"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
Showing posts with label homeowner. Show all posts
Showing posts with label homeowner. Show all posts
Thursday, January 28, 2010
Monday, December 7, 2009
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
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
Saturday, November 14, 2009
Interesting Interest Rates
30 Year Home Mortgage Rate Hits 17% Prime Rate at 16%+ Savings account interest reaches 12% Ancient post depression history NO - 1982
The graph above shows the history of the Prime Rate (interest rate charged to a bank's least risky and best customers) - compare those rates to what you pay for credit cards, auto loans, and mortgages, for a real eye-opener
The graph above shows the history of the Prime Rate (interest rate charged to a bank's least risky and best customers) - compare those rates to what you pay for credit cards, auto loans, and mortgages, for a real eye-opener
Here is a little chart of the Fed Funds Rate (the interest rate the Federal Reserve Banks charge member Banks to borrow - single day loans), the 30 Year Mortgage Rate, the Daily Savings Account Rate, and the 1 Year CD Rate (all averaged for the respective year) :
1982: Fed Funds 12.25% Mortgage 17% Savings 12%
1989: Fed Funds 9.17% Mortgage 11% Savings 8.5%
1995: Fed Funds 5.9% Mortgage 7.9% Savings 4.75% 1 Year CD 7%
2000:Fed Funds 6.42% Mortgage 8.1% Savings 5.5% 1 Year CD 6.625%
2005:Fed Funds 3.33% Mortgage 5.9% Savings 2.35% 1 Year CD 3.25
2007:Fed Funds 5.04% Mortgage 6.3% Savings 4.25% 1 Year CD 4.9%
2008:Fed Funds 1.85% Mortgage 6% Savings 2.5% 1 Year CD 2.5%
2009:Fed Funds .25% Mortgage 5.1% Savings 0.5% 1 Year CD 2%
Why are all of the numbers important? They show the level of inflation, the cost to consumers for borrowing, and perhaps most significantly, the profit the banks are making on money. For example, in 1982, while mortgages were 17% plus points, banks were being charged 12.25% by the Fed and paying 12% to depositors. Keep in mind that a deposit in a bank is nothing more than a customers loan to the bank for the rate of interest being paid on the savings account or CD.
At that time, there was a 5% margin between the cost of money and the rate that could be charged to consumers for a mortgage. The MARGIN narrowed to 2%+/- for the next 27 years; then at the height of the crisis, the margin grew to 5% again. So, in inflation and in recession, the Banks made the same margin. Rates were so stable that savings bank bankers were called "3-6-3" bankers: take it in at 3% (savings deposits) lend it out at 6% (mortgage) and go home at 3 (afternoon) (That was the time before securitization of mortgages).
There are two lessons to be gleaned from the figures other than the fact that Banks make money: 1. When the Cost of Funds (to Banks) is low Banks charge what the market will bear. It is a "free market", unlike the regulated days of the 60s and 70s, and Banks can take advantage of this era. 2. The current interest rates are so low, that as to Banks, there is almost free money. This will not stay so cheap for Banks.
With the interest rates so low, and Banks making 5% on mortgages, and more than 3% on Prime Interest Rate loans (the rate charged to the best customers (those with no risk of default - like GM, right?) why are Banks charging 19%-30% for credit card debt? This is the primary debt for consumers beyond a mortgage. The Banks are making an obscene 15% to 25%+ on the average borrower's credit card balance!!
1982: Fed Funds 12.25% Mortgage 17% Savings 12%
1989: Fed Funds 9.17% Mortgage 11% Savings 8.5%
1995: Fed Funds 5.9% Mortgage 7.9% Savings 4.75% 1 Year CD 7%
2000:Fed Funds 6.42% Mortgage 8.1% Savings 5.5% 1 Year CD 6.625%
2005:Fed Funds 3.33% Mortgage 5.9% Savings 2.35% 1 Year CD 3.25
2007:Fed Funds 5.04% Mortgage 6.3% Savings 4.25% 1 Year CD 4.9%
2008:Fed Funds 1.85% Mortgage 6% Savings 2.5% 1 Year CD 2.5%
2009:Fed Funds .25% Mortgage 5.1% Savings 0.5% 1 Year CD 2%
Why are all of the numbers important? They show the level of inflation, the cost to consumers for borrowing, and perhaps most significantly, the profit the banks are making on money. For example, in 1982, while mortgages were 17% plus points, banks were being charged 12.25% by the Fed and paying 12% to depositors. Keep in mind that a deposit in a bank is nothing more than a customers loan to the bank for the rate of interest being paid on the savings account or CD.
At that time, there was a 5% margin between the cost of money and the rate that could be charged to consumers for a mortgage. The MARGIN narrowed to 2%+/- for the next 27 years; then at the height of the crisis, the margin grew to 5% again. So, in inflation and in recession, the Banks made the same margin. Rates were so stable that savings bank bankers were called "3-6-3" bankers: take it in at 3% (savings deposits) lend it out at 6% (mortgage) and go home at 3 (afternoon) (That was the time before securitization of mortgages).
There are two lessons to be gleaned from the figures other than the fact that Banks make money: 1. When the Cost of Funds (to Banks) is low Banks charge what the market will bear. It is a "free market", unlike the regulated days of the 60s and 70s, and Banks can take advantage of this era. 2. The current interest rates are so low, that as to Banks, there is almost free money. This will not stay so cheap for Banks.
With the interest rates so low, and Banks making 5% on mortgages, and more than 3% on Prime Interest Rate loans (the rate charged to the best customers (those with no risk of default - like GM, right?) why are Banks charging 19%-30% for credit card debt? This is the primary debt for consumers beyond a mortgage. The Banks are making an obscene 15% to 25%+ on the average borrower's credit card balance!!
What is worse, in anticipation of the new laws which prohibit card issuers from arbitrarily raising interest rates because of a one time-one day late payment, or because a payment was a day late on A DIFFERENT CARD, Interest Rates on credit cards have jumped 10%-20% and credit limits have been reduced by 50%-75%.
The next post will deal with the profits being made by banks in real dollar terms. Why is any of this important? The so-called recovery is only in the financial markets. Unemployment is soaring, the dollar is weak (to be explained next post) and the average consumer has seen no relief. Oh, and in case anyone has missed the news, foreclosures are still going strong.
Author's Copyright by Richard I. Isacoff, Esq, November 2009
Wednesday, September 23, 2009
Foreclosures; Another Shoe is Dropping
Currently, in the City of Pittsfield, MA, there are 190 properties in some stage of foreclosure; 69 are currently in default, 30 are Bank owned, 16 are awaiting a foreclosure sale date, and the rest are in some part of the process (such as sale completed but deed not yet recorded or waiting for the sale with a date set).
For a city the size of Boston, or Atlanta, or even Springfield, MA, that number might not be worthy of note, but in a city of 40,000, to have 190 HOMES in some state of being taken from the homeowner is alarming. What is more concerning is the fact that there is no action on the part of the city to assist those homeowners in trouble. There are no meetings inviting homeowners to learn how to protect their home which is probably their biggest investment; the local community college, which offers courses and seminars in all types of subjects, has no offerings to educate homeowners about how to avoid the common pitfalls that lead to defaults and foreclosure. There isn't even a hotline that is well publicized, that a homeowner in trouble can call to get emergency legal assistance/counseling.
What is most disturbing is that the situation in Pittsfield is not the exception, but the rule. This issue pervades the country and, yet, because we have moved to a new news cycle, gets no attention anymore. The stock market is nearing 10,000 again; the dollar is low so exports are high; oil is over $70/barrel but not too much; gold is over $1,015 per ounce but that is because of the weak dollar; inflation is under control; and the Federal Reserve is continuing to give the banks cheap money to lend. The fact that it isn't being loaned to consumers or small businesses also goes undetected.
We are facing a real housing crisis. As has been commented on and explained in earlier postings, the next wave of adjustable rate increases is about to hit - the so-called Option-Arms, were "prime" borrowers could get a mortgage, and pick a payment for the month. Well, that period of pick as you may is starting to change. Most had that scheme for 3-5 years. The 3 year period is beginning to end (2006-2008) was most of the activity, so we will start to see loans that have to have PRINCIPAL & INTEREST PAID each month for the remainder of the loan term (27 years generally). That will be coupled by a rate increase of 2%-3%, based on the contract (mortgage documents).
So, will the better qualified borrowers start to default and hit the statistics as a "property in foreclosure"? Not all of them but YES, many will! Keep in mind that many of these borrowers no longer have the jobs they did when they got the loan, or hours have been cut, or the second job is gone, or there is no overtime. This will start another decline in home prices and cycle of panic.
Mortgage lending has already slowed to a trickle of what it was. That is not all bad, but when people cannot refinance or buy a new home, even when they have a steady job and decent income, but only a 670 credit score (680 being the line between prime/regular and the evil sub-prime borrower) we have a major problem.
In many areas, local banks and credit unions are trying to fill the void, but the demand is greater than the supply of loans. And, many institutions have new financial requirements to meet per FDIC, OTS, OCC and the rest of the alphabet; the locals have little to lend on anything but the best prime loans.
One hidden factor regarding the recovery of home prices and the market: banks that have foreclosed on homes, many homes, are NOT putting them on the market for sale, hoping for a recovery in pricing and not wanting to flood the market and further depress prices by increasing the supply of "existing" homes beyond the demand.
So much for the good news!
We are facing a real housing crisis. As has been commented on and explained in earlier postings, the next wave of adjustable rate increases is about to hit - the so-called Option-Arms, were "prime" borrowers could get a mortgage, and pick a payment for the month. Well, that period of pick as you may is starting to change. Most had that scheme for 3-5 years. The 3 year period is beginning to end (2006-2008) was most of the activity, so we will start to see loans that have to have PRINCIPAL & INTEREST PAID each month for the remainder of the loan term (27 years generally). That will be coupled by a rate increase of 2%-3%, based on the contract (mortgage documents).
So, will the better qualified borrowers start to default and hit the statistics as a "property in foreclosure"? Not all of them but YES, many will! Keep in mind that many of these borrowers no longer have the jobs they did when they got the loan, or hours have been cut, or the second job is gone, or there is no overtime. This will start another decline in home prices and cycle of panic.
Mortgage lending has already slowed to a trickle of what it was. That is not all bad, but when people cannot refinance or buy a new home, even when they have a steady job and decent income, but only a 670 credit score (680 being the line between prime/regular and the evil sub-prime borrower) we have a major problem.
In many areas, local banks and credit unions are trying to fill the void, but the demand is greater than the supply of loans. And, many institutions have new financial requirements to meet per FDIC, OTS, OCC and the rest of the alphabet; the locals have little to lend on anything but the best prime loans.
One hidden factor regarding the recovery of home prices and the market: banks that have foreclosed on homes, many homes, are NOT putting them on the market for sale, hoping for a recovery in pricing and not wanting to flood the market and further depress prices by increasing the supply of "existing" homes beyond the demand.
So much for the good news!
Friday, June 5, 2009
Buying at Foreclosure May Be Less Than You "Bargained For"
With the rise in foreclosures and the resultant drop in real estate prices, coupled with the lower interest rates available for "qualified" borrowers, an increasing number of people are buying property at foreclosure sales. The idea is to purchase a house at the "distress" sale price, and end up with a bargain.
As in any other business transaction there are issues that must be considered, aside from the matter of having financing/available funds ready at the time of the foreclosure sale. Some can turn what seems like a "great deal" into a nightmare. For instance:
1. There are no guarantees or warranties that accompany the house. You buy what you see - no more, no less. Further, there is no obligation on the part of the foreclosing party or the auctioneer to point out flaws or defects with the property
2. It is imperative to have an attorney or title company (depending on the state where the property is) check the land records to determine if the foreclosing entity has good title through its sale. In essence, can the company legally foreclose?
3. Getting financing BEFORE the auction is critical. You will have to place a rather large deposit in order to be a successful bidder, and that IS NOT refundable because you discover, later, that you cannot obtain a loan. How can this be done? One way is for you to have your local bank view the property with you. You will have to get an appraisal from a company approved by the bank, and have the full title report available. In addition, it would be wise to get a home inspection - obviously this is not possible if the house is occupied.
4. If the house is occupied by the owners or tenants at the time of the sale, once you buy it it is YOUR responsibility to have the tenants or former owners (who have just become tenants) leave the property. This might well mean eviction, a process that can take, without any major fighting,3 months. With arguments and the tenants trying to stretch out the time they have before they have to vacate, you might not get possession for 6 months.
5. Consider an alternative to buying at the foreclosure sale. You can contact the owner, or the realtor who might be trying to sell the house pre-foreclosure, as make your offer. If it is less than the amount owed, typical in most foreclosures, you might suggest that you want to make an offer directly to the lender for a "short sale". This is where the lender takes a loss, but gets rid of the house. Keep in mind that the lender will have to pay at least 15% of the balance owed, just to foreclose - and then it has to pay taxes, maintain the house, market the house for sale etc. This way you can get an inspection, have time to get financing, and not have to evict the owners because they will leave by agreement when you buy the house.
Last - let the buyer beware
Author's Copyright by Richard I. Isacoff, Esq., June 2009
http://www.isacofflaw.com/
rii@isacofflaw.com
As in any other business transaction there are issues that must be considered, aside from the matter of having financing/available funds ready at the time of the foreclosure sale. Some can turn what seems like a "great deal" into a nightmare. For instance:
1. There are no guarantees or warranties that accompany the house. You buy what you see - no more, no less. Further, there is no obligation on the part of the foreclosing party or the auctioneer to point out flaws or defects with the property
2. It is imperative to have an attorney or title company (depending on the state where the property is) check the land records to determine if the foreclosing entity has good title through its sale. In essence, can the company legally foreclose?
3. Getting financing BEFORE the auction is critical. You will have to place a rather large deposit in order to be a successful bidder, and that IS NOT refundable because you discover, later, that you cannot obtain a loan. How can this be done? One way is for you to have your local bank view the property with you. You will have to get an appraisal from a company approved by the bank, and have the full title report available. In addition, it would be wise to get a home inspection - obviously this is not possible if the house is occupied.
4. If the house is occupied by the owners or tenants at the time of the sale, once you buy it it is YOUR responsibility to have the tenants or former owners (who have just become tenants) leave the property. This might well mean eviction, a process that can take, without any major fighting,3 months. With arguments and the tenants trying to stretch out the time they have before they have to vacate, you might not get possession for 6 months.
5. Consider an alternative to buying at the foreclosure sale. You can contact the owner, or the realtor who might be trying to sell the house pre-foreclosure, as make your offer. If it is less than the amount owed, typical in most foreclosures, you might suggest that you want to make an offer directly to the lender for a "short sale". This is where the lender takes a loss, but gets rid of the house. Keep in mind that the lender will have to pay at least 15% of the balance owed, just to foreclose - and then it has to pay taxes, maintain the house, market the house for sale etc. This way you can get an inspection, have time to get financing, and not have to evict the owners because they will leave by agreement when you buy the house.
Last - let the buyer beware
Author's Copyright by Richard I. Isacoff, Esq., June 2009
http://www.isacofflaw.com/
rii@isacofflaw.com
Thursday, February 26, 2009
Mortgage Modification - Court Ordered
Below is a letter I have written to the U.S. Congressman from my district, outlining the reasons I believe that the measure being taken up by Congress, to give Bankruptcy Judges the right to modify primary residence mortgages, should be approved. If you can, write your Congressman to ask his support, the letter, I believe, is self-explantory
RICHARD I. ISACOFF, P.C.
ATTORNEY AT LAW
100 NORTH STREET
SUITE 405
PITTSFIELD, MASSACHUSETTS 01201
____________
e-mail rii@isacofflaw.com
ATTORNEY AT LAW
100 NORTH STREET
SUITE 405
PITTSFIELD, MASSACHUSETTS 01201
____________
e-mail rii@isacofflaw.com
TELEPHONE (413) 443-8164 TELECOPIER (413) 443-8171
VIA FACSIMILE 202-226-1224
The Hon. John W. Olver
U.S. House of Representatives
111 Longworth HOB
Washington, DC 20515
Dear Congressman Olver
I write not only as a constituent, but also as an attorney who represents distressed homeowners in our area who are trying to save their homes from foreclosure. This is a genuine and urgent crisis that demands immediate and targeted congressional action. As such, I encourage you to support H.R. 200, legislation that would provide relief to these homeowners.
Too many families in this District and throughout the Commonwealth are on the brink of losing their homes to foreclosure. Across the country, it is estimated that 8.1 million homes will be in foreclosure over the next four years if Congress does not act. As devastating as foreclosure is for the individual families whose homes are threatened, the effects of this foreclosure epidemic are felt throughout the economy. Indeed, virtually every economist has recognized that the financial crisis gripping the country can be resolved only by dealing with the root cause –the escalating millions of foreclosures. I will gladly send you detailed and summary materials on this issue.
H.R. 200 would help families save their homes by giving them more flexibility to restructure the mortgages on their primary residences. The bill would fix current law, enacted in 1993, that prevents judicial modification of primary home mortgages, but allows such changes to virtually all other loans. Why shouldn’t Judges be able to correct “bad faith” loans – regardless of which side acted in bad faith?
Sadly, the magnitude of the foreclosure crisis dwarfs the response to date from Washington. The very clear lesson of the last two years is that foreclosures will not be curbed through top-down voluntary efforts on the part of the financial services industry alone, no matter how many incentives are provided. Courts must be empowered to implement economically rational loan modifications where the parties are unwilling to do so on their own. Loan modifications through the bankruptcy courts can be accomplished on a sufficient scale and time frame to have a meaningful impact. The mere threat of judicial modification may, in fact, lead to more meaningful voluntary loan modifications.
OLVER, REP./CON’T
February 21, 2009
Page 2
President Obama recognized Chapter 13 judicial mortgage modification as an effective approach to stemming the foreclosure tide and expressed his support for legislation that would accomplish this. While the Mortgage Backed Securities investors and market-makers might lose some value, getting a modification that pays 80% of the loan with interest, is better than a foreclosure sale yielding 40%-50% of the investment cost.
Please support the Bill – campaign for it. I worked with you in the days of the BNE collapse and RECOLL Mgt.; I would be honored to do so again. If you need additional information, please contact me at my office on (413) 443-8164, my private cell phone (413) xxxxxxxx or by e-mail.
Sincerely,
Richard I. Isacoff, Esq
RII/mpb
cc: Maureen Thompson, NACBA
Website:www.isacofflaw.com
BLOG: http://finance-for-us.blogspot.com
Saturday, February 21, 2009
Mortgage Rescue Plan: Does It Need a Rescue?
Now we know what the monsters are under the bed: partisan politics, inertia, greed, and despair. The economy keeps getting worse and every program that is announced to help gets roundly criticized by the Press, Pundits, and Politicians. How about injecting some hope into this quagmire?
The latest rant is against the Mortgage Bailout for Homeowners. For the most part, those leading the charge seem to be talking about borrowers who KNEW that they were borrowing more than they could afford to pay back, or the borrowers who got a mortgage loan where the borrower could make minimum payments (interest only or some other lower amount) hoping/expecting the house to rise in value so the borrower could refinance again, or the borrower who lied on his/her mortgage application in order to qualify for the loan without realizing that at the very first rate adjustment, she/he would not be able to afford the payment if it went up, but prayed for a raise/new job/no rate increase/ or divine intervention (or is that intervention by the intelligent designers?).
Below is the content of an e-mail I sent to CNBC's morning business show, SquawkBox, about the call for a financial revolution against the President's plans. You can see the clip where Rick Santelli, a Trader at the Chicago Mercantile Exchange attacks the Homeowner Mortgage Bailout, by going to the web address provided: http://www.cnbc.com/id/29283701
THE E-MAIL
Dear Becky, Joe and Carl (please excuse the use of the familiar but…),
I am a private-practicing sole practitioner attorney in Western Massachusetts. My background is banking, S&L work-outs for the State of Maryland and with FSLIC, Regulator in connection with the S&Ls, and part-time lobbying in the mid-80s for the Mutual Savings Bank industry. I relocated back to Western Mass to run the Berkshire County portion of the ill-fated Bank of New England and ended up working for the Fleet/FDIC workout group, RECOLL Mgt. (Great career move – I resigned as President and CEO of a de novo FSB [federal savings bank] I had started in Ellicott City, MD.).
I take extreme exception to Mr. Santelli’s commentary, his logic, and his outlook.
I represent people, statewide, who are presently losing their homes. Not one has a Lexus or other such luxury car, and if having 1 bathroom with inside plumbing is a luxury, then I guess all of my clients have a luxury.
Just for perspective, the President’s yet fully clarified program will help my clients: the short-form facts of some are as follows:
1. Husband and wife – both working for the same molding company, both laid-off the same day. For the past 18 months, only one has been able to get a job at a time. Husband hired, wife hired, Husband laid-off. Husband gets job, wife gets laid off, etc. Mortgage with Beneficial (which is under a consent decree in Mass. for bad lending practices). Interest rate high; clients “sold” insurance (life, AD&D, disability); loan adjusts up but the disclosures show a downward adjustment by .25% each year “if for a 12 month period all payments made on time” (day due, not 15 day grace period). Repeated calls to Beneficial have yielded no help in a modification
2. Single woman in late 50s. Religious Ed teacher at Catholic High School. Loan from BankUnited, FSB in FL, through a local broker. Initial year’s payments based on 1.7% teaser rate but interest rate, not payments, adjusted month 2 to index (6 mos LIBOR) plus margin (6.75%). Payments increase by 7.5% per year. At end of first year, Orig principal of $159,000 is now $163,000. At month 43 of loan payment is $700+/-. Month 44 –payment is $1,400.30 for rest of loan. Becky will be Pope before this woman will understand the loan she was sold. Oh, by the way, the Broker lied, in writing, and is no longer in business. Closing costs/fees to Broker and Lender - 6% making it a “High Cost Loan”
3. First time home-buyer with 720 FICO. Mortgage Broker puts her in 2/28 LIBOR ARM –tells her the rate will go up and down like prime. Never tells her first adjustment will be 3%. She tries to refi and is told her income is not adequate. House is a two-family but because she rents to family member, Lender will not count the income. She has “banked” payments for the period after the second adjustment, based on the original payment. Money is available to Lender. Lender went to sell at foreclosure. I stopped it, but no response from Lender. All we asked for was original deal – as presented by broker – 30 year fixed 7% - accept monies held by me in escrow, capitalize thew arrears, if any, after recalculating the balance by applying the original rate and actual payments.
4. HFC sells 30 year fixed rate loan. Borrowers have ability to pay with acceptable ratios 32/36 DTI. Loan is billed as a “conventional 30 Year Fixed”. Loan is, in reality a “Simple Interest Loan”, so interest runs every day. There are no 15 day grace periods – pay on the 2nd of the month and get an additional day’s interest charged. Pay on the 16th, which would normally require a 3% of the payment penalty, and pay the penalty PLUS 15 days interest. RESULT: Negative Amortization – off the books – run as a ledger accrual account. $425,000 loan - $22,000 accrued, not paid, interest in 18 months. No payment ever went 30 days – all made by 15th day.
I have a dozen more like these. I have filtered out the guy who has refinanced 13 times since 1985, and now want to get out of the 14th loan – an Option Arm – he can no longer afford. This is the person Santelli should attack. This person kept “cashing out” the equity and is now in a bind due to a 25%-40% drop in prices in the Boston metro area.
One last note – why are people afraid of a judge determining if a loan was made by a lender in bad faith? Misrepresentation goes both ways, and the borrower is the weaker party. Maybe the Lenders should have watched their originators more carefully.
I watch the show every morning from 6-6:45 –get to my office at 7:05 and grab it on CNBC Plus while I go through the e-mails and loan docs. Great show, but how about some better balance. Darwin was right, but to use his theory as a life approach is ignoring basic decency. It is like the “let them eat cake” of the 18th century French elite. Santelli does not sound French.
Richard Isacoff
(end of the e-mail)
The latest rant is against the Mortgage Bailout for Homeowners. For the most part, those leading the charge seem to be talking about borrowers who KNEW that they were borrowing more than they could afford to pay back, or the borrowers who got a mortgage loan where the borrower could make minimum payments (interest only or some other lower amount) hoping/expecting the house to rise in value so the borrower could refinance again, or the borrower who lied on his/her mortgage application in order to qualify for the loan without realizing that at the very first rate adjustment, she/he would not be able to afford the payment if it went up, but prayed for a raise/new job/no rate increase/ or divine intervention (or is that intervention by the intelligent designers?).
Below is the content of an e-mail I sent to CNBC's morning business show, SquawkBox, about the call for a financial revolution against the President's plans. You can see the clip where Rick Santelli, a Trader at the Chicago Mercantile Exchange attacks the Homeowner Mortgage Bailout, by going to the web address provided: http://www.cnbc.com/id/29283701
THE E-MAIL
Dear Becky, Joe and Carl (please excuse the use of the familiar but…),
I am a private-practicing sole practitioner attorney in Western Massachusetts. My background is banking, S&L work-outs for the State of Maryland and with FSLIC, Regulator in connection with the S&Ls, and part-time lobbying in the mid-80s for the Mutual Savings Bank industry. I relocated back to Western Mass to run the Berkshire County portion of the ill-fated Bank of New England and ended up working for the Fleet/FDIC workout group, RECOLL Mgt. (Great career move – I resigned as President and CEO of a de novo FSB [federal savings bank] I had started in Ellicott City, MD.).
I take extreme exception to Mr. Santelli’s commentary, his logic, and his outlook.
I represent people, statewide, who are presently losing their homes. Not one has a Lexus or other such luxury car, and if having 1 bathroom with inside plumbing is a luxury, then I guess all of my clients have a luxury.
Just for perspective, the President’s yet fully clarified program will help my clients: the short-form facts of some are as follows:
1. Husband and wife – both working for the same molding company, both laid-off the same day. For the past 18 months, only one has been able to get a job at a time. Husband hired, wife hired, Husband laid-off. Husband gets job, wife gets laid off, etc. Mortgage with Beneficial (which is under a consent decree in Mass. for bad lending practices). Interest rate high; clients “sold” insurance (life, AD&D, disability); loan adjusts up but the disclosures show a downward adjustment by .25% each year “if for a 12 month period all payments made on time” (day due, not 15 day grace period). Repeated calls to Beneficial have yielded no help in a modification
2. Single woman in late 50s. Religious Ed teacher at Catholic High School. Loan from BankUnited, FSB in FL, through a local broker. Initial year’s payments based on 1.7% teaser rate but interest rate, not payments, adjusted month 2 to index (6 mos LIBOR) plus margin (6.75%). Payments increase by 7.5% per year. At end of first year, Orig principal of $159,000 is now $163,000. At month 43 of loan payment is $700+/-. Month 44 –payment is $1,400.30 for rest of loan. Becky will be Pope before this woman will understand the loan she was sold. Oh, by the way, the Broker lied, in writing, and is no longer in business. Closing costs/fees to Broker and Lender - 6% making it a “High Cost Loan”
3. First time home-buyer with 720 FICO. Mortgage Broker puts her in 2/28 LIBOR ARM –tells her the rate will go up and down like prime. Never tells her first adjustment will be 3%. She tries to refi and is told her income is not adequate. House is a two-family but because she rents to family member, Lender will not count the income. She has “banked” payments for the period after the second adjustment, based on the original payment. Money is available to Lender. Lender went to sell at foreclosure. I stopped it, but no response from Lender. All we asked for was original deal – as presented by broker – 30 year fixed 7% - accept monies held by me in escrow, capitalize thew arrears, if any, after recalculating the balance by applying the original rate and actual payments.
4. HFC sells 30 year fixed rate loan. Borrowers have ability to pay with acceptable ratios 32/36 DTI. Loan is billed as a “conventional 30 Year Fixed”. Loan is, in reality a “Simple Interest Loan”, so interest runs every day. There are no 15 day grace periods – pay on the 2nd of the month and get an additional day’s interest charged. Pay on the 16th, which would normally require a 3% of the payment penalty, and pay the penalty PLUS 15 days interest. RESULT: Negative Amortization – off the books – run as a ledger accrual account. $425,000 loan - $22,000 accrued, not paid, interest in 18 months. No payment ever went 30 days – all made by 15th day.
I have a dozen more like these. I have filtered out the guy who has refinanced 13 times since 1985, and now want to get out of the 14th loan – an Option Arm – he can no longer afford. This is the person Santelli should attack. This person kept “cashing out” the equity and is now in a bind due to a 25%-40% drop in prices in the Boston metro area.
One last note – why are people afraid of a judge determining if a loan was made by a lender in bad faith? Misrepresentation goes both ways, and the borrower is the weaker party. Maybe the Lenders should have watched their originators more carefully.
I watch the show every morning from 6-6:45 –get to my office at 7:05 and grab it on CNBC Plus while I go through the e-mails and loan docs. Great show, but how about some better balance. Darwin was right, but to use his theory as a life approach is ignoring basic decency. It is like the “let them eat cake” of the 18th century French elite. Santelli does not sound French.
Richard Isacoff
(end of the e-mail)
It is difficult to convey the details of the President's plan at this point, because thee are none. It is not that the program isn't outlined in detail, but the who qualifies, how does someone apply for help, how do you communicate with your lender, etc, has not been finalized. We are supposed to receive the operational details on or about March 4th. In the meantime the next post will have a summary taken from the Whitehouse Press information, stories in the Wall Street Journal and the New York Times and other publications.
Author's Copyright by Richard I. Isacoff, Esq, February 2009
e-mail: rii@isacofflaw.com
website: http://www.isacofflaw.com/
Tuesday, November 18, 2008
Homeowners Not To Get Bailout Money
F.D.I.C. - MORTGAGE CRISIS - BAILOUT - MORTGAGE BACKED SECURITIES
It comes as quite a surprise to many, like the 535 members of Congress, that the recommendation and plans put forth by the F.D.I.C. regarding the way in which to help homeowners and stabilize the housing market is being ignored by the Administration's Secretary of the Treasury, Henry Paulson.
Now, truth be told, Secretary Paulson is probably a good bit smarter and experienced than I am, but perhaps some of his advisers and employees are not. More to the point, I suggest that F.D.I.C., suggesting a direct to homeowner mortgage aid program, may have the correct perspective. If the complaint is accurate, that the problem started due to adjustable mortgages being sold to and "bought" by sub-prime borrowers leading to Mortgage Backed Securities ("MBS"), then fixing those mortgages should alleviate the worst of the problems.
The securities markets, those entities that buy and sell literally millions of mortgages after they are bundled into MBS, have determined that the assets, because the true Fair Market Value is unknown, are worthless. That is as absurd as stating that they are worth 100% of the principal and interest owed on each underlying mortgage. EXTREMES - both views. There will be losses, but if they can be quantified by F.D.I.C. or any other agency of the Federal government, the investors in MBS should be more secure, have a sense of balance restored, and allow the markets to return to a sense of normalcy.
The F.D.I.C. program, in its entirety is at, http://www.fdic.gov/loans/loanmod/index.html. The basics are to underwrite a portion of the outstanding mortgages where there is a default, so that the holders of the MBS know that the value is still there. The basics of the program, which the Treasury is fighting despite the rules for use of the Bailout funds, is to MODIFY EXISTING MORTGAGE LOANS
1. Pay servicers $1,000 to cover expenses for each loan modified
2. FDIC/bailout funds would share up to 50% of the losses if a modified loan re-defaults
FDIC projections state that 2.22 million loans could be modified, having a book value of $444 billion with a total program cost of only $24.4 billion. Assuming a 33% default rate 1.5 million foreclosures could be avoided
One might also believe that while the people working for Secretary Paulson are working around the clock and are very bright, some of them in key spots have no experience in this type if crisis. If you have never worked-out failed assets (loans) in real-life, not just through computer modeling, nor as estimated by economists, actuaries, financial analysts, and Goldman Sachs/Wall Street, you may miss critical details. Here, to fix the problem, the problem must be understood: it is not securities; it is the inability to pay mortgages and the resulting erosion of home values.
THERE IS NO EASY ANSWER! That does not mean that we should have had to panic, lose confidence in the system itself, and, by stampede, cause the securities market drop like a rock.
author's copyright by Richard I. Isacoff, Esq. - November 2008
http://www.isacofflaw.com/
It comes as quite a surprise to many, like the 535 members of Congress, that the recommendation and plans put forth by the F.D.I.C. regarding the way in which to help homeowners and stabilize the housing market is being ignored by the Administration's Secretary of the Treasury, Henry Paulson.
Now, truth be told, Secretary Paulson is probably a good bit smarter and experienced than I am, but perhaps some of his advisers and employees are not. More to the point, I suggest that F.D.I.C., suggesting a direct to homeowner mortgage aid program, may have the correct perspective. If the complaint is accurate, that the problem started due to adjustable mortgages being sold to and "bought" by sub-prime borrowers leading to Mortgage Backed Securities ("MBS"), then fixing those mortgages should alleviate the worst of the problems.
The securities markets, those entities that buy and sell literally millions of mortgages after they are bundled into MBS, have determined that the assets, because the true Fair Market Value is unknown, are worthless. That is as absurd as stating that they are worth 100% of the principal and interest owed on each underlying mortgage. EXTREMES - both views. There will be losses, but if they can be quantified by F.D.I.C. or any other agency of the Federal government, the investors in MBS should be more secure, have a sense of balance restored, and allow the markets to return to a sense of normalcy.
The F.D.I.C. program, in its entirety is at, http://www.fdic.gov/loans/loanmod/index.html. The basics are to underwrite a portion of the outstanding mortgages where there is a default, so that the holders of the MBS know that the value is still there. The basics of the program, which the Treasury is fighting despite the rules for use of the Bailout funds, is to MODIFY EXISTING MORTGAGE LOANS
1. Pay servicers $1,000 to cover expenses for each loan modified
2. FDIC/bailout funds would share up to 50% of the losses if a modified loan re-defaults
FDIC projections state that 2.22 million loans could be modified, having a book value of $444 billion with a total program cost of only $24.4 billion. Assuming a 33% default rate 1.5 million foreclosures could be avoided
One might also believe that while the people working for Secretary Paulson are working around the clock and are very bright, some of them in key spots have no experience in this type if crisis. If you have never worked-out failed assets (loans) in real-life, not just through computer modeling, nor as estimated by economists, actuaries, financial analysts, and Goldman Sachs/Wall Street, you may miss critical details. Here, to fix the problem, the problem must be understood: it is not securities; it is the inability to pay mortgages and the resulting erosion of home values.
THERE IS NO EASY ANSWER! That does not mean that we should have had to panic, lose confidence in the system itself, and, by stampede, cause the securities market drop like a rock.
author's copyright by Richard I. Isacoff, Esq. - November 2008
http://www.isacofflaw.com/
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