A Short Sale May Not Mean You’re Home Free
Financially troubled borrowers may think that foreclosure or a short sale of their home means their mortgage woes are over.
Not necessarily.
Some homeowners are finding that when they sell their homes for less than the outstanding mortgages — a so-called short sale — their mortgage companies are going after them for some or all of the difference. Mortgage companies are also sometimes taking legal action to recover unpaid amounts after a foreclosure is completed. Read more
Bankruptcy Judge Loan Modification Plan Hits Wall in Senate
The bankruptcy bill, sponsored by Sen. Richard Durbin (D-Ill.), permits bankruptcy judges to reduce, or “cramdown,” homeowners’ mortgage payments to help borrowers stay in their homes — an option currently available to save vacation homes, yachts and almost any other valuable asset, but not primary homes. The House passed a similar bill in March, but it’s been stalled in the upper chamber while Durbin and other Senate leaders tried for weeks to negotiate the support of the giants of the finance industry, including Bank of America, Wells Fargo, JP Morgan Chase and the Credit Union National Association.
A central element of the Democrats’ strategy to stabilize the economy — empowering homeowners to prevent foreclosures through bankruptcy — has hit a wall in the Senate, where fierce opposition from the finance industry is threatening to kill the proposal this week. Read more
Mortgage Cram-Downs Stripped Out of Rescue Bill
Cram-downs are kaput in Congress.
Legislation to give bankruptcy judges the power to reduce home mortgage debt–by “cramming down” the principal–doesn’t appear to have enough votes and will be stripped out of a broader housing bill in the Senate.
The cram-down effort is a major plank of President Barack Obama’s housing rescue, which also offers financial incentives to mortgage servicers to modify loans and allows some homeowners with little to no equity to refinance.
The cram-down measure already passed the House of Representatives as part of the housing rescue. But it faced heavy opposition from the banking industry, and there were signals last week that Senate leaders might discard the measure from the housing bill.
2nd loan modifications and the OBAMA PLAN
Well today the news broke about President Obama ‘s new new stimulus plan, or as they put it his “expansion” to the foreclosure prevention program. Previously the President and all the supporting cast lined up to explain how with $75 billion, the housing crisis could be solved. Lenders would modify loans in mass and borrowers would finally get the relief they need. Fast-forward a couple months and now we are seeing lenders continuing their reluctance with a few bright spot exceptions.
The “expansion” deals with second mortgages. The lenders prompted by the first go round had a valid point. “Why should we modify our loan, when the 2nd gets to sit back and collect their full payment, often at a higher interest rate.” This argument won favor with Washington, and now the President is doing the following: Read more
Bill to Protect Homeowners Against Loan Modification Scams Clears Committee
SACRAMENTO – The Senate Judiciary Committee today passed a measure by Sen. Ron Calderon (D-Montebello) that will protect California borrowers who are struggling in today´s troubled housing market.
The bill, SB 94, authored by Sen. Calderon, will prevent a person or a business from charging an upfront fee to a borrower for helping negotiate a loan modification on that borrower´s behalf. Such services are free of charge from non-profit housing counselors. Read more
Banking Department Takes Action Against Mortgage Modification Companies
Companies ordered to stop unlicensed activity in Pennsylvania
HARRISBURG, Pa., April 22 /PRNewswire-USNewswire/ — The Department of Banking recently ordered four out-of-state mortgage modification companies to stop engaging in unlicensed activity in Pennsylvania.
The department issued cease and desist orders against Consumer Loan Modification of Arizona and U.S. Settlement Services of Florida on April 10 and Federal Loan Modification Law Center LLC of California on April 14. All three companies advertise on their Web sites to refinance mortgage loans in Pennsylvania when they are not licensed to do so. The companies must comply with the orders or file appeals by the end of April. Read more
Ocwen Financial exec on loan modifications
Ocwen Financial, one of the country’s largest subprime loan servicers, has taken a beating in recent years from homeowners and community groups for alleged predatory lending and aggressive foreclosing on borrowers who have fallen behind.
The Association of Community Organizations for Reform Now, or ACORN, continues to stage protest rallies in front of the company’s West Palm Beach headquarters, demanding foreclosure freezes and a hold on evictions while more liberal loan modification are worked out.
But Ocwen claims it runs one of the most efficient and innovative loan servicing companies in the country and got in on the front end of the foreclosure problem before it ballooned into a crisis that tipped the economy into recession.
So far, Ocwen claims to have saved some 90,000 homes from foreclosure and boasts one of the lowest redefault rates of any servicer in the country, meaning that after a modification, more of the loans it manages stay current. It also claims to be able to finish the loan modification process in about 21 days.
Read more from the Miami Herald
Ocwen begins loan modifications under Treasury plan
Ocwen Financial Corp., a servicer of subprime mortgages, is among the first mortgage servicers to begin modifying loans under the U.S. Department of the Treasury’s Home Affordable Modification Program.
The program, unveiled last month, allows at-risk borrowers to reduce their monthly mortgage payments in an effort to keep them from losing their homes. It creates a $75 billion loan modification program that would allow “responsible homeowners” to refinance to interest rates as low as 2 percent. Read more
Modifying loans may not stem foreclosures: Boston Fed
NEW YORK (Reuters) – Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Barack Obama’s plan to stem foreclosures by modifying loans.
Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.
Loan modifications are not necessarily a better deal for investors either, wrote Boston Fed economists Christopher Read more
JPMorgan Uses Unique Strategy To Reach Troubled Borrowers
JPMorgan Chase & Co. (JPM), trying to show its gentle side to troubled homeowners, is offering them rare face-to-face counseling from trained advisors in 24 “homeownership” centers around the country.
The initiative is partly to counter the allegation that lenders give short shrift to such borrowers. At a recent congressional hearing, banks were criticized for funneling struggling homeowners to call centers, where service was poor and waits were long.
JPMorgan also hopes the strategy will help get around one of the biggest obstacles to loan modifications: distressed borrowers’ reluctance to contact their lender in the first place.
“It’s a visible and understandable sign to consumers that we want to talk to you about your mortgage if you are struggling,” Thomas Kelly, a JPMorgan spokesman, said.
JPMorgan is alone among major mortgage servicers to open such walk-in centers, though many have boosted staff to assist borrowers over the phone. Its 24 centers have been opened in areas hard-hit by the housing bust, including nine in California and five in Florida. Others are in the New York City area as well as Phoenix, Denver, Atlanta, Chicago, Detroit Las Vegas, Philadelphia and Washington, D.C.
