-performers $11.5bn (2.5%) became re-performers.

The cycle between the non-performing and re-performing loans includes both subprime and prime loans, Amherst said. “The behavior of re-performers is weak, no matter from which bucket they are taken.”

In addition the overall size of the re-performing bucket may be understated because it does not include loans in modification limbo during the HAMP-mandated three-month trial period. The research warns the pool of modified loans is also expected to increase, as recent and proposed changes to HAMP regulations are making the program more widespread to include ever growing numbers of distressed borrowers.

One such change is the proposed Senate Bill 1731, the Foreclosure Prevention and Assistance Act of 2009, which would require loan servicers to determine if a distressed borrower is eligible for a modification before beginning the foreclosure process.

But in order for the servicer to make that determination, the servicer must make contact with the borrower to verify employment and income information. If the servicer can’t contact the borrower, the foreclosure can’t proceed. This differs from HAMP, a voluntary program that lets a servicer continue the foreclosure process if contact can’t be met.

“At the minimum, the consequence of S. 1731 is that there will be a longer time between last payment and foreclosure. At worst, S. 1731 may suspend the foreclosure process indefinitely for many borrowers,” the report said.

While HAMP workouts are keeping the pools of real estate owned (REO) property relatively small, Amherst predicts a low percentage of eventual success of HAMP modifications is inevitable.

“When HAMP is less successful than hoped, and the reality of the housing overhand hit the market – we would expect to see further governmental action,” the report said, noting the most likely course of action is a plan that contains principal forgiveness.

Denver Business Journal – Last week, Treasury Secretary Timothy Geithner announced that about 500,000 American families were participating in the home loan modification program initiated by the Obama administration. But the complexity of the paperwork required to modify a loan, coupled with rising unemployment and depressed home prices, may conspire to find many more losing their homes in the months to come, the head of the Mortgage Bankers Association said Tuesday.

“You can’t modify someone if they don’t have income or a job,” said John Courson, president and CEO of the MBA, during a news conference. “We have to be realistic going forward. If we are going to play a numbers game, we are going to see a smaller percentage of borrowers in default able to be modified. It’s an unfortunate and difficult fact we are going to have to face.”

The MBA, which is holding its annual convention this week in San Diego, is looking to create a think tank of people whose mission will be to find new and creative ways to overcome the challenges that the next wave of foreclosures will present.

One of the biggest challenges faced by those attempting to modify loans is the massive amount of paperwork borrowers must complete. In about 99 percent of the cases, the packages come back missing documentation or with some kind of error, noted Michael Berman, vice chairman of the board of MBA and president and CEO of CW Capital, a real estate finance and investment management company.

He said servicers are learning that they have to spend more time upfront with borrowers and lenders.

“When a loan is originally obtained, in most instances, there was a loan officer,” Berman said. “The one thing we are coming to a conclusion about is to build that into the process in order to successfully modify the loan.”

Even more disturbing, Courson noted, is that nearly 50 percent of borrowers facing foreclosure have not had contact with or talked to their loan servicer.

“Some because of abandoned properties, others because borrowers are shamed and embarrassed,” he said.

And, the problem is expected to get worse before it gets better. The MBA expects unemployment to keep going up until the middle of next summer, with delinquencies to follow and foreclosures going up through the latter part of the year.

Hi Paul. 

My ex-husband and I purchased a 2 acre lot and and new manufactured house about 6 years ago.  We are both on the mortgage.  We filed bankruptcy and got divorced a couple years ago. 

When we got divorced, he stayed in the home.  the mortgage was not reaffirmed in the bankruptcy.  Since then, I have gotten remarried. 

My ex is now 3 months behind on the mortgage and is in the process of moving out.  Since i am on the loan, wells-fargo is working with me and has offered a loan modification. 

My ex has decided that he doesnt want us to move in to the house and I suspect he is going to try to short sale it behind my back.  The property is in a very distressed condition (his doing) and now is worth way less than the loan amount.  Can he do that if I dont agree to it? 

If I am willing and able to make the payments (which I am), can he prevent me from doing so?  I really dont want to lose the house and we are willing to rehab the property.  We would like to live there long term. 

Any advice would be a blessing.  Thanks!!!

Patti (more…)

Journal Star – Denise and Kevin Barret thought they had found a solution earlier this year after they fell behind on their mortgage.

One night in February, they saw a television ad for the Federal Loan Modification Law Center, a very official-sounding entity that promised it could reduce homeowners’ payments while saving their homes from foreclosure.

So the Barrets called the number and were told that for an initial payment of $995 the company could renegotiate the couple’s delinquent mortgage and get them a better interest rate and more affordable payments.

It sounded like a good deal, and the company at the time had a reasonable rating with the Better Business Bureau, Denise Barret said.

So the Barrets signed up.

Denise said she was in contact with the company weekly as representatives told her they were negotiating with Liberty First Credit Union, the Barrets’ lender.

Every time the Barrets got a letter or phone call from Liberty First, Federal Loan Modification Law Center representatives told them to ignore it, saying it was just a scare tactic, Denise said.

“They kept telling us, ‘Don’t call the bank, it will just slow down the process. Don’t offer them any money,’” said Kevin Barret.

That’s exactly the opposite of what credible experts advise for homeowners who fall behind on their mortgages.

The result: Around the first of May, the Barrets received a letter from Liberty First, informing them their home was scheduled to be sold at auction.

Frantic, Denise said she called the credit union.

“Liberty First said they had never heard from them,” she said.

The Barrets bought a century-old house near 120th and Nebraska 2 in 2004. They paid $165,000.

The couple had moved back to Nebraska in 1999 after Kevin served in the Marine Corps. They initially settled in Eagle.

Denise said they fell in love with the converted bunkhouse on seven acres, which is not far from Otoe County, where the Barrets both grew up – she in Nebraska City, he in Syracuse.

At first they had a rent-to-own arrangement with the previous homeowners, and things went pretty well for a couple of years.

But then came 2006.

In February of that year, Kevin, who was 46 at the time, had a heart attack. He underwent quadruple bypass surgery the next month.

He had barely recovered when Denise was struck by a brain aneurysm in August of that year.

To help pay for their medical bills, the couple refinanced their mortgage and cashed out some of the equity in their home, which Kevin said at one time was as much as $60,000.

Things seemed as though they couldn’t get any worse for the couple, but then Kevin lost his job right before Thanksgiving.

The bad news continued just a few months later, when Denise, too, lost her job.

The Barrets again refinanced their mortgage in November 2007, increasing the mortgage debt from $148,000 to nearly $178,000 between a first and second mortgage, according to county real estate records.

Denise said their mortgage payment jumped from around $1,300 a month to more than $1,800.

In August 2008, the couple filed bankruptcy, just after they started falling behind on their mortgage payments.

County real estate records show Liberty First issued a default notice at the end of June 2008.

Kevin said they’d fall behind on payments, catch up, only to fall behind again.

While purporting to be helping the Barrets, the Federal Loan Modification Law Center was racking up complaints all over the country.

In April, the Federal Trade Commission filed a federal lawsuit against the company, alleging it misrepresented that it could obtain a loan modification or stop foreclosure in all cases.

The complaint also alleged that the company falsely claimed in radio and TV ads to be affiliated with the federal government.

Nabile “Bill” Anz, managing attorney for Federal Loan Modification and one of the people named in the FTC’s complaint, told the Orange County Register in April that the company may have been aggressive, but it had obeyed the law.

Since then, Anz seems to have changed his tune. On Aug. 4 he voluntarily resigned from the California State Bar Association, with charges pending against him.

According to a news release, the bar filed an application in July to have Anz declared “involuntarily inactive,” alleging he failed to perform for clients of the Federal Loan Modification Law Center and failed to refund fees to clients of the business.

The news release said Anz admitted the misconduct that was alleged in the application.

Some states have also taken action against Anz and his company.

In July, Wisconsin regulators banned the company from doing business there and ordered it to provide refunds to all its customers in the state.

That action likely is a moot point, as it appears the company is no longer doing business. Its Web site is no longer operational and its phone has been disconnected.

Mike Cameron, an attorney with the Nebraska Department of Banking and Finance, said the department has fielded a couple of complaints about the Federal Loan Modification Law Center.

“I’m thinking two or three at most,” he said.

Cameron said that because the company is already the subject of an FTC investigation, he refers complaints to the federal government.

Michael Snodgrass, executive director of NeighborWorks Lincoln, said two red flags with any foreclosure rescue offer are the requirement that you pay for it and a promise of a renegotiated interest rate or lower payments.

“If you have to pay something to save your house,” there is something wrong,” Snodgrass said.

He said NeighborWorks, which offers free foreclosure counseling among its many housing education services, never promises results.

Snodgrass said he has seen clients at NeighborWorks who have used or considered using foreclosure rescue companies.

“If you’re losing your home, you’re grasping at straws,” he said. “If you see an ad from a company, it’s awful tempting to look at.”

Denise and Kevin Barret will lose their home – there is no doubt about that now.

Earlier this month, they stood in a Lancaster County courtroom and agreed to be out of their house by the end of the month, which is Monday.

As they talked with a reporter Friday, a steady stream of people drove up their driveway and into their front yard to take advantage of their need to sell off possessions that won’t fit in their new home, a rented townhome near 61st and Vine streets.

In a way, their lives are coming full circle – the town home is in the same development they lived in shortly after they got married, Denise said.

She alternates between tears and anger.

She cries when she thinks about losing her home, the place she and her husband fought so hard to keep.

The tears turn to anger, though, when she thinks about all the help the government is handing out to banks and to people to buy houses and new cars.

“They’re giving these brand-new homeowners $8,000 bonuses,” she said. “Why aren’t they helping the people who are losing their homes?”

There are programs to help people facing foreclosure, but the Barrets say they found out about them too late.

Kevin says he’s talked to the Veterans Administration and a lawyer, but the response has been, “You should have brought this to us earlier.”

“If I had a nickel for every time I heard that, I’d be able to pay off our house,” he said.

Denise said she and her husband aren’t telling their story to get pity.

“We’re not doing it to make people feel sorry for us,” she said. “We just don’t want it to happen to them.”

va loan on a disabled veteran handicap constructed home! I applied thru chase for a modification since refi is a no with the home value gone down in michigan! I’ve waited since april till tomorrow> sept 1 to find out I have a ginnie mae and they work not with the obama modifcation government plan.SOOO turned down ! Recent kidney war related transplant has lowered income with added expenses along with wife becoming disabled which when working was part of the loan finacials soo with her change in income also I could benefit greatly with a moification! WHATS UP with the ginnie mae not being on board?? Dave (more…)

I currently have two loans with National City (now PNC) my 1st mortgage is $600k and the 2nd is $150k. 

I am technically in foreclosure with the first but working with the loan modification department on a workout package. 

My 2nd is due to charge off at the end of the month.  I have asked them repeatedly to work with me on a modification but they have only come back with a reduced payment for two years. 

I would like to stay in my home but given that I am down $300k don’t feel the 2nd is reasonable and am waiting on the first to determine what I should do next. 

Should I let them charge off the 2nd mortgage? 

Please advise?

Dewey (more…)

I am doing a loan modification. Customer lives in Seattle and has 2nd property , single famioly house in Delray beach fl.  Lender is Suntrust. Has not made a payment since Dec 2008.  Her finacials appear to qualify for a modification.

She just got the property leased for a year with a 2nd year optiop. She can prove the lease and the fact that she has recieved 1st last and security.

Can I expect the mod to go through if everything is up to par or will the fact that it is a 2nd home make it impossible even if she has it rented?

Thank You,

Roben (more…)

Los Angeles – Threatening possible criminal and civil prosecution, Attorney General Edmund G. Brown Jr. today ordered 386 mortgage foreclosure consultants to post $100,000 bonds and register with his office.

He also ordered more than two dozen companies to justify suspicious loan modification claims made in “slick advertising,” online and through the mail.

“Hoping to lower their mortgage payments, thousands of homeowners were instead duped by slick advertising and money-back guarantees,” Brown said. “The time for accountability is at hand, and this rogue industry must clean itself up or face legal action,” Brown added.

Brown also unveiled a new website (ag.ca.gov/loanmod) that provides homeowners tips to avoid loan modification fraud, allows them to determine if a company is registered with his office and makes it easier to file complaints.

Brown today joined with the California Department of Real Estate and the State Bar of California in a new partnership to combat loan modification and foreclosure fraud.

Brown has sent letters directing 386 mortgage foreclosure consultants to register with his office within 10 days and post $100,000 bond, or demonstrate why they are not required to. If the consultants are required to register and have failed to do so, they are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation. Eighty-five of these consultants are based in Los Angeles County, 133 in Orange County, 47 in the Inland Empire, 68 in San Diego County and seven in the Bay Area.

Additionally, Brown sent letters today demanding that 27 loan consultants substantiate suspect claims made on the internet and in direct mail advertising. For instance:

* Brown directed Irsfeld, Irsfeld & Younger, LLP as corporate counsel for JL Richman, doing business as Home Retention Programs of Glendale, Calif. to substantiate its claims including: “Our team has 10 years of success in negotiating 90% of all mortgage loan modification requests to a successful outcome….For the modification requests we accept, our modification failure rate is less than 1%.”

* Brown directed 21st Century Real Estate Investment Corporation of Rancho Cucamonga to substantiate its written solicitations including: “[y]our proposed loan modification is a 30 year fixed/3.5% interest rate with a monthly payment of $495. Your monthly savings is $705. Total savings over a 30-year period is $253,800. . . . Your first payment will be negotiated to begin March 2009 – payable to your current lender for $495.”

* Brown directed Mortgage Modification Solutions of Irvine to substantiate its claims including: “Our services are due to the FEDERAL MANDATE which makes it mandatory for mortgagees, upon the default of a single family mortgage, to engage in loss mitigation actions” and “Why $3995.00 is nothing compared to what you can accomplish in return? #1- It’s 10 times more expensive to hire a CPA or a Financial Advisor to exclusively analyze & Research your financial affairs to create a plan acceptable to the Banking standards.”

* Brown directed Alliance Law Center of San Diego to substantiate its letters to consumers stating: “Final Notice: 3/11/09, our review of certain information indicates you may be a victim of federal disclosure violations and/or predatory lending violations, therefore your loan may be invalid, and you may qualify for a loan modification saving you thousands of dollars.”

The State Bar of California today announced that it has obtained resignations from two lawyers and filed charges against a third for their loan modification activities. The State Bar’s special team on loan modification complaints continues to investigate more than four hundred active complaints from consumers about lawyers’ roles in loan modification scams.

Brown has made it a top priority to combat loan modification fraud. As part of a nationwide sweep last month, Brown filed suits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down 32 companies and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

The Department was recently approached by the mortgage industry and bankruptcy experts regarding the Department’s current guidance on mortgagors in bankruptcy.  As a result of these discussions, the Department understands that contact with debtor’s counsel or a bankruptcy trustee does not constitute a violation of the automatic stay and that waiting until a bankruptcy is discharged or dismissed before offering loss mitigation may be injurious to the interests of the borrower, the mortgagee and the FHA insurance funds. 

Effective immediately, mortgagees must, upon receipt of notice of a bankruptcy filing, send information to debtor’s counsel indicating that loss mitigation may be available, and provide instruction sufficient to facilitate workout discussions including documentation requirements, timeframes and servicer contact information.  Working through debtor’s counsel, mortgagees may offer appropriate loss mitigation options prior to discharge or dismissal, without requiring relief from the automatic stay and in the case of a Chapter 7 bankruptcy, without requiring re-affirmation of the debt.  It is strongly recommended that the bankruptcy trustee be copied on all such communications.  All loss mitigation actions must be approved by the Bankruptcy Court prior to final execution. 

Nothing in this mortgagee letter requires that mortgagees make direct contact with any borrower under bankruptcy protection.  However, the information required to file a bankruptcy petition (now a matter of public record) will often include sufficient financial information for the mortgagee to properly evaluate the borrower’s eligibility for loss mitigation.  Using this financial information, many mortgagees have been able to complete the loss mitigation evaluation before the bankruptcy plan is confirmed and have offered a pre-approved loan modification agreement.  For those mortgagors that sought bankruptcy protection solely to avoid foreclosure of their homes, this solution allowed the mortgagor to have the bankruptcy dismissed and begin fresh with a mortgage obligation that is both current and with payments that the mortgagor can afford.  For those mortgagors with other financial problems, the resolution of the mortgage problem will put them in a better position to resolve the remaining financial issues.

Where the mortgagor filed the bankruptcy Pro Se, (without an attorney), the Department recommends that information relating to the availability of loss mitigation be provided to the mortgagor with a copy to the bankruptcy trustee.  This communication must not infer that it is in any way an attempt to collect a debt.  Mortgagees must consult their legal counsel for appropriate language. 

Mortgagee Letter 2008-32

Colorado Independent – A top Democrat on Monday warned the nation’s banks that, unless they get more aggressive in modifying mortgages to prevent foreclosure, Congress will renew previous efforts to empower families to keep their homes through bankruptcy. But Sen. Richard Durbin (Ill.), the upper-chamber’s second ranking Democrat, also gave the banks three months to comply with his ultimatum — a span over which roughly 1 million new homeowners are projected to enter foreclosure.

Congress and White House officials have created a series of programs designed to entice mortgage lenders and servicers to modify troubled loans voluntarily, but those efforts haven’t kept pace with an ever-rising number of foreclosures, which have already topped 1.5 million since January. The issue has plagued lawmakers, who have spent hundreds of billions of dollars propping up the nation’s banks, but have provided little in direct help for families caught in the swirl of the housing crisis, which was at the root of the current recession.

Durbin is the sponsor of legislation to alter the bankruptcy code to allow judges to trim, or “cramdown,” the terms of primary mortgages to keep people in their homes — an option current law doesn’t permit. The Senate killed the proposal earlier in the year, but it could resurface if foreclosures continue to rise and the banks continue their reluctance to cut mortgage rates on their own. Durbin, for his part, thinks the bankruptcy change can’t come soon enough.

“The voluntary efforts by some banks to slow the foreclosure crisis and stabilize America’s housing market have not worked,” Durbin said during a housing forum at the Center for American Progress Action Fund. “Whether the bankers and mortgage servicers are failing because of intransigence or incompetence doesn’t matter … They have to do much better.”