"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 rescue plan for homeowners. Show all posts
Showing posts with label rescue plan for homeowners. Show all posts
Thursday, January 28, 2010
Monday, January 11, 2010
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.
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.
Saturday, October 10, 2009
"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
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
Wednesday, September 16, 2009
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/
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/
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
Monday, May 18, 2009
Foreclosures Skyrocket - Help Doesn't
(NOTE: For reasons that are obvious to most of us, the majority of the financial information published, in print or by broadcast, has been about the economy in general, the mortgage crisis and the "fix" to it, the looming credit card disaster, or the stock market's on-going saga. Consequently, nearly all of the postings to deal with these issues. Other legal matters have not been forgotten)
We have all heard about the various federal plans to help homeowners keep their homes. Unfortunately, nearly all of the programs have had little impact to date, which has left borrowers who are in trouble at the mercy of the lenders/mortgage companies or the manager of the mortgage backed security ("MBS") that really owns the mortgage.
According to an article in the New York Times, published on May 14th, 55,000 homeowners have signed for assistance with one of the federal mortgage-relief programs. At first glance that may seem like a good response. Put into perspective though, in April there were 342,000 foreclosures. The point? The programs are not working. (see the chart from the New York Times above)
The Senate, without any support for the Senate Bill 61 from the White House to pass it, voted down legislation that would have made the mortgage lenders and the MBS managers pay attention and try to fix this country's biggest economic problem. The Bill would have given Bankruptcy judges the power to modify loans that were deemed unfair and predatory in nature. Lenders would have had to compromise or face the Courts. The Banking lobby killed it.
As long as the housing market continues to slide, and as long as foreclosures continue to climb, we will not see a major recovery in the general economy. One might argue that it is the 650,000 lost jobs last month that is the root cause of the recession (5,000,000+ jobs lost in the past 8 months). BUT, the crisis started when the mortgage market collapsed, loans that people could not afford adjusted, and the MBS that were being held nationally and internationally became worthless overnight. The MBS and CMBS (Commercial Mortgage Backed Securities), both of which are derivatives, represented trillions of dollars - yet the downfall of one "Bank", Lehman Brothers, began the chain reaction that has brought us to our knees.
There is little that can be done on the national political level, except for writing our elected representatives and asking that work for their constituents instead of the lobbyists. However, there are other steps that can be taken to help stricken borrowers.
The New York Federal Reserve Bank and the New York City Bar Assn. have set up a program to train lawyers to help victims of predatory lending practices, or the economy as it relates to home mortgages. The courses, offered at no cost to the participants provided each takes at least one pro bono (no fee based on the homeowners financial hardship) case in the next 12 months, will give the attorneys the knowledge to review all phases of the loan transaction to determine if the Lender/Broker/Originator took advantage of the Borrower, or if the Servicer is now committing violations of the Federal or State rules regarding collections, notices, foreclosure procedures, etc.
In Massachusetts, The Boston Bar Association has run similar type training, although not as comprehensive, as has The Mass Fair Housing Association in conjunction with the Hampden County Bar Assn ( western Mass) Foreclosure Task Force. Further, attorneys with experience in the field are handling those cases which come to them either on a pro bono basis, or if the borrower can pay, for a fee based on the ability to pay. The idea here is to do as much as we can to save houses.
At any given time, I have 5-8 predatory lending/hardship cases in process. The results are good so far, but each case takes a great deal of time, mainly on the telephone, on hold (listening to bad music). Each Lender and Servicer has different procedures that have to be followed; that is easy once you know what they are. The biggest issue is speaking to someone, on behalf of my client(s), who can make a decision or at least refer me to someone else who can do so. When I am doing a training course, I caution attorneys to just try to get their client(s) back to the place that the client really bargained for, and to have the attorney's fees paid by the Lender; not to try to get a big judgement against the Lender etc. The goal is to stop foreclosures and keep homes.
For example, I have a couple who Borrowed from Wells Fargo through a Broker, Direct Finance, whose representative (originator) promised a $1,200 per month payment, matching the existing loan. My clients were getting cash out of the closing to payoff credit card and medical debt. The closing where my clients actually signed all of the paperwork was a farce. The attorney that actually was the settlement agent (closing attorney - all of whom represent the Lender technically) was filling in for the Lender because the attorney that was supposed to do the work had a conflict in his schedule. The closing lasted 15-20 minutes. There was no way that the attorney could explain all of the documents and the terms of the loan to the borrowers in that time. In fact, the borrowers, my clients now, were just given paper after paper to sign - the attorney had another appointment.
When my clients finally received documents with the actual figures on them, the payment was $1,900 per month PLUS taxes and insurance, for a total of $2,200. This was $1,000 above what had been promised. My clients had been told that the rate would drop from the 7.75% they had, to 5.75 % which would make up the difference for the "cash out" portion of the refinance. Further, the Originator cannot be found - by me, the Broker, or the Lender. However he did the same thing, working for a different broker, to a couple to which he was referred by my clients. This indicates that there was a pattern and practice of fraud and deceit, at least by the originator and quite possibly by the Broker.
My sole job in the matter above is to make a deal so my clients can keep their home. We are not asking for punitive damages, or compensation for the stress, anxiety and "conscious suffering" my clients have been enduring since receiving a foreclosure notice. e simply want was my clients thought they were "buying", and my fees which a nominal in the context of the loan itself and the Lender's attorneys' fees.
If you are facing a foreclosure and the reason is not simply that you haven't paid the mortgage company, but could have, but is because of irregularities in the lending process or what you believe were problems, contact your State or local bar association for a referral to an attorney who is handling these type of cases. If you cannot find an attorney, feel free to contact us at the email address below, and we will try to get you a referral to competent counsel
Author's Copyright by Richard I. Isacoff, Esq., May 2009
Monday, April 20, 2009
Money For Foreclosure Relief: An Expensive Fiction
An Associated Press story in the New York Times on April 16, 2006 headlines "SIX LENDERS TO GET HOME LOAN AID", specifying in the body of the story that the recipients of the $9.9 billion are JPMorgan Chase, Wells Fargo & Co, GMAC Mortgage (which owns the Ditech entity), CitiMortgage, Select Portfolio Servicing, and Saxon Mortgage.
A FRONT PAGE story in the Wall Street Journal the day before read "BANKS RAMP UP FORECLOSURES". Guess who this article refers to as "ramping up": JPMorgan Chase, Wells Fargo, and FannieMae and FreddieMac. Citigroup stated that it had stopped foreclosures until March 12th at the request of the Obama administration but has gone back to business as usual. If a borrower is a "good candidate" for a modification as determined by CitiGroup, which means that it must own the loan - no securitization - it will wait and see what happens. GMAC too had stopped actions at the Administration's request, is back foreclosing. It stated that 10% of the mortgages in some state of foreclosure may be eligible for a federal program.
It seems that the government is rewarding lenders to foreclose. They are giving additional $$billions to the same companies that are not using the funds to help homeowners, but rather are using the funds to beef-up their balance sheets. It is not even being done under the guise of some Federal program like "HOPE NOW", which has had little impact on solving the problem, but at least gives the aura of respectability. One can at perhaps admire the honesty of these companies which do what they want, with seeming impunity. Select Portfolio and Saxon Mortgage are two of the most difficult entities with which to deal. Wells Fargo, while professing to be helpful is a throw-back to the old joke about banks lending you money when you don't need it - the have taken that addage to heart with mortgage bailouts.
Why is this issue being dealt with here, where the posting have tried to educate and explain? Because this is an education also. The much publicized "homeowner relief plan" was just for PR. If you have a home in danger of foreclosure, DO NOT WAIT for the government to help you. Assume that money is being spent, but more likely than not, to pay for the deficiency balance which remains after a family is evicted from their home which just went through foreclosure, fetching 60%-70% of the outstanding balance of the mortgage. We cannot have the Banks losing any more money, can we?
Your best bet is to contact an attorney who has experience in debt counseling, foreclosure prevention, and depending on your situation, bankruptcy. A competent lawyer can answer your questions about your risk of losing your home and can suggest several courses of action which might bring you a good resolution. At least, you will have someone on your side!
Author's Copyright by Richard I. Isacoff, Esq., April 2009
http://www.isacofflaw.ccom/
rii@isacofflaw.com
A FRONT PAGE story in the Wall Street Journal the day before read "BANKS RAMP UP FORECLOSURES". Guess who this article refers to as "ramping up": JPMorgan Chase, Wells Fargo, and FannieMae and FreddieMac. Citigroup stated that it had stopped foreclosures until March 12th at the request of the Obama administration but has gone back to business as usual. If a borrower is a "good candidate" for a modification as determined by CitiGroup, which means that it must own the loan - no securitization - it will wait and see what happens. GMAC too had stopped actions at the Administration's request, is back foreclosing. It stated that 10% of the mortgages in some state of foreclosure may be eligible for a federal program.
It seems that the government is rewarding lenders to foreclose. They are giving additional $$billions to the same companies that are not using the funds to help homeowners, but rather are using the funds to beef-up their balance sheets. It is not even being done under the guise of some Federal program like "HOPE NOW", which has had little impact on solving the problem, but at least gives the aura of respectability. One can at perhaps admire the honesty of these companies which do what they want, with seeming impunity. Select Portfolio and Saxon Mortgage are two of the most difficult entities with which to deal. Wells Fargo, while professing to be helpful is a throw-back to the old joke about banks lending you money when you don't need it - the have taken that addage to heart with mortgage bailouts.
Why is this issue being dealt with here, where the posting have tried to educate and explain? Because this is an education also. The much publicized "homeowner relief plan" was just for PR. If you have a home in danger of foreclosure, DO NOT WAIT for the government to help you. Assume that money is being spent, but more likely than not, to pay for the deficiency balance which remains after a family is evicted from their home which just went through foreclosure, fetching 60%-70% of the outstanding balance of the mortgage. We cannot have the Banks losing any more money, can we?
Your best bet is to contact an attorney who has experience in debt counseling, foreclosure prevention, and depending on your situation, bankruptcy. A competent lawyer can answer your questions about your risk of losing your home and can suggest several courses of action which might bring you a good resolution. At least, you will have someone on your side!
Author's Copyright by Richard I. Isacoff, Esq., April 2009
http://www.isacofflaw.ccom/
rii@isacofflaw.com
Sunday, March 8, 2009
Mortgage Rescue Plan - What's Missing?
The last post entailed a discussion of the President's basic loan modification plan to help 1 in 9 homeowners. The plan is comprehensive and deals with loans that are owned by a bank, FannieMae (FNMA), FreddieMac (FHMC), or the Federal Housing Administration (F.H.A.). The problem arises, as often stated here, when the mortgage loan is sold into a securitization pool which strips the mortgage loan of its individuality.
It is no longer a "regular" loan; it is part of a large pool of loans, each loan providing a small part of the means to pay interest to the people who buy the pool by buying little pieces of it called bonds (fancy name is Mortgage Backed Securities), and each mortgage itself, giving the collateral to be certain the interest will be paid. After all, home loans are the safest in the world! Right?? Remember, the loan (or mortgage loan) is the I.O.U. that you give to the lender; the mortgage is you giving your house as collateral for the I.O.U.
Currently, the housing market and the loan market are in a downward spiral. Even if there is a loan modification to make a mortgage loan more affordable, by lowering the interest rate, thereby lowering the payments, if the house has decreased in value from $200,000 to $160,000, the Borrower is paying for value that has disappeared. Sure, the Borrower took the money and the evaporation of value is not the Lender's fault. However, Borrowers could probably pay the normal interest rate if the amount of the loan was reduced to the actual market value.
On the other side of the matter of fault, assume that the lender is one of the good ones and has done nothing wrong. The lender is being asked to lose $40,000 (in the example). Who would want to do that and it isn't fair. Life isn't fair. The was no contract at the time of your birth that you, or a parent-type person, signed stating that "LIFE WILL BE FAIR". Not trying to be humorous or cavalier, that is reality.
What is also reality is that a borrower who owes 20% more than a house is worth, is likely to just walk away if the borrower's financial situation gets worse. Why try to save a house that won't have equity for 10.5 years ($200,067 loan principal at 5% interest for 30 years will not pay down to $160,000, the amount of the value of the house for 10.5 years). Yes, there is no appreciation of value in the house calculated so maybe in 9 years the mortgage and house will have the same value.
Reality check: If someone is pushed to the wall because of a loss of income, or increased energy costs, or due to illness/healthcare expenses, WHY WOULD THAT PERSON KEEP A HOUSE THAT IS NOT WORTH THE MONEY HE/SHE OWES??
The current Presidential plans do not address the problem of the Loans that are part of securities ("MBS"). The difficulty is that there are dozens of contract involved in each one. NO ENTITY IN THE CHAIN OF OWNERSHIP HAS THE RIGHT TO MODIFY THE LOANS UNLESS SPECIFICALLY ALLOWED IN ALL OF THE AGREEMENTS.
The House of Representatives has passed a bill that would allow Bankruptcy Judges to modify the loans, essentially changing the contracts. These same judges do this every day on virtually every other kind of contract, including mortgages - just not mortgages on primary residences. Hopefully, the Senate will pass the same bill or once that conveys the same powers to the Courts.
There are no easy answers to the mortgage crisis, especially since it was allowed to get out of hand. Yes, there are bad borrowers who will "milk" the system. But, there are millions of borrowers who were swindled when they got their mortgages, and have been hit hard a second time with prices plummeting.
Links are provided below for further information on the Senate Bill, and the effects of the issues on several homeowners.
************************************************************
Bloomberg News Article on the Senate Bill
http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=akFgFGFBhDp0
************************************************************
Reuter's Article on the Effects of the Bill and a Bankruptcy Judge's Opinion
Author's Copyright by Richard I. Isacoff, Esq, March 2009
Saturday, March 7, 2009
Mortgages, Mortgages, Everywhere, Yet Not A Drop For Me
We finally have the basics of the Mortgage Bailout for Homeowners -at least for some homeowners. The Administration crafted a plan, touted in the mainstream media as "Plan Could Aid 1 in 9 Homeowners". This program is designed to help people who might face foreclosure, keep their homes. This is great news! With inertia being the strongest force in the universe (at least ours), a step forward is truly a huge one. There is at least one significant gap however. BUT FIRST, the good news -PLAN BASICS:
1. Plan applies ONLY to primary residence
2. Mortgage balances cannot exceed $ 729, 750.00 - (this doesn't affect my clients)
3. You will only qualify if your total monthly mortgage payment (principal, interest, taxes, insurance) is more than 31% of your PRE-TAX monthly income. Example - you (and spouse if married) take home $750 every week, but your wages BEFORE TAXES are $900 every week, Using the BEFORE TAX figure of $900-
a. multiply it by 52 (number of pays in the year), which equals $46,800 (yearly PRE-TAX income;
b. divide that by 12 (months in the year) to get the monthly PRE-TAX income amount, here equaling $3,900;
c. multiply that figure, $3,900 by 31% (.31) = $1,209
If your total monthly mortgage payment is more than $1,209 , you would be eligible for the program. It does not matter if you are current in payments or behind, but you cannot have a large stash of cash in the bank or under the mattress.
Income WILL BE VERIFIED - Borrowers will have to sign a form allowing the Servicer/Lender to get a copy of the Borrower(s)' federal tax transcript (Form 4506-T) AND, if you are employed you will need 2 months of pay stubs; If self-employed then third-party proof of earnings in addition to the tax information. Everyone will be on the lookout for fake income figures and other FRAUD.
The concept behind this approach is to have the Lender reduce the monthly payment to an amount of not more than 38% of BEFORE TAX income, with the Treasury sharing the cost of reducing the payments to not more than 31% of BEFORE TAX monthly income.
Here is the bad news: While Borrowers with loans through FHA, VA or owned by FannieMae (FNMA) or FreddieMac (FHMC), will have no problem if the otherwise qualify (above guidelines), IF YOUR LOAN IS IN A MORTGAGE-BACKED SECURITY, and if there is a Servicer, the modification can be done only if the agreement( called the Pooling and Servicing Agreement or "PSA") among the investors, lenders, servicers, trustees, etc. allows the changes. Keep in mind, that as explained in earlier posts, no one expected this collapse, so most of the PSAs are not written to allow much in the way of modifications. Also, participation is voluntary. The majority of the Adjustable Rate Mortgages made to so-called sub-prime borrowers are in this category.
The full details of the plan, the "HOME AFFORDABLE MODIFICATION PROGRAM GUIDELINES", are available at http://www.financialstability.gov/ which is the official Treasury website. It is 19 pages, most of which gets fairly technical. At the same site there is a Summary of Guidelines called "MAKING HOME AFFORDABLE".
If you are in trouble with your loan, or soon will be, call the company that sends you the monthly statements. If they are of no help, call the "Hope Hotline" at 1-888-995-4673, or contact my office.
Author's Copyright by Richard I. Isacoff, Esq - March, 2009
http://www.isacofflaw.com/
rii@isacofflaw.com
1. Plan applies ONLY to primary residence
2. Mortgage balances cannot exceed $ 729, 750.00 - (this doesn't affect my clients)
3. You will only qualify if your total monthly mortgage payment (principal, interest, taxes, insurance) is more than 31% of your PRE-TAX monthly income. Example - you (and spouse if married) take home $750 every week, but your wages BEFORE TAXES are $900 every week, Using the BEFORE TAX figure of $900-
a. multiply it by 52 (number of pays in the year), which equals $46,800 (yearly PRE-TAX income;
b. divide that by 12 (months in the year) to get the monthly PRE-TAX income amount, here equaling $3,900;
c. multiply that figure, $3,900 by 31% (.31) = $1,209
If your total monthly mortgage payment is more than $1,209 , you would be eligible for the program. It does not matter if you are current in payments or behind, but you cannot have a large stash of cash in the bank or under the mattress.
Income WILL BE VERIFIED - Borrowers will have to sign a form allowing the Servicer/Lender to get a copy of the Borrower(s)' federal tax transcript (Form 4506-T) AND, if you are employed you will need 2 months of pay stubs; If self-employed then third-party proof of earnings in addition to the tax information. Everyone will be on the lookout for fake income figures and other FRAUD.
The concept behind this approach is to have the Lender reduce the monthly payment to an amount of not more than 38% of BEFORE TAX income, with the Treasury sharing the cost of reducing the payments to not more than 31% of BEFORE TAX monthly income.
Here is the bad news: While Borrowers with loans through FHA, VA or owned by FannieMae (FNMA) or FreddieMac (FHMC), will have no problem if the otherwise qualify (above guidelines), IF YOUR LOAN IS IN A MORTGAGE-BACKED SECURITY, and if there is a Servicer, the modification can be done only if the agreement( called the Pooling and Servicing Agreement or "PSA") among the investors, lenders, servicers, trustees, etc. allows the changes. Keep in mind, that as explained in earlier posts, no one expected this collapse, so most of the PSAs are not written to allow much in the way of modifications. Also, participation is voluntary. The majority of the Adjustable Rate Mortgages made to so-called sub-prime borrowers are in this category.
The full details of the plan, the "HOME AFFORDABLE MODIFICATION PROGRAM GUIDELINES", are available at http://www.financialstability.gov/ which is the official Treasury website. It is 19 pages, most of which gets fairly technical. At the same site there is a Summary of Guidelines called "MAKING HOME AFFORDABLE".
If you are in trouble with your loan, or soon will be, call the company that sends you the monthly statements. If they are of no help, call the "Hope Hotline" at 1-888-995-4673, or contact my office.
Author's Copyright by Richard I. Isacoff, Esq - March, 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/
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