Mortgage Settlement - Not For Everyone

Hooray! We have a Mortgage Settlement - $26B worth but who gets help and where does the rest of the money go? NO ONE KNOWS yet, and no one know who is covered and will get assistance of any kind!

What we do know is that the 5 major servicers, Bank of America, JPMorgan Chase, Ally Financial (the old GMAC), CitiBank/CitiMortgage etc, and Wells Fargo are funding the settlement (there may be others later).

We DO KNOW that if you live in Oklahoma you opted out of the settlement, and if your loan is owned by FannieMae (FNMA) or FreddieMac (FHMC) YOU ARE NOT INCLUDED. Below is a link to the website for the Settlement where you can check to see if your loan is owned by either of these GSEs (Gov't Sponsored Enterprises).

We also know that 1. if your case falls into the included category and you lost your house in what would be deemed an improper foreclosure you may be entitled to $2,000+/-. 2. If your mortgage payments are current but your house is worth less than you owe, you may be eligible for a refinance to a low rate. 3. If you need a modification, you might get a Principal Reduction so you owe less and therefore your payment may be lowered. (No items 2 and 3 ARE NOT reversed - seems like they should be however).

Nothing will be ready for 6-9 months, and most of the programs will be administered through the States' Attorneys General's Offices - the program will be implemented over the next 3 years.

Some perspective on the Settlement amount: 2011 - Bk of Amer earned $17B after loan loss reserves ("net" income $1.4B); JPMorgan "Net" Income $19B; Citi "Net" Income $11B; Wells Fargo $16B. Just these 4 banks had a "Net" Income of $47B for 2011 and that is without stripping reserves for the Settlement that have already been put aside and reduced income.

Last - the official word is "Wait, you will be contacted" or, if you are in the foreclosed category being handled by your State's Attorney General, contact that office through the link provided on the National Mortgage Settlement site.

http://www.nationalmortgagesettlement.com/help

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

rii@isacofflaw.com

www.isacofflaw.com

Mortgage Mods - Where Did The Money Go?

My mortgage modification clients often ask about the class actions or Attorney Generals actions against mortgage companies, lenders, and servicers, when the newspapers/Internet proclaims "XYZ Bank settles with Massachusetts for $XXX Million". The biggest single question is "Where did the money go?" Unfortunately, the answer I give is "I don't know except that there was no fund set up for modifications". Then I get the BLANK STARES from my clients.

"How can that be?" they query, to which I reply, "I do not know - probably to offset the cost of the suit and to establish a new unit to investigate mortgage fraud AND to help balance the budget." To this date I have never received notification that the Commonwealth of MA is setting up a fund to help borrowers avoid foreclosures, or even to set up an agency to help homeowners apply for a loan modification.

At this juncture, homeowners are being cast adrift. The 50 States +/- CA & MA (depends on the day) have been arguing with the biggest lenders/servicers over a settlement for all of these institutions evil-doings; and they were indeed evil! The proposals are at $26Billion or $26,000,000,000 but no one is offering to pay. Instead the Banks et al want to promise they won't do it again and that they will make it easier for homeowners to get a modification. Making it more difficult would be to say "NO, WE WON'T DO MODS ANYMORE". No money will go to individual homeowners. No funds will be set up to help a borrower get caught up. As the title of the movie proclaimed "GONE IN 60 SECONDS" (so where is Nicholas Cage when we need him?).

Even if there is money made available, the selection/application process will be as difficult as getting the modification as evidenced by the recent Federal "EHLP" (Emergency Home Loan Program) program that only gave out 1/2 of the $1Billion allocated for it.

In fairness, because of the structure of the mortgages, now part of giant pools of loans called "Mortgage-Backed Securities" or "MBS" for short, no Bank owns the loan(s). They are collateral for a Bond, typically a fixed income security, pieces of which are bought and sold as part of mutual funds, retirement funds, and corporate investments. It's like GE borrowing money by issuing a bond - this means that GE is stating to the world that if it receives up to $XXXMillion from investors, GE will pay them interest at "X"% for "Y" years, and GE puts up its assets as collateral. With MBS, the underlying assets of the fund, home mortgages, are the collateral.

The refrain often heard when one is trying to get a modification is "The Investors do not allow modifications" or "This requested modification is outside investor guidelines". When the investor is the Federal Nation Mortgage Association (FannieMae) or the Federal Home Mortgage Corporation (FreddieMac) or the Federal Housing Administration (FHA) the formula used to determine "Yes" or "No" is at least obtainable. And, because these are either Government Agencies or quasi-government agencies, they do participate in the HAMP program. But, you deal not with Fannie or Freddie or the FHA but with the loan SERVICER. This is the company picked to run the pool of loans - to collect payments and send out bills, and to start foreclosures and to actually WORK ON MODIFICATIONS.

There is no rhyme or reason to the process. Each servicer has slightly different requirements, all allowed by the Making Home Affordable program which created HAMP. Paperwork must be submitted and often resubmitted again and again. This is the period that most borrowers give up or taking time from work to put documents together again and again, in the hope of getting an affordable payment now that there is no more overtime or even one less job for the borrower(s) to count-on for the money to meet the payments.

I often sit at my desk working on one project, while on hold different times with a servicer for an hour or sometimes two. I can keep working on my computer and have at least one other phone in use while I work with a servicer. So far, my results are good but my client has no money to pay for all of that time, even when I only count the time I am actually doing calculations and filling out forms or talking to a servicer's representative. Because, in addition, there are the hours spent with the client who has no money to pay for the time and the results.

The most frustrating part of this process is when I ask my client, "Okay, you are now 4 months behind because the payment went up. How much have you saved? Certainly if the payment was $700 per month and now it's $850, you have the $700 put aside for each of the four months the Bank returned your money!", and the client answers "Nothing - I paid other bills". At which point I ask "Well, how are you going to pay if you get a modification if you can't even save the money you had been paying?". Occasionally the client will say "I don't know". Most often I hear "Well, when I have the modification, I will be able to make the payments somehow". With trepidation I ask "How, if you can't make the payments now?".

This conversation takes place in my office or on my telephone at least twice every week and sometimes twice a day.

RULES FOR GETTING A MODIFICATION:

1. Call the Servicer and ask for modification or HAMP documents or go on their website and print them

2. Put all required documents together - fill them out completely and DATE THEM ALL and send them to the address stated on the website or the forms. Often they MUST be faxed.

3. Remember, if you are working with an attorney or any other third-party, that person/entity is going to have to have written permission from you to deal with the servicer/lender

4. Documents expire in 60 days. That means if you send in only some of the documents required, and then send in more, and then send in more because the servicer wants them, the first docs you submitted may be "stale dated" - just like bread - and need to be updated and resubmitted. This is where the process breaks down for most Homeowners.

5. Put aside the mortgage payment you were making or that you hope to be making. If you cannot save the money, you cannot save your home. Put simply, If a borrower is not disciplined enough to save the money to pay the mortgage, then there is no ability to pay the modified payment - so what is the point of going through all of the aggravation. Sometimes Life Is Not Fair.

6. If you get a package sent to you from the lender/servicer open it immediately. If documents are due on Wednesday of next week Make sure they get there by then. A day late and you are disqualified. Fair? Probably not but read the last sentence of Item 5 above.

The people with whom you will speak are not bad people. They are doing a job, trying to avoid losing their house and are jsut asking the questions they must to avoid being fired. Don't rant at them - that assures NO COOPERATION. Remember that the folks at the top of the MBS pyramid are the folks "calling the shots" and they can't lose.

Author's Copyright by Richard I Isacoff, Esq October 2011

rii@isacofflaw.com

http://www.isacofflaw.com

Record 2.9 million Foreclosures; Investors Want Money

There were two "complimentary" articles yesterday - one in American Banker, entitled "MBS Trustees Push JPMorgan Chase for Access to Loan Files", the other from RealtyTrac's Agent Advocate newsletter announcing, "Record 2.9 million U.S. Properties Receive Foreclosure Filings in 2010...". It seems that the Trustees of the Mortgage-Backed Securities ("MBS") are demanding loan files from servicers, looking for bad underwriting, false documents, missing documents, but most importantly trying to force the MBS servicers/originators to "repurchase" or "buy-back" bad loans in the varying securitization pools that comprise the MBS.

It is all too common at this time to see a mortgage loan owned by "Deutsche Bank as Trustee for the ABC Mortgage Funding Trust Series 2005-34", with the loan serviced by some other company, like Saxon, or OCWEN, or AHMSI (America Home Mortgage Sevicing Inc), or JPMorgan Chase or....

What does this mean? Maybe the right to get a loan modification!!! The details are a bit confusing, but bear with me please.

Jeff Horwitz in his article in the American Banker states "They've (the Trustees) been called "braindead", "negligent", and "otiose"" (this rather obscure word simply means ineffective, worthless, or superfluous). He goes on however to state that it might be the Trustees which have the ability to force Servicers to repurchase the bad loans.

In an unusual legal twist, because of Washington Mutual Bank's ("WAMU") insolvency and momentary receivership (federal control during paper signing), Deutsche Bank as the Trustee, assumed the responsibilities of the Servicer, WAMU, which had breached the 30o+ page contract, detailing who does what and how much everyone is paid. The agreement is called the "Pooling and Servicing Agreement" or "PSA". In another case, Wells Fargo has sued EMC Mortgage, another servicer, for failing to turnover documents.

For homeowners, with a mortgage from WAMU or where they serviced a loan which was part of an MBS, this may give them a party to sue to get a loan modification. In short, the Making Home Affordable Program and HAMP do not give mortgagors/homeowners a right to sue. Now however, with Deutsche Bank taking the dual role of Trustee and Servicer and getting all of the responsibilities that goes along with both positions, it is quite possible that Courts will recognize the borrowers right to sue under what is called a "Third-Party Beneficiary" theory.

This theory states that if two parties make a contract to benefit a third party, that third party has a right to sue to enforce the contract, even though the third party did not sign the contract. Here, while HAMP may not give that status to homeowners, it does allow the parties to sue each other. When one of the parties to the contract takes on multiple roles, the protections that each party has may disappear. Basically, you cannot indemnify yourself or get insurance for your own actions.

Perhaps, even more direct would be the right to sue Deutsche Bank, in its capacity as Trustee and Servicer, under the premise that it now, due to its servicing role and assumption of liabilities, has a duty to the borrower, that it is acting for the Investors and the Borrowers.

The other article, from RealtyTrac which tracks foreclosures throughout the country, discusses the record number of foreclosures; 2.9 million!! Many of these foreclosure filings could have been avoided if modifications were granted. Remember, individual homeowners have not had a right to sue to enforce the HAMP modification program, and HSBC/Household/Beneficial does not participate at all. Just think about the situation if 15% of the 2.9 million foreclosures were modified loans instead - that would have been 435,000 non-foreclosures (almost 2 months worth of filings).

Hopefully, the information above is understandable and of use. Please contact us if you have questions -e-mail is best.

Author's Copyright by Richard I. Isacoff, Esq, February 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

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/

HAMP: "You Probably Think This LAW Is About YOU!"

This posting's title, with apologies to Carly Simon who wrote and sung Billboard's 72nd most popular song ever, is appropriate if any of us think that the Mortgage Modification issues and Programs, like HAMP, are about us; they are all about the Servicers/Lenders and the INVESTORS of the ubiquitous Mortgage-Backed Securities ("MBS").

The program, which has no teeth for enforcement by any entity (Treasury, FDIC, Federal Reserve, etc.) was established to protect the INVESTMENT pools of securitized mortgages. This means simply that the mortgage and investment communities refused to permit any government force-down of a program that might hurt "ROI" or "Return on Investment", or more crudely put, the PROFITS and INCOME made by the owners of these mortgage pools, and by the Goldman Sachs and Lehman Brothers of the world - the people who brought us the "great meltdown"

In fairness, the whole idea behind putting a large number of mortgages together, computing the average interest rate to be paid by homeowners, while at the same time calculating the expected or historical number of "bad" (non-paying) loans, was to enlarge the market of home ownership. By putting the mortgages into securities, all of the mortgage originators, brokers, lenders, banks, mortgage companies, who made these mortgage loans were "off the hook".

As stated in earlier posts, only the investors had anything to lose and they had done their homework. They figured out how much to pay for $1 billion of what became a BOND secured by home mortgages. What could be safer? Based on past experience, the Depression aside, the answer was Nothing Could Be Safer! Or maybe not!!!

During the early musings about what to do as the market was plummeting, and Mortgage-Backed Securities were being valued at $0 - high figures of 40% of face value, there were many theories put forth as to "What Do We Do Now?". One of those concepts was to have Congress and the Supreme Court declare that the contract making up these pools of mortgages, could be broken, for the sake of national security. Remember, our financial stability was gone and the markets were in free-fall.

Rejecting that idea, and rather than one of the Federal Government's arms publicly insuring that no MBS would drop below 70% of face value because the Federal Government would guaranty the FIRST 30% of losses which would have stopped the spiral down, the free-market system functioned as it is designed to do, and we ended up with the mess we are in currently regarding FORECLOSURES!!

The Making Home Affordable ("MHA") program which gave birth to "HAMP" really was a deal with the mortgage and securities industries. The program is about making sure that profits stay high enough to continue to attract buyers of MBS. The way to accomplish that goal is to NOT make modifications that will hurt the INVESTOR - Homeowners be damned. 9%-10% unemployment is no excuse for defaulting on your mortgage payment. If you can catch up fast enough you get to keep your house. If not, well, the house goes to sale at auction -but you can't bid -HA! Gotcha!

Realize that the reason the rules do not help most of the homeowners applying for modifications, or foolishly, a principal write-down, is that they are not supposed to. The rules are there, as written, to protect investors. Well, YES and NO!. If the investors take significant losses, the spiral down starts again and soon a family homestead will consist of two large tents.

Author's Copyright by Richard I. Isacoff, Esq

http://www.isacofflaw.com/

rii@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/

The Sale is Over - My House is Gone!

The first step in reversing a foreclosure is to prevent it in the first place. Makes no sense but it is true. Very few people (almost none) lose a house to foreclosure without knowing it is going to happen. This is true in a state like Massachusetts which does not require a Court hearing before a foreclosure sale, or one like Connecticut where there is a Court required mediation before any sale can take place. The first clue that there might be a foreclosure sale is that the homeowner HAS NOT PAID HIS/HER MORTGAGE FOR A NUMBER OF MONTHS!

Hire a lawyer and if you do not know who to call, call the State Bar Association. Or go to or call a Housing Agency or go to a Court and ask someone in the Clerk's Office what to do, especially if there is a Housing Court where you live. Do whatever you can (legally) to stop the sale.

Okay, the sale takes place and the Lender buys back the house. What now? How have I managed to reverse a sale or actually 4 or 5 of them (one pending now)? The secret, which really is just good lawyering, is to understand the process; from the time a loan application is completed - the origination process, closing, recording of the documents, servicing (sending bills and collecting monthly mortgage payments), all of the steps in the actual foreclosure process, and, critically, WHAT HAPPENS AFTER THE SALE!!

In almost all States, there is a short period after a sale takes place for the homeowner and borrower to contest the validity of the sale. It may involve going to a Court, or registering the opposition at the place recording the Land Records or filing a grievance with a special Board; but there is a way to contest the proceeding. This step is important because it stops the process in its tracks. Stop the Foreclosure Deed from being put on record. Remember the purpose of the sale is for the Lender to get money - that is why it is called a foreclosure SALE. It get incredibly more difficult to reverse the sale if there is a second transfer to another buyer.

Do not forget that the lender which has your mortgage ordered the sale. Call them as soon as possible after the sale. You may have to wait on hold for an hour but so what! It's your home. Get to the foreclosure department at the lender, which may take another hour, but again, so what! You may be referred to the law firm or auctioneer which held the sale -call it. Do not give up until there is no one left to call. Make detailed notes of every number you called or department to which you were transferred, the name of the person(s) to whom you spoke, the length of the call, the length of the conversation, the CONTENT of your conversation, and anything else you think might be important.

The legal work really comes down to a few issues:

1. Was the sale conducted in strict accordance with the State statute - there are no federal laws?
2. Was the sale and the property properly advertised? (this is part of state procedure)
3. Were all of the steps required after the sale followed by the Lender and the "Buyer"?
4. Can you get to a Court and file a suit to prevent the deed from being recorded while things get sorted out?
5. Were you in the middle of a modification program, especially one under the Making Home Affordable program (HAMP modification), the so-called Obama Plan? If so contact the Lender IMMEDIATELY, and call a lawyer or housing agency.
6. Even though you were behind, can you make any payments to show good faith - family/friends who didn't realize the seriousness of the problem?
7. If you had previously spoken to a bankruptcy attorney CALL HIM/HER IMMEDIATELY.
8. Is the loan one owned by FannieMae or FreddieMac? If so, there is a good chance you can get the foreclosure fixed, rather undone.

There are another dozen legalities and related matters that should be examined, but the ones above will be the most critical right after the sale.

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

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

FORECLOSURES 1 - MODIFICATIONS 0

There is no way to maintain this BLOG as frequently as would be liked because FORECLOSURES ARE NOT DECREASING! We are saving at least one (1) house a week and for a small office that is a huge investment of time.

If you have your home sold at a foreclosure sale and you have not taken all possible steps to stop the sale, shame on you. If you never knew what options were available, shame on the attorneys and the mortgage industry. Keep in mind that a MORTGAGE SERVICER would rather foreclose than modify despite HAMP. The why is simple!

Servicers are paid a fee to handle the payments and billing on a monthly basis, of all loans in the portfolio. If a percentage of those loans get delinquent enough to warrant legal action the servicer wants no part of the process. They are paid for collecting money and sending bills, and referring mortgages to legal firms for foreclosure. THEY ARE NOT PAID FOR MODIFICATIONS! Yes, there is a provision in the Making Home Affordable package that theoretically pays $1,500 to a servicer for each modification, but that only applies to FannieMae and FreddieMac loans.

MOST IMPORTANT, A SERVICER LOSES NOTHING IF A HOUSE IS FORECLOSED AT A HUGE LOSS. The owner of the loan losses but the Servicer does not care. It gets paid for servicing the loan and gets paid for taking it to foreclosure. For example,there is no loss TO THE SERVICER because the loan was for $200,000 and the foreclosure sale resulted in the mortgagee (lender) buying the house back and then selling it for $100,000. No one has any risk of loss except the HOMEOWNER

So, we are left with the problem of a company spending money (salaries) to try to work on a modification by contacting the owner(s) of the loan and asking for permission and not getting paid for the work. Now, most servicing agreements (the contract between the owner of the loan, or the Trustee of the Mortgage Backed Security that actually owns the loan) grant a certain amount of leeway for the servicing company (A.S.C., AHMSI (old Option One), Ocwen, HomeEq, CitiMortgage etc, Chase Mortgage etc., ETC.). This flexibility is very limited. What is not limited is foreclosing, and each foreclosure gets money to the servicer for finalizing the loan.

If this all reads like "Lost in the Fun House" or "One Flew Over the Cuckoo's Nest" or the housing equivalent of FEMA during Katrina in Louisiana, that is because it is counter-intuitive and counter-productive, and costly. The monetary costs can be calculated and written-off as a "cost of doing business". The Servicer or owner of the loan, the Mortgage Backed Security or the Bank, may even receive money from the bail-out programs for foreclosing and "taking a loss"

The good news - It is possible, sometimes, to reverse a foreclosure. I know this because I have done FIVE (5). There are no tricks, no easy ways to do it, and no lender will want to cooperate AT FIRST. Details in the next installment

Author's Copyright by Richard I. Isacoff, Esq, April, 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

Never Mind Who's On First; Where Is First?

In the on-going saga of the Making Home Affordable Program, which spawned HAMP and HARP, no less a giant in news than the New York Times, carried what seems to be directly contradictory information about the program's success/failure.

In the Saturday January 16th edition the Times ran two stories: "JPMorgan Chase Earns $11.7 Billion" by-lined to Eric Dash, and "U.S. Mortgage Plan Aided 7 Percent of Borrowers" by-lined to Sewell Chan. Both stories are well-written and intriguing, but neither can be accurate. The problem is that no one knows the truth.

Eric Dash recites that JPMorgan has been so successful that it has $26.9 billion set aside for employee bonuses. That is attributed in large part to the fact that the "...bank has agreed to temporarily modify 600,000 mortgages. Only about 89,000 of those adjustments have been made permanent." Mr. Sewell, in his news story states that "Mortgage payments have been permanently lowered for more than 66,000 borrowers under the Obama administration's $75 billion program to protect homeowners from foreclosure..." He goes on to write "as of the end of December, they said [Treasury and HUD] more than 853,696 homeowners were actively in the modification program... The figure includes 787,231 trial modifications and 66,465 permanent modifications"

Assuming the number of trial modifications is correct in both stories, that means that all other lenders COMBINED account for only 253,696 modifications - less than 29%. Has JPMorgan really outpaced ALL OTHER LENDERS COMBINED and done 71% of all modifications? And if Treasury and HUD are reporting only 66,465 permanent modifications, how has JPMorgan Chase managed 89,000? That would mean that JPM Chase has done all of the reported HAMP modifications and 23,000+/- of their own!

The reality is that NO ONE KNOWS! Further, the Treasury Department and Housing and Urban Development do not have a clue about what is really happening "in the trenches". Yesterday I received an e-mail from a client who had applied for and been approved for a trial modification. Now, 4 months later, after making all of the required payments, she received a letter from the venerable JPMorgan Chase asking for a "complete Trial Modification Package".

This scenario is playing out in 1/2 of my clients going through HAMP. Who knows what the percentage is nationwide? The program is not bad, it's just that no one is in charge. Washington feels good because "they" can say that "they" have committed $75 billion to help the entire country - 4 million homeowners. It's not working! (And think about the amount of money - $75 billion for all 4 million (and increasing) mortgages in trouble: $26.9 billion for bonuses at JPMorgan Chase Investment Banking.)

HAMP and HARP are disasters - there is no enforcement of the rules set out by Treasury and HUD. There is no monitoring on an institutional basis. All reporting is unaudited. What is worse, there is no one for a borrower seeking help to call.

The lenders/servicers have call centers staffed with people who try to be helpful but just do not have much information. They read from a computer screen to tell borrowers what they need to supply to apply. The call center folks may have an FAQ section to which they can refer. But, if there is a problem such as the one my client has, where she is being asked to start over, there is no one who can help her. The call center people will say that documents have been received and processed but they cannot fix the problem of the new request; nor is there anyone else with whom the borrower can speak. Give up? Do Not! Ask for a supervisor, send in new documents, certified, return requested mail.

Next installment - what to do until the Doctor comes. An outline of how to navigate MHA a/k/a HASP and the off-spring HAMP and HARP

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

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

Mortgages, Foreclosure, Morality

It is unfortunate but we must deal with the economics of keeping versus "walking away from" your house.

Housing values have fallen dramatically over the past 18 months, to a level that many homeowners owe more than the house is worth. That is not so bad if the owner can make the payments without struggling. But what happens when a foreclosure looms? The choices seem obvious - 1. Let the house, your home, go to a foreclosure sale, and you move; or 2. Scrape and fight and get money any honest way you can to try to keep that house you call home.

Ah, one might say - you are acting immorally by walking away from the home and the debt. Or, someone might think, "Gee, if I give up my house I will never be able to get another one." Better yet is the argument bringing the kids into the equation "Well, I can't move my kids to a different school or a different neighborhood. I MUST keep my house even if it kills me. I will work 20 hours a day if necessary!"

First, there is nothing immoral about making a contract with a bank or other lender that states "We, the BANK, will lend you money to pay for a house, and YOU promise to pay us back, a little each month. IF YOU DO NOT PAY we will take your house away from you and evict you." That is the deal. The contract, mortgage and note" do not mention heaven, hell, purgatory, or even limbo (if it still exists). It does not state that if you do not pay, and you believe in reincarnation, that you will come back as a rock, or a brick that get put into a house destined for foreclosure.

Let's be realistic: which is worse - 1. Kids having to move to a different house (same school through school choice in Mass. at least) and have to make new friends in the new neighborhood [even that doesn't work if they are past grammar school] or 2. Mom/Dad in a foul mood, bickering and fighting as to who is to blame for the money problems. That "discussion" typically goes something like this:"You were paying the bills. You knew we were getting behind. Why didn't you do something about it?" Responding in a louder voice "ME? You are the one who went to work for that sleazy contractor/sales force/outlet store/whatever. Why aren't you back to work yet. I mean why haven't you gotten a second (or third) job? I told you not to get that mortgage" Now, yelling back, "How dare you talk to me like that. I earned $XXXXX - how was I to know that..." Shrieking, the retort is "Is was your job to know! And you should have seen that the mortgage was no good (or that the house would drop in value or whatever).

That is great for kids to hear and feel - feel the tension in the house; understand that Mom/Dad (one or both) are angry, scared, "in a mood", ignoring those kids except to yell at them. And if there are no kids, but a spouse or companion, the battle rages on, neither party stopping to work out a solution - analyze the options. Just move ahead blindly because he/she MUST keep the house!!

There is no shame in finding out that you cannot pay the increased payments, or the regular payments because hours were cut. Do not try to blame yourself by believing "I should have read the papers more closely - even though I did not understand anything" or convinced that, if you are on lay-off, you will be called back to work and you can catch up then.

The mortgage companies had no problem or regrets in selling loans they knew might not be good. These same banks and lenders do not hesitate to let their own investment properties go to foreclosure if there is no value and it would be "good money after bad". They had no difficulty with their collective consciences when the mortgages were packaged and sold to mutual funds that crashed. They do not feel immoral when they refuse to modify loans so you can keep you house, or when they send you paperwork to complete which you send in which they lose so you send it in again, which they don't ever get etc.

I am not advocating just walking away from the debt/house without a full examination of whether there is a solution that will let you keep your home. But, I am pushing you to "do the numbers". Is it realistic to try to keep the house? Is there any equity in it or will you paying on value that was never there or that disappeared? How about the relationship with your partner, family, your kids?

If there is any shame in any of this housing mess, it would be that families are devastated and torn apart - not by having to move, but by trying to hang on to a dream that is not lost, just postponed.

It is just money - Contact an FHA Home Preservation Counselor or an attorney who deals with these issues regularly so that you can at least have all of the facts BEFORE you make a decision. If you are concerned about the Lender coming after you for any deficiency (difference between what you owed and the foreclosure sale price) there are ways to avoid that, legally. Do not despair - there is help available.

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

http://www.isacofflaw.com/

rii@isacofflaw.com

Foreclosures, Jobs, Bank Mergers, & What Retirement ?

As we approach the end of the year there are a number if issues we should keep in mind. All are important but at differing levels depending on our own circumstances

1. The Foreclosure Crisis is far from over. There are currently approximately 3.5 million homes in some stage of foreclosure. It is projected that 2010 will see another 3 million enter foreclosure (that's 6.5 million without any further economic deterioration). Keep in mind that this does not include mortgages in default, by even as much as 90 days, that have not been moved to the "F" status by the lender.

The Making Home Affordable Program ("MHA") is broken, probably beyond repair. Very few (less than 1% of the loans in the Trial Modification period) have made it to a permanent modification. Lenders are blaming borrowers for not sending in documents timely or for not making payments within the successive 30 day periods. True, the are a certain number of borrowers who will not be able to keep their homes because they could never have afforded it, or have had a life altering experience from which they cannot recover.

BUT, I have had to submit documents for 40% of my clients, for whom I am working the MHA program, 2, 3, and even 4 times; and sometimes Borrowers are promised coupons for payments, never get them, make a payment late and are disqualified from the program - this again from my personal experience as an attorney with knowledge of the MHA program, bankruptcy, mortgages, real estate conveyancing, finance and financial planning, money management, banking and economics.

2. Un-Employment and Under-Employment exceeds 14%. Add to that sobering figure the numbers of jobless who no longer have unemployment benefits and who have given up registering for jobs at the local State Agency, and we move to the 18%-20% range or 1 in 5 or 6 people in the eligible labor force. This does not help the foreclosure problem - it's hard to pay for your house with no job, or with receiving a cut in hours by 25%, or by getting a "new" job paying $11/hour instead of the $18/hr in the job just lost.

Un/under-employment doesn't help consumer spending either. People are spending less, especially for true discretionary items, like the new car, new television, new washing machine, extra pair of shoes, and eating out. That is bad for business profits which is bad for job creation or just job market stability. And it is not just the big stores that are suffering; in fact, they can weather the storm better than the mom and pop stores and small businesses nationwide. All of this leads to a further erosion in jobs and then another round of foreclosures, and then another bank failure and on and on.

3. In a mere 15 months there has been such a massive consolidation in the Banking and Finance sectors that 3 years ago the Justice Department would have been bringing anti-trust actions daily (yes, that is hyperbole but barely). How has this hurt? Try to get a loan from any non-local bank, especially if you have average credit individually or are a small business with no access to equity markets (selling stock for example) or public debt offerings (like corporate bonds).

So now we have businesses, under the gun because of a downturn in business which is caused by un/under-employment, which cannot get money to stay in business waiting for the economy to turn positive - thus another business failure. Or we have an individual who cannot convince his/her lender to modify a loan or refinance it (no cash out at closing, just a lower interest rate) because the bank finds the Borrower's credit does not meet the lender's NEW credit criteria.
Guess what? Another foreclosure! Oh, and by the way, each foreclosure tends to lower the values of homes around the foreclosed property, so equity evaporates making it impossible for the under-employed with an above-average but not stellar credit score to refinance because the loan-to-value ratio (amount of loan divided into the value of the house) is too high (greater then 70-80%).

4. The "golden years" of retirement? They may be gone for an entire generation who had investments in 401k plans, IRAs, and the stock market generally. Sure the markets are up in the sense that the Dow, NASDAQ, and S&P indices are up from their lows, but have average people recovered their losses. Basically NO! When we hear "The stock market is up 24% from a year ago" (still 30+% below where it was before the crash) that means that the securities traders are making money and some large corporations are as well. Sure, some individuals' portfolios have gained back part of the loss but recovered? NO! And we still do not know about Social Security, or health care, or ....

Further, as discussed on NPR's show "Marketplace Money" this morning by Knight Kiplinger, editor-in-chief of one of the most respected financial publications, there is a new reality: People cannot depend on the equity in their homes for part of their retirement funding. His comments went on to state that "... now housing has returned to its rightful place, as a place you live. It is shelter; it is not an investment".

This is a major change in approach from what had been a belief held for decades by homeowners, and was part of the advice given by investment counselors/financial planners to their customers/clients. It went something like this: "With the yearly appreciation on your house being 5%, in 14 1/2 years the value will have doubled and the mortgage will be paid down by one-half, so you'll have plenty of equity when you sell to buy that nice condo by the beach".

Now we cannot plan to use the house we live in for retirement money - after 25 years and 5 refinances, but never beyond 80% of the house's value, we will be lucky to have the funds to pay off the then existing mortgage and have a few dollars left for? Certainly not the condo on the beach. Is that what has happened in the housing market and if so, what is being done to stop the further erosion of value, goes down every time there is a foreclosure in the area of your home.

We go back to the Mortgage meltdown, the continuing high un/under- employment, the rampant crimes committed by Wall Street mortgage securitizers, and our own use of our homes as the means to get money for vacations, a new car, a new porch or pool etc. When you get a Home Equity Line Of Credit ("HELOC") and it comes with a debit card to make using the credit line easier, we should have known something was not right. Paying for a cup of coffee with your house's equity? Maybe not that bad but...

* * * * * * * * * * * * * * * * * * * * * * * *

More crucial is our attitude, the way we all believe this will turn out. There is growing despair among those hit hardest - those who have lost jobs and those who are losing homes. EMPLOYMENT is perhaps the biggest obstacle to overcome. If people are gainfully employed they can begin to recapture their lives. Then and only then there is the potential to save the home, or not worry about whether the heating bill should be paid or the electric bill; and the car payment?

After a sign that the job scene is getting better, people NEED to see and believe that the government is taking real steps to stop foreclosures. Earlier posts have discussed some of the ways the loans which have become securitized can be modified. That said, our current financial services (banking, brokerage, insurance) regulators like FDIC, Federal Reserve, Treasury Department must take action to force the lenders to modify those loans that already qualify for the MHA program. Lost documents, unreasonable deadlines given to borrowers, no clear instructions on where to send payments, an endless loop of telephone prompts without human intervention for 30-45 minutes, all have to stop.

Maybe the outcome of the foreclosures will be to create jobs with the companies that service the loans, inspect the properties, go to Court to evict you, and clean up the property to get the house ready for sale.

Prognosis? the patient, us, will live but what will be the quality of life?

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

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

"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/