Mortgage Settlement:Sky Clearing or Storm Coming?

Whether CA and NY join is anticlimactic. The quibbling over the amount of the settlement was foolish. $17B or $25B has never been the issue. Of bigger concern is the ultimate trickle-down (how Reaganesque) to the affected homeowners.

The Banks have wanted a "free" pass as to future suits and an indemnification from suits by borrowers who are now out of house and home. I know that there will be the hue and cry of "they only got what they deserved; after all they didn't make their payments - so the paperwork was faulty - they didn't pay!" (I worked at a bank where a fellow SVP called it the "Human Cry" - never knew if it was a clever pun or...). Here, there is a human cry and it's from the families who fell behind for legitimate reasons (loss of job due to federal program cutbacks), tried to get a modification but before they could react their house was gone.

I have worked with nearly 100 variations of that scenario in the past 3 years! And I have handled 50+/- of the situation where the house got to be too expensive and the homeowner stopped paying because the mtge co refused payments after 90 or 120 days delinquent.

For that first group, where there were no assignments, where MERS (Mortgage Electronic Registration System) initially foreclosed, where HAMP was ignored or where a major Lender/Servicer stated to me "We don't have to do modifications because we did not take any Federal ("TARP") money", is the group that should be compensated. With the per household figure being $1,500, that's not even 1st, last and security for an apartment, and in many places barely 1st month's rent.

The Securitization of mortgages into RMBS (Residential Mortgage Backed Securities - where thousands of mortgages were pooled together - See Posting Dated ) made this fiasco possible. In a sense, the banks have had to deal with the losing cards they got in the draw. The suit should have included the rating agencies, the Investment Banks, and all who facilitated a swindle that makes Madoff look like a low level Ponzi scheme.

I cannot point a finger at any one individual, organization, regulator, administration etc and say "You caused this world recession!!" That being the case, the Banks that allowed forged or failed documents to be used, corrupted the Civil side of the legal system by swamping Plaintiffs' lawyers with Wall Street law firms to a point where, even though all procedures were followed the hired guns won.

I ran failed S&Ls in MD and part of the Bank of New England mess in MA - I have chased and caught the thieves and cut the business/person who just got a raw deal some slack. Here we have Corporate Persons, some of which took "assets" at the request or arm twisting of the Fed, Treasury, OCC, or FDIC, being asked to pay a quarter's earnings to make up for a systemic failure. That's the price for being in the game but here everyone has lost. Stockholders, displaced CEOs and other officers, Homeowners, Administration officials etc.

The $25B is just hush money - hush to the whole bloody mess.

Author's Copyright by Richard I Isacoff, Esq, February, 2012

www.isacofflaw.com

rii@isacofflaw.com

PS AN AGREEMENT WAS REACHED JUST AFTER I RELEASED THIS FOR 10AM FRIDAY. HERE IS A LINK TO THE JUSTICE DEPARTMENT'S PRESS RELEASE http://tinyurl.com/73ypvub

Banks, Foreclosures, and Deceit

In his article, in the Tuesday November 15th edition of the New York Times, about foreclosures, David Streitfield discloses the Banking/Mortgage industry’s callousness to the plight of homeowners across the country. Mr. Streitfield writes, referring to Bank of America and JPMorgan Chase "Both have maintained whatever missteps their personnel might have made... No one lost their house who should not have, the banks say". This arrogance is why we cannot fix the mortgage problem. Why did the homeowners end up in foreclosure? Perhaps the Banks and lenders did not follow the LAW about mortgage lending; so by their logic the mortgages should be discharged.

The technicalities that the Banks dismiss are the basis for the protection of property rights. If the foreclosure documents are forged or unverified, the Banks have no way to know if the borrower should have been foreclosed against. This is akin to law enforcement saying that the Miranda warnings given to suspects are not needed because the person would not have been arrested if he/she was not guilty. The same Banks, a mere 2 years ago, argued that they needed federal help to survive, while they really needed help to build profits. Can we hold them to the same standard in dealing with the substance of modifications - that they must grant a modification because the homeowner should have kept his/her house anyway, job loss and bad lending aside?

On the same day, the Times ran another article about the fact that Bank of America, the largest holder of mortgages, has the lowest percentage of Making Home Affordable or HAMP modifications, among the 5 major mortgage servicers/lenders. Maybe there is a mere technicality that will allow some Federal agency to force the mammoth B of A to follow the program in place for modifications, instead of arbitrarily denying such relief just because to paraphrase the Banks, No one will lose their house who doesn't deserve to lose it!

Author's Copyright by Richard I. Isacoff, Esq, November 2010

rii@isacofflaw.com

http://www.isacofflaw.com/

New Homeowner Protection - Neighborhood Stabilization Act

The new Neighborhood Stabilization Act, which was enacted with an Emergency Preamble, became effective, in part, upon signing by Governor Duval Patrick on Thursday, July 29, 2010. The new law gives meaningful additional protections to Homeowners facing foreclosure, and tenants living in houses that have gone to foreclosure sale. We will deal with the Ownership issues in this post and the Tenant issue in the next.)

In order to foreclose on a property in the Commonwealth of Massachusetts a mortgagee/creditor MUST give the homeowner/mortgagor a 150 day Notice To Cure the default giving rise to the foreclosure threat. This "Cure Period" is subject to the following rules:

1. If the lender/servicer certifies that is has "engaged in a good faith effort to negotiate a commercially reasonable alternative to foreclosure..." (defined below) and

2. If this effort "has involved at least one meeting either in person or by telephone, between a creditor's representative and the borrower or borrower's attorney or the borrower's representative..." and

3. "After such meeting the creditor and the borrower were not successful in resolving their dispute, then the creditor may begin foreclosure proceedings after a right to cure period lasting 90 days..."

4. If the borrower does not respond to mail offering to negotiate within 30 days (does not state when the 30 days starts) then the borrower must live with the 90 day period allowed the creditor instead of the 150 days

KEY DEFINITION

"Creditor has made a good faith effort to negotiate and agree upon a commercially reasonable alternative to foreclosure shall mean that the creditor has considered"

a. "an assessment of borrower's current circumstances including without limitation (they can consider more, not less) income, debts, and obligations"

b. "the net present value ("NPV") of receiving payments pursuant to a modified mortgage loan as compared to the net recovery following foreclosure" -(this is a calculation taking into account the following factors to arrive at a value to compare to the value of the modified loan)

1. the current market value
2. the costs of foreclosure
3. foreclosure stigma discount to re-sell the house
4. the total unpaid balance
5. number of months expected before sale
6. taxes and insurance costs
7. the appreciation/depreciation forecast.

The creditor must use the Mass Housing Finance Agency formula, FDIC formula, or Treasury formula.

c. "...The creditor shall provide by first class mail and certified mail or private carrier to the borrower documentation of the good faith effort 10 days prior to meeting, telephone conversation specified..." (in paragraph 2. above)

The importance of this law cannot be overstated. While it grants an extra 60 days to the borrower, sixty days which did not exist until the Commonwealth passed an earlier law in 2009, it REQUIRES the creditor to assess the situation OR wait 150 days to BEGIN a foreclosure process. It is as far as the Commonwealth can go to try to force a creditor / mortgagee to negotiate a modification.

The notice that has to be given to the borrower/mortgagor before the creditor can start the foreclosure process, whether it is a 90 day notice or a notice after the 150 days, MUST contain the following information

1. Nature of the default and the amount of money needed to cure/fix the default
2. The date by which the default must be cured (stating "150 days after the date of this letter" or "90 days after the date of this letter" is not good enough. The creditor must give an actual DATE)
3. That is the borrower/mortgagor does not cure the default (pay the back amount owed) the creditor can take steps to foreclose on the house
4. The name and address of the creditor and the telephone number of a representative whom the borrower/mortgagor can contact if the borrower/mortgagor disagrees with the statements in the notice
5. Name of current and former mortgage broker or mortgage loan originator for the mortgage
6. Statement that the mortgagor/borrower may be eligible for help with the names and telephone number of the agencies
7. That the creditor may sell the property to pay off the mortgage
8. That the borrower/mortgagor may redeem the property anytime PRIOR to the sale by paying all amounts due
9. That the borrower/mortgagor may be evicted after the sale (this does not mean 5 minutes after the sale but after proper eviction proceedings in the Court)

NO PROPER NOTICE, NO FORECLOSURE

The Act gets technical - do not try to navigate it yourself. If you are behind and you receive a Notice to Cure, and you cannot PAY ALL ARREARS, contact a lawyer or Housing Agency immediately
Author's Copyright by Richard I. Isacoff, Esq, August 2010

rii@isacofflaw.com
http://www.isacofflaw.com

Class Actions for Modifications or Divine Intervention

There has been movement in some state courts to shore-up the failure of the legislation enacting the Making Home Affordable program initiatives to modify loans (HAMP etc); Federal Courts seem paralyzed.

As stated in an earlier post, there is no private right of action under the Home Affordable Modification Program ("HAMP") or any of its siblings. Congress, the Treasury, Federal Reserve, and all of the alphabet soup of regulators (FDIC, OCC, OTS, TARP Oversight, etc), evidently did not want (or caved-in to the mortgage investment community) homeowners to be able to sue mortgage servicers and actual lenders just because the servicers and lenders uniformly and regularly ignore the intent and actual RULES and REGULATIONS set out in the MHA/HAMP enacting legislation/rule-making.

The lack of this "private right of action" means that no matter how slip-shod, devious, lying, resistant, unethical, and immoral the servicers and lenders are in reviewing, analyzing, and denying modifications, homeowners/borrowers CANNOT sue in Federal Courts, and specifically Bankruptcy Courts, to force a modification OR sue because the servicer/lender has REFUSED to follow Federal regulation, rules, and guidelines. Even if the home is foreclosed and sold after the servicer/lender promised a modification, Congress and the White House, in their hurry to curry favor with the Banking interests (Goldman Sachs, Chase, Bank of America) and keep lobbyists happy, failed to put any teeth in its MHA/HAMP legislation.

Only the regulators like the Treasury, FDIC, Office of Thrift Supervision ("OTS"), Federal Reserve, can even recommend/urge/push the Banks and Investors in mortgages and Mortgage-Backed securities to follow the rules. There are no teeth in the rules and regulations.

Some State Courts have seen fit to force Lenders and servicers to show that they have acted in good faith when a Homeowner manages to get before a judge. The key here is "acting in good faith". If there has been no "good faith", or worse, demonstrated "bad faith", State Courts are allowing injunctions to stop foreclosures. No one expects there to be a modification when a homeowner is 30 months behind and cannot make a payment even if it based on 2% interest rate for 40 years, unless the problem was fraud in the origination of the loan. But most issues are regular people with regular problems in today's economy: job loss, reduced income, illness or death.

The exception may be CLASS ACTION SUITS. Simplifying a complicated legal issue, simply put, if there can be shown that as a pattern and practice a lender/servicer systematically and consistently rejects modifications, or acts so negligently as to de facto reject modifications (never gets paper processed etc), and there are enough diverse persons affected, then there may well be a "CLASS" of persons affected enough to demonstrate that all are "third-party beneficiaries" of the federal law.

Homeowners and their attorneys should begin to think about such Class Actions. Perhaps if there are enough suits against Lenders/servicers and the "investor-managers" of the Mortgage-Backed Securities, Congress may take action: Don't count on the mortgage industry or the Banks to help any more than they are forced to by some higher power (as morality is out, do not plan on Divine Intervention).

Author's Copyright by Richard I. Isacoff, Esq, July 2010

rii@isacofflaw.com

http://www.isacofflaw.com/

Recession In Real Life

Has anybody stopped to look at real people, and not just to discuss economic theory. The theory states that a "recession occurs when there are two or more consecutive quarters when the gross domestic product ("GDP") falls". GREAT - what does that mean? To most of us NOTHING. It’s just another scorecard for the government and the entities that control the money supply, the interest rates, the federal budget, and the stock market, and of course, it is important for economists.

The problem for the un-wealthy is that this country is "...Of the People, By the People, and For the People...". The key word is "people" - that is opposed to "person". The government, out of necessity, looks only at the TOTAL financial picture of the ENTIRE country. Policy is made for a GRAND SCALE, the people, so that "on average" a stimulus package will work; a foreclosure prevention program will actually abate the crisis of people losing their homes; the unemployment rate starts to decline.

"On average" does not help any individual, just the larger group. By that I mean that there will be a few that do very well, a few that really get hurt, and the vast majority probably survive - but barely!

Look at the results of the Making Home Affordable Program, the parent to the Home Affordability Modification Program ("HAMP"). Foreclosures continue at numbers far exceeding what we have seen in the past, and much of the slow-down in the pace of foreclosures is because mortgage companies just do not want any more inventory.

SOME EXAMPLES OF THE PROBLEM:

1. American Home Mortgage Servicing Inc. ("AHMSI"), the 6th largest servicer in the country, has 124,300+ loans it was handling that are more than 60 days delinquent and program eligible. Just 10,000 (9%) of these were in the first step to a modification, a Trial Modification Program; and only 232 (less than 2/10ths of 1%) had permanent modifications. No wonder - I submitted a package, with ALL of the required documents for a client, and after waiting 3 months, he was offered a Trail Modification that INCREASED his payments by $180/month - 17%. His loan was sold through Predatory practices, a fact of which AHMSI and its attorneys are aware but, so what! ON AVERAGE, when they do a modification, it helps.

2. Wilshire Mortgage (technically Wilshire Credit Corporation) buys and services large blocks of mortgages. My clients fell behind due to a loss of pay - (company closing so $18/hr became $8.10/hr), and because of very bad accident, where husband was out of work, getting grafts etc, for 8 months. I submitted a COMPLETE HAMP package to Wilshire, using their forms and comprised of 40 pages, on August 19, 2009. In early January I called as we had received no response despite many telephone calls to the company. I was told that they had the documents but they were now out of date - please update. I sent a full new package per instructions on 2/2/2010, but the scheduled foreclosure sale for 2/17/2010 would not be postponed. So I filed for protection under Chapter 13 of the Bankruptcy Code THE DAY BEFORE THE SALE, and have filed suit against Wilshire within the week.

3. HSBC/HFC/Household Finance (I & II)/Beneficial (all the same owner - HSBC) had been sent documents over a month ago. I contacted both the foreclosure attorney and HFC’s (et al) primary litigation counsel for help. Literally the day before the sale was to take place I had to file suit to stop the sale. The loan was a "bait and switch" with multiple sets of original documents, with a last minute increase in the interest rate, federally and state required disclosures not given to the borrowers, or or incorrect on the face of the documents. No modification was ever even offered to the borrowers despite their submission of documents.

4. The mortgages I have with JPMorgan Chase, Bank of America and Bank of America Home Mortgage (the old Countywide), Saxon Mortgage, OneWest (formerly IndyMac Bank)and several others, follow the same pattern

"ON AVERAGE":

In ALL of the above cases, my clients can afford their mortgage with a rate reduced to 5%. In all cases, the necessary paperwork was filed timely to prevent a foreclosure sale, but WITH THE SPECIFIC MORTGAGE the lender/servicer was just too busy. ON AVERAGE the claim is that the companies are responsive and adhering to the MHA program guidelines. That may be true but dealing with SPECIFICS, people are losing their homes. I have at least 15 cases just like these with more coming in every day - and most are taken with the hope that the lender will have to pay attorney fees because the clients do not have the money.

MHA, HAMP, HARP, TARP, and the other acronym programs, work "ON AVERAGE" - or in these cases they DO NOT. Even the Government’s grand scale of looking at problems for the mass solution do not make any sense. It’s like looking through binoculars backwards. Everything looks fine until you hit the iceberg.

Author's Copyright by Richard I. Isacoff, Esq, February 2009

rii@isacofflaw.com

http://www.isacofflaw.com/

Keeping Your House

"Making Home Affordable", Loan Modifications, Loss Mitigation, "HAMP", "HARP" "HASP" - all are programs of one type or another to help homeowners from losing their house. They are not working very well as detailed in prior posts. So, WHAT DO YOU DO TO KEEP THE HOUSE?

There is no easy way. Outlined below are steps that should be followed and followed and followed to stop a foreclosure or fend off the possibility of facing a foreclosure.

1. As soon as you believe that you might have a problem making payments, contact the lender's loss mitigation department or the Making Home Affordable ("MHA") department.

2. Get written instructions from the lender/servicer of the steps to follow and documents needed to get a loan modification.

3. Keep in mind that a loan modification ("loan mod") can be a reduction in rate for the balance of the loan, or just a deferral of a few payments. Do not under-sell your problem and if the suggested solution will not work over the long term, ask for a different program.

4. Typically, you will be asked to supply documents including at a minimum: a. Hardship Affidavit (check http://http://www.makinghomeaffordable.gov/ for the form), b. Financial Statement (form lender directs you to retrieve from website), c. one or two years tax returns, d. your two most recent pay stubs, e. proof of homeowners insurance being in-place on the property, f. copy of recent real estate tax bill g. one or two months bank statements. There may be other documents required.

5. PAY ATTENTION. Provide ALL requested/required documents the FIRST TIME you send in your request/plea for a Loan Mod. The biggest reason for denial of help to a homeowner is that no all of the paperwork was sent

6. Make several copies of everything you send to the lender as the first package has a 50/50 chance of being lost

7. Send the package Certified Mail, return receipt requested. You may need proof later that you DID send the documents

8. Begin calling for the status of your Loan Mod 4-5 days after the package was received. Be prepared to spend 45 minutes on the telephone navigating the computer enhanced telephone answering system. DO NOT JUST HANG UP! This is what military folks call "Hurry up and wait". DO IT!

9. Call every 3-4 days, without fail, to check on the progress. Call even if the customer representative says not to call so often. It is your house at stake, not his/hers.

10. If you are told after 10 days that your package was not received, send a new package. Be sure to update the pay stubs. It shouldn't be necessary to re-submit everything, but it is. Just do it!

11. Check the Lender's/servicer's website to see if the is the ability to track your Loan Mod application online.

12. If you have a problem, call the lender as often as is necessary to get your answer - get a live person on the telephone. You might not get the answer you need, but it is a start

13. If it looks like a foreclosure will begin against you, or if one already has, call an attorney who deals with foreclosure prevention. One of the organizations that can help you find a lawyer is the National Association of Consumer Bankruptcy Attorneys at http://www.nacba.org/ ; another is the American Bankruptcy Institute at http://www.abi.org/ (look for the consumer bankruptcy center). Other resources - your local Bar Association. Explain your problem and ask for a referral

14. DO NOT sign up for the "Send us $2,500 and we will fix your problem" companies. Too many of them are scams.

15. DO NOT WAIT UNTIL THE WEEK BEFORE A FORECLOSURE TO START TO TAKE ACTION. You will lose!!

Below are listed the websites for 5 major lenders' Homeowner Assistance programs.

Wells Fargo https://www.wellsfargo.com/mortgage/account/paymenthelp

JPMorgan Chase https://www.chase.com/chf/mortgage/hrm_options

OCWEN https://www.ocwencustomers.com/openFCLSPreventionPlan.action

Bank of America and Countrywide http://homeloanhelp.bankofamerica.com/en/loan-solutions.html

CitiMortgage https://www.citimortgage.com/Mortgage/Home.do?page=homeowner_assistance
Author's Copyright by Richard I. Isacoff, Esq. January 2010

http://www.isacofflaw.com/
rii@isacofflaw.com

One Bank's Lies, Another's Obfuscation?

The answer to the title question is a qualified MAYBE! (Obfuscate: to muddy the waters so no one has a clue about the real answer or even the question) Based on ever changing figures, the Wall Street Journal reported, in its December 11th edition, that there are nearly 5% of the homeowners in the Making Home Affordable Program ("MHAP")who have "permanent" mortgage modifications. If we go back to the beginning of the MHAP, it was estimated that there were 2,700,000 homeowners eligible. That figure did not include loans that did not fall within modification guidelines, even if they did come within the HARP (Home Affordable REFINANCE Program) structure.

The math on the 2.7 million figure equates to about 1.15% of those eligible have a permanent modification. That is substantially up from the numbers reported only 3 weeks ago but... The reality is that the Banks, including the biggest in the country (Bank of America, CitiBank, JPMorgan Chase) are not making loans or loan modifications without being forced to do so.

In my practice in western Western Massachusetts, I am dealing with a multitude of lenders, in every case, trying to save a home. While I have the occasional client who got into financial trouble of his/her own doing, the vast majority, 90-95%, find themselves facing foreclosure because of job loss, fewer hours available, ill health/death and the related medical bills, or family problems such as divorce, or some combination of these factors. ADDING TO THESE ISSUES IS THERE DEVASTATION OF BAD LOANS AND THE ECONOMIC COLLAPSE.

The only way I can get the attention of some of the lenders is to file suit. That is my last resort - whether the action is in a State court or in U S Bankruptcy Court. There is little interaction with loan workout specialists, now called Loss Mitigation Specialists, before documents, often obtained from the MHA.gov website, are sent to the lender. It is at this critical juncture that lenders or their servicing companies are lying or obfuscating.

All of the current articles quoting lenders as to the reason so few modifications are becoming permanent, cite the lenders as stating that only a small percentage complete all of the required paperwork, and of those, 1 out of 5 default on the "Trial Payment Period" payments. It is my personal experience that fully 50% of the submissions to the MHA program at any specific lender are LOST. I have sent 2,3 and sometimes 4 packages to the MHA department of a mortgagee/servicer before I get a set of documents that are not lost. Seldom will anyone in the servicing side say "I am sorry, we misplaced the documents we need." It is generally a form letter, received by me or my client, that states that the client did not qualify because inadequate information was provided, specifically that the package of forms was never received.

Even at that a new problem arises: after 45-60 days of waiting the documents sent are stale (outdated) or the foreclosure, which had been postponed due to the eligibility and contact under MHA, is re-scheduled. As for the default in payments - if someone receive a notice on Dec 4th that states the beginning payment under the trial period is due Dec. 1st, how can anyone comply? If I am lucky enough to get a lawyer for the lender involved, the process moves much more efficiently, as the lawyer knows the stakes for the lender.

In fairness (a phrase I am getting tired of having to use) to the mortgage folks, they are overwhelmed. No one could prepare for this number of "problem" mortgages. Okay, fine! Why then are modifications being refused by lenders? Has not the Treasury, FDIC, and the Federal Reserve, along with the "Administration" said they want the program to work, and NOW? Yes, but none of these folks tried to assist in getting a bill through the House of Representatives that would have put pressure on the Banks etc. to MAKE Homes affordable.

When the House debated a bill to allow Bankruptcy Judges to modify home mortgages, and it seemed like it would pass, but the Mortgage Backed Security holders and big investors said NO! and the spike in permanent modifications was announced to show that nothing else was needed.
On Monday the bill was defeated and I predict it will be back to business usual - just the endless loop of automated prompts from one department to another and the seemingly coordinated 45 minute wait for a representative.

Author's Copyright by Richard I. Isacoff, Esq, December 2009

http://www.isacofflaw.com/
rii@isacofflaw.com

How Many Clients Does it Take....

"How Many Clients Does It Take To Change A Light Bulb?" is the name of a small but funny (to a lawyer anyway) book by a fellow attorney from the other end of Massachusetts. Val (actually Giovanni) Diviacchi has written this short but all to true statement, not just about clients, but about all of us in reality. The Answer? One! He/she holds the light bulb and expects the world to revolve around him/her!

Looking at the growing number of foreclosures and the ever-increasing unemployment, we do not have the luxury of waiting for the world, the state, the Feds etc., to help us. As was reported in the New York Times last week by Peter S. Goodman, the modification programs, including the so-called Obama Plan, the Making Home Affordable program, are not working. Under MHA only 2,000 out of 700,000 modification in process have become permanent. Considering that there were 2.7 million loans eligible for that one program, the percentage is scary - 7/100ths of 1% (or .0007 for decimal lovers)

If you are facing a foreclosure or might be in the near future because of a job loss or cut-back, illness, marriage, baby, or just bad money management you should act now. First, contact the lenders loss mitigation department or its "troubled borrower" department. Ask what they can do to help. If you were out of work for 3 months and are just that same 3 months behind, you should be able to work out a plan quickly. I say "should" because even easy problems can be made into full blown wars .

If you have received a notice that states that the Lender is or intending to foreclose, CALL A LAWYER who works in one or more of the areas of foreclosure prevention, predatory lending, loan modifications, and bankruptcy. This is not the kind of problem that will go away. Do not think by not picking-up that certified mail that you are safe! THE WORLD WILL NOT REVOLVE AROUND YOU.

The following link is to an interview of me by a local television host, Andrew Cort, DC, JD. It describes how it came to pass that mortgages were bad and foreclosures happen in Mass. at the rate of 125 each day.

Spend the time to watch the video. I may not be pretty, but the words are worth it (Just close your eyes and LISTEN!).

http://www.andrewcort.com/spirit12RichardIsacoff.html

"Making Home Affordable" Program Is Not Working

The Obama administration's Making Home Affordable program, you know the one to stop foreclosures on millions of homes, is missing the mark. As was reported in the New York Times by Peter Goodman in today's edition, "The Congressional Oversight Panel, created last year to keep tabs on taxpayer bailout funds, said the Obama administration’s program would prevent fewer than half of predicted foreclosures." (To read his full story go to http://www.nytimes.com/2009/10/10/business/10modify.html ).

Mr. Goodman's article discusses the overriding problems with the program, but does not deal with the situation from a day-to-day point of view. In reality, the Obama Program, as it is called, (which is really named Making Home Affordable ("MHA"), and has under it two programs - Home Affordability Modification Program "HAMP" and the Home Affordability Refinance Program "HARP") does not accomplish the goal of home preservation.

Basically, if a homeowner is behind now, but was current as of January 1, 2009, and meets other criteria, the homeowner should be eligible for a loan modification. The modification allows the participating lender to set up a 3 month trial period wherein the borrower makes affordable payments based on actual financial information submitted to the lender, after which the lender can decide to modify the loan or not. The terms are dictated by the lender and may not ever become permanent.

The most disturbing part of the situation is that homeowners are going into foreclosure at a record rate, and the programs at best are being outpaced by the foreclosures by 3 or 4 to 1. Elizabeth Warren, head of the TARP Oversight panel, estimates that even when everything is working at full speed, the programs will lose the battle against foreclosure schedules by 2 to 1. The honest homeowner who "bought" a mortgage without really understanding the terms and was sold "a bill of goods", like thinking he/she had a 30 year fixed mortgage when in reality the rate changed after 3 years, has no recourse.

The lenders, Wall Street folks, and investors, who pushed and packaged these loans, and now do not want to take any loss of income, are not being held accountable. They still have no risk of loss. Taxpayers, meaning the homeowners who are in trouble, are the ones paying the entire cost of the programs, YET CANNOT EVEN GET HELP IN MOST CIRCUMSTANCES.

With the jobless rate being reported at near 10%, which means it is probably over15% (people off benefits and not looking anymore are not reported), and layoffs continuing, more and more people will be a situation where foreclosure is inevitable. The MHA could work, but not without the full cooperation from the lenders and mortgage servicers. With no one being in charge to enforce ACTIVE participation in MHA, and there being no regulator with teeth to force compliance, the people who own the loans will not allow the programs to work. They will lose money if modifications become permanent. Guess who wins this battle.

For now, it's the only game in town. If you are facing foreclosure, apply for an MHA program. Once it's determined you are eligible, any foreclosure action is put on hold while your application is considered.

(A correction from 9/28/2009 post: I incorrectly stated that Rep. Barney Frank was from Western MA. He is, of course, from Eastern MA)

Author's Copyright by Richard I. Isacoff, Esq, October 2009

rii@isacofflaw.com
www.isacofflaw.com

More On Modfications - The Borrowers' Hidden Costs

Mortgage Modification, as stated in earlier posts, can mean anything from allowing a late payment without a fee attached to it, or reducing interest and principal substantially. Unfortunately, most are closer to the deferred penalty than a true modification of terms which will allow the borrower to keep their home.

In today's USA Today, there is a brief analysis of the business of mortgage modifications. The article "Many mortgage modifications push payments higher" by Stephanie Armour, recites the history of 2 borrowers, but details the problems with the program. http://www.usatoday.com/money/economy/housing/2009-09-14-mortgage-modifications-not-helping_N.htm?csp=34

The MHA (Obama) program concentrates on lowering payments. This is accomplished by lowering the interest rate, and, if necessary, extending the term of the loan to 40 years, so that the payment of principal, interest, taxes and insurance, is no more than 31% of the borrowers gross income each month. HOWEVER, the amount of principal owed can actually increase substantially in the process. Per USA Today's quote of government studies "Of loans modified from Jan. 1, 2008, through March 31, 2009, monthly payments increased on 27 percent and were left unchanged on an additional 27.5 percent, according to a recent report by banking regulators." Dismal? Yes! The light might be that the new program, MHA, will do better.

For a borrower that has fallen 6 months behind with his/her $1,500/month payment, accumulated interest, penalties, late fees and other costs, such as legal and inspections, all get added to the amount ultimately owed by the homeowner. In this example, that translates to a minimum of $14,000 added to the amount owed. This in turn would normally increase the monthly payments so a balance has to be reached, generally by adjusting the rate.

NOTHING IS FREE as we all know. Many of these mods (common slang now for mortgage loan modifications) are fixed for only 5 years, and can then adjust. The mod itself creates a new Adjustable RateMortgage ("ARM"). Is this just postponing the inevitable foreclosure? Maybe so - but at least there is a chance for the borrower (who can find new/additional employment, and can clean up his/her credit score, and can make every payment on time) to keep the house by a refinance at the 5 year adjustment period.

Other issues with modifications. There are a number of agencies, well-intended, which help borrowers at risk for foreclosure, to get a modification. The thought there is that by postponing the foreclosure at least the borrower has an opportunity to keep the house. One of the problems here is that many of these agencies are ill-equipped to go toe-to-toe with a mortgage company, be it the servicer or the actual lender. To many of the agencies, any modification is better than none - right? MAYBE!! If the agency is funded by getting modifications done, it can turn into a numbers game. A modification completed is one towards the quota for funding. Keep in mind that a modification can be simply delaying 2 or 3 payments until the end of the loan, or even creating a balloon payment at the end of the term of the loan.

Well, some may say, at least the borrower kept the house for a few more years. Well, I say, "SO WHAT"? The modification should give the borrower a real shot at keeping her/his home for as long as she/he wants.

Recapping, we have a federal program that was put into place for loan mods - fixes - to allow homeowners, who are facing imminent foreclosure or who will be falling behind over the next several months because of a job cut or an UPWARD MORTGAGE INTEREST RATE ADJUSTMENT, to keep their homes. The program allows the mortgage industry, company by company to participate or not. There is only one standard program and that is the Making Home Affordable ("MHA") plan.

Lenders can opt to modify any way they would like to, and are doing so, especially to those borrowers who do not qualify for MHA. The modification may be detrimental to the borrower in the long term but who cares? CreditSights, which is a firm that tracks such matters, states that of the more than 1/2 million mods this year, 90% have resulted in higher principal balances. Good? Bad? It would seem that just adding back interest and fees to a delinquent loan is not good. It seems and is counter-intuitive, and counter to success. It is a short term fix - a band-aid.

HERESY but perhaps there are those who would be better-off losing the house that is a constant struggle to pay for, month after month, year after year. Maybe some homeowners would be better-off losing a house, regrouping and getting finances straight, renting for a few years and saving money each month for a down payment on a house that is affordable.

Author's Copyright by Richard I. Isacoff, Esq, September, 2009

rii@isacofflaw.com
http://www.isacofflaw.com/

Mortgage Modification Mandates

As a follow-up to the last post, several important matters:

1. If you have submitted the application for a loan modification under the "Making Home Affordable" program, any foreclosure proceedings must stop. The exception is if you do not meet the basic criteria (see http://www.makinghomeaffordable.gov/)

2. To see if your lender/servicer MUST participate in the program go to http://www.financialstability.gov/impact/contracts_list.htm - if it is listed, it has to deal with the modifications

If the lender or servicer received any TARP funds or "volunteered" to be part of the Home Afforability Modification Program "HAMP" or the Home Affordability Refinance Program "HARP" it should be on one of the lists

3. If a mortgage company or servicers tells you not to send any money until the paperwork is received or not to send money for any other reason, ask for the person's name or employee number. Also, ask how you be certain that you should not send any payment. Even if you are satisfied that you do not have to send a payment "that" month, DO NOT USE THE MONEY for anything else. Set up a separate savings account and put all of the money for the payment(s) in the account. If the MHA modification doesn't work, and the lender has its own program, you WILL be asked if you have the last "X" payments, since the last one mailed.

4. If you get mail offering to help you get a loan modification, and the solicitations asks you to send in any money, even after you have called the company and spoken with a "counselor" DON'T DO IT, unless it is your lender/servicer and you have an agreement. There are hundreds of scams right now - 15% of my clients have paid money to some company that cannot help, except to help themselves.

Two expressions come to mind: "God helps those who help themselves" and "God help those who help themselves". (Interesting what one "s" can do!)

5. If you have questions, call a bankruptcy attorney or a foreclosure attorney in your area. If you don't know who to call, check http://www.naca.org/ or for a lawyer http://www.nacba.org/ OR send me an e-mail

Author's Copyright by Richard I. Isacoff, Esq, August, 2009

http://www.isacofflaw.com/
rii@isacofflaw.com