Archive for the ‘loan modification’ Category

Top 5 Answers for Homeowners about Strategic Mortgage Default

walk away, strategic mortgage default

1. Should I intentionally default on my home mortgage?

Today, many people are ‘intentionally’ or ‘strategically’ defaulting because cash is more valuable than credit. Because many of the banks were unethical, some borrowers don’t feel the ‘moral obligation’ to pay, especially when the banks are being less than cooperative as buyers try to work things out. Rather than defaulting, the best thing to do is use the Section 702 program of the Obama act, which allows a qualified third-party buyer to take possession and make a ‘bona fide’ offer to the bank. This helps show the debt ‘settled’ on your credit and can eliminate the second mortgages completely. Walking away and allowing the bank to foreclose still allows the second lender to render a judgment—and possibly garnish your wages. You may also have to file for bankruptcy to recover from the credit nightmare.

In addition, it is always best to gain the most knowledge to make the best decision for yourself and your family.  There are great workshops and seminars that reveal the different programs the are available to homeowners and discuss the pitfalls people may encounter.  For specialized assistance in saving your home, consult a specialist and discover real options that fit your scenario.

2. As a borrower, what are some ways I can gain leverage with my mortgage holder?

One way to gain leverage with a lender is to establish a ‘substitute mortgage’—a security pledge that is offered to the seller’s lender, with a third party (lawyer or Escrow company) for a lesser amount of the current payment. Over time, this will result in a significant amount of collected funds that can be used as negotiating leverage to release the borrower from the debt, or dictate terms for a loan modification in the borrower’s advantage.

3. Why have loan modifications and foreclosures become the predominant answer for so many in distressed property situations, and why can this be problematic?

The reason why loan modifications and foreclosures have become the answer for so many is because many real estate professionals erroneously consider the short sale process to be too complex. Not knowing how to orchestrate the transaction and not having the correct forms and contact information with all the different parties is overwhelming for many Realtors, so they forego an option that would otherwise be in the owner’s best interest. The result is unnecessary spending of tax payer’s funds that are being used for the alternative solutions, when capital contributions from the ‘street level’ can be used to offset the losses and payoff the delinquencies without requiring such taxpayer contribution.

For specialized assistance in the short sale process, consider discussing your options and the entire process with a specialized short sale consultant.

4. Why is a short sale strategy more advantageous than a loan modification or foreclosure approach?

The reduced payoff in a short sale can release you from the debt obligation. This allows you to re-establish your credit faster and re-enter the market much wiser. A loan modification actually builds a debt trap around the borrower who is emotionally attached to a property, milking the borrower for every last nickel. A foreclosure ruins a homeowner’s credit and takes a much longer time period to recover from.

If you find out you need more work to fix your credit, consult with a credit repair specialist to discuss your options and find out what is right for you.

5. I’ve heard borrowers in default need a ‘General Public Disclosure?’ Why

Many people are not aware of the ‘alternatives’ when facing foreclosure. The state and the federal agencies do not provide any literature to default borrowers as a ‘preventative’ measure. Knowing your options, as detailed on a General Public Disclosure document, can make all the difference in establishing a deal that’s in the homeowners’ best interest.

Source:   Marian Anthony (RISMedia): Real estate finance expert, author and speaker, Marian Anthony is the President of Anthony Realty Group (ARG)–a San Diego-based consumer advocacy agency that helps educate real estate professionals throughout Southern California to better assist home buyers and investors. Anthony is also founder of the California Default Mortgage Hotline—a non-profit public interest group availing financially-stressed homeowners in mortgage default with validated information and industry resources.

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Bank of America to Cut Mortgage Debt for Homeowners

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The plan is one of the boldest moves yet to address the plight of millions of U.S. homeowners who are “under water,” owing more on their homes than they’re worth.

Bank of America Corp. said it would reduce mortgage-loan balances as much as 30% for thousands of troubled borrowers, in what could presage a wider government effort to encourage banks to offer debt reduction to ease the mortgage crisis.

So far, most modifications, including those under the government-subsidized Home Affordable Modification Program, involve reducing interest rates. Some also extend terms to 40 years, to shrink monthly payments.  But banks are finding that some borrowers aren’t willing to keep making even reduced payments, believing they have little hope of ever having equity in their homes and might be better off renting, and perhaps buying a less-expensive home later.

“Severely under-water homeowners are reluctant to accept a solution that does not offer some reduction in principal,” said Barbara Desoer, president of Bank of America Home Loans. “The whole purpose of the program is to get more customers to return phone calls” and make payments for trial modifications so workouts can be made permanent, she added.

The action by Bank of America is notable because it is the largest mortgage servicer, collecting loan payments on one of every five home loans in the U.S.  At the end of last year, 14.76% of them were at least 30 days past due or in foreclosure, versus an industry average of 12.31%, according to Inside Mortgage Finance.

The bank’s program is limited to Countrywide borrowers whose loan balance is at least 120% of the estimated home value, who are at least 60 days overdue, and who can show that financial hardship makes them unable to meet current payments. The bank estimated that 45,000 customers will qualify for principal reductions averaging more than $60,000.

Source:  JAMES R. HAGERTY And NICK TIMIRAOS (The Wall Street Journal)

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Wells Fargo Will Join in Modifying Second Mortgages

wells fargo home mortgage modify second mortgages

Wells Fargo & Co. has joined Bank of America Corp. as the first two banks to sign onto the federal government’s program to modify second mortgages.

Under the government’s plan, borrowers who have been extended loan modifications on first mortgages can now apply to reduce their second mortgages.

Analysts say banks have been reluctant to adopt this part of the government’s loan modification program because they continue to hold most second mortgages and forgiving them will be costly.

The program is part of the Obama administration’s mortgage modification program that is aimed at reducing monthly payments to help customers stay in their homes.

The modification program offers lenders who made “piggyback” loans – second mortgages that allowed consumers to make a small or no down payment during the housing boom – incentives to lower payments or eliminate the loans entirely. During the market’s peak, even customers with spotty credit history were extended second mortgages.

By signing up for the program, all customers of Wells Fargo or Wachovia who have already modified their first mortgage through the modification program, known as the Home Affordable Modification Program or HAMP, can also modify their second mortgage.

Source: Associated Press and

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Bank of America is 1st to service 2nd Lien Modifications

bank of america

Bank of America announced Tuesday (01/26) that it is the first mortgage servicer to sign an agreement formally committing to participate in the second-lien component of the Home Affordable Modification Program (HAMP).

The news follows a “verbal commitment” to the program made by CEO, Brian Moynihan made during a meeting with Treasury Secretary, Timothy F. Geithner earlier this month, the company said in a statement.

The Charlotte, North Carolina-based bank says it has systems in place to begin implementing the administration’s Second Lien Modification Program as soon as the Treasury releases final program policies and guidelines. Federal officials first introduced 2MP last April, but since then most market observers have labeled the program as “on hold.”

The Treasury has estimated that up to 50 percent of at-risk mortgages have second liens. The 2MP piece of the administration’s multi-pronged mortgage relief program will require modifications that reduce the monthly payments on qualifying home equity loans and lines of credit when a HAMP modification on the first mortgage is carried out.

The federal government is encouraging lenders and servicers to sign up for the second-lien program, William Apgar, HUD’s senior adviser for mortgage finance, said Tuesday at a housing conference in Washington, according to Bloomberg News. Second liens are “not an easy problem to solve,” Apgar said.

“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Barbara Desoer, president of Bank of America Home Loans.

Desoer said inking the contract before the final program guidelines are released demonstrates “Bank of America’s strong overall commitment to homeownership retention and to the Making Home Affordable program.”

Bank of America is the nation’s largest mortgage servicer, with a servicing portfolio of nearly 11 million first mortgages and 3 million second liens. Through its participation in 2MP, BofA says it will modify eligible second liens regardless of whether the first lien is serviced by Bank of America or another participating servicer.

“2MP will become a valuable addition to Bank of America’s broad toolkit of potential solutions for customers facing financial difficulty and will increase our ability to help even more homeowners,” Desoer said.

Using non-government programs, Bank of America says it modified more than 57,000 second liens to assist financially strapped homeowners over the last two years.

Source:  Carrie Bay (

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Loan Modification – A Summary Tidbit (Video)

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What is a Loan Modification?

Will it destroy my credit?

How will it affect my credit?

For more Videos, subscribe to the Backyard Wealth channel on YouTube.

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Loan Modifications Decrease Payments over 20 Percent

loan modification saves couple

In its third quarter, Fannie Mae and Freddie Mac implemented 405,700 trial and permanent loan modifications under the administration’s Home Affordable Modification Program (HAMP) and refinanced 4 million loans, according to Foreclosure Prevention & Refinance Report, the Federal Housing Finance Agency (FHFA).

Nearly half of the modifications resulted in borrowers’ payment decreasing by over 20 percent. In addition, loans modified in recent quarters performed slightly better six months after modification than did earlier modification. Short sales and deeds in lieu increased by 39 percent to 17,400.

In addition to refinancing 4 million loans, Fannie Mae and Freddie Mac refinanced more than 155,700 loans through the Home Affordable Refinance Program (HARP), from January through November 2009. HARP grew to 9 percent of total refinancing volume in August and September, and in November it increased to 9.8 percent.

Volumes of all categories of foreclosure prevention actions increased during the third quarter. According to the report, approximately 105,500 foreclosure prevention actions were completed in the third quarter (up 22% from the second quarter).

Source: Brittany Dunn (

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A Nationwide Campaign Kick-Off starts today to help more struggling homeowners


The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications.

The modification program, which has helped over 650,000 borrowers, is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward.

Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year. Through the efforts being announced today, Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones.

“We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowners,” said the new Chief of Treasury’s Homeownership Preservation Office (HPO), Phyllis Caldwell. “We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones.”

In her new role, Caldwell will lead HPO’s conversion drive efforts. “Encouraging borrowers to move through the process of converting trial modifications to permanent modifications remains a top priority for HUD,” said HUD Assistant Secretary for Housing and FHA Commissioner David Stevens. “As a part of our continuing efforts to improve the execution of the HAMP program, HUD is committed to working with servicers, borrowers, housing counselors and others dedicated to homeownership preservation to improve the transition of distressed homeowners into affordable and sustainable mortgages.”

With tens of thousands of trial modifications being made each week, the Administration is now working to ensure that eligible borrowers have the information and the assistance needed to move from the trial to the permanent modification phase. (All mortgage modifications begin with a trial phase to allow borrowers to submit the necessary documentation and determine whether the modified monthly payment is sustainable for them.)

As the first round of modifications convert from the trial to permanent phase, the Administration has identified several strategies for addressing the challenges that borrowers confront in receiving permanent modifications.

In addition to the conversion drive that kicks off today, the Obama Administration has already taken several steps to make the transition from trial to permanent modification easier and more transparent by:

* Extending the period for trial modifications started on or before September 1st to give homeowners more time to submit required information;

*Streamlining the application process to minimize paperwork and simplify the submission process; meeting regularly with servicers to identify necessary improvement to borrower outreach and responsiveness;

* Developing operational metrics to hold servicers accountable for their performance, which will soon be reported publicly;

* Enhancing borrower resources on the website and the Homeowner’s HOPE Hotline (888-995-HOPE) to provide direct access to tools and housing counselors.

Find out more about The Mortgage Modification Conversion Drive.


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