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Loan Modifications have become loaded words politically and economically and as things get worse they get much more personal. Nationwide efforts have been made to educate homeowners in their search for the right loan modification for their home before they fall into foreclosure. Unfortunately only a small percentage 16% to around 25% of eligible homeowners (depending who you talk to) get a loan modification trial and even that represents a small percentage of the number of those that actually wanted or needed a loan modification but weren’t eligible.

The fear and anger of losing their home to foreclosure seems to have led 5 homeowners to torture, kidnap and beat two loan modifiers. Weston and Parmelee, two of the five to be arraigned, were, according to prosecutors, undergoing foreclosure on their home when they sought assistance from the victims. They were not happy with the results the loan modifiers were getting and asked for their money back. Weston, Pamelee, Gonzales, Canez and Parker arranged a meeting with the loan modification agents. It seems to be at that meeting that Daniel Weston and Gustavo Canez robbed and tortured the loan modification agents while the other three accused watched, according to prosecutors.

This unfortunate case underlines the desperate situation many find themselves when their home is going through foreclosure.
However this case seems to be a little more complicated. According to, again, the prosecutors, Gonzales, Parker and Parmelee had a standing business arrangement where they would send customers from their real estate business which adds a few question marks to any complaints the assailants might have against the loan modification agents.

We will have to wait for the official hearing but what does seem safe to state is that this case will only highlight more the credit crisis and the loan modification “solution” in general, as well as showing once more the potential for evil humans have.

Another lesson to learn from this case is that you are best dealing with a government paid, that means free for you, agent when you are looking for information and help on your loan modification. Free help is the best help in this case. This is a rather counterintuitive notion for those of us that are used to paying for quality information however in this case paid agents are more likely to be biased and charge us for things we can do ourselves (or with free help) for nothing.

The reason for this is that the government does not want an avalanche of foreclosures on their hands. Unfortunately due to a rise in unemployment this seems to be what the government is going to have to face. However they are willing to spend over 75 billion dollars to avoid to the best of their ability this situation. If you qualify for the loan modification they want you in. Your bank might not want to give you the loan modification because in some cases it really doesn’t seem to make financial sense to them.

So before you torture your local loan modification agent contact the making homes affordable program (HAMP) and see what they can do for you.

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Personal incomes and spending fell in September, even as a rise in the gross domestic product has economists declaring that the recession has ended.

As part of the Obama’s administration Making Home Affordable Program (HAMP) name and shame (or praise) initiative, every month a list of banks and mortgage providers is issued. The good banks are praised the bad ones are marked. The idea is to provide an extra incentive for providers to speed up their loan modification procedures.

September’s Loan Modification league showed the winners and losers of the HAMP loan modification league. The league shows the order of the “best” and “worst” banks based on the percentage of loan modifications they carried out, or more accurately, they placed on a trial loan modification, from the total of eligible loans they had to work with.

HAMP Winners Top Ten
1.    Saxon Mortgage Services, Irving, Texas (41%)
2.    Aurora Loan Services, Littleton, Colorado (33%)
3.    Citimortgage, O’Fallon, Missouri (33%)
4.    Nationstar Mortgage, Lewisville, Texas (28%)
5.    JP Morgan Chase, New York, New York (27%)
6.    GMAC Mortgage, Fort Washington, Pennsylvania (26%)
7.    Select Portfolio Servicing, Salt Lake City, Utah (26%)
8.    Wells Fargo Bank, San Francisco, California (20%)
9.    Residential Credit Solutions, Fort Worth, Texas (17%)
10.    Green Tree Servicing, Tempe, Arizona (12%)

What conclusions can we get from this data? It is hard to provide a solid interpretation from such a small selection of banks and mortgage providers but what does seem to jump out of the page is that among the top ten HAMP performers are small banks. In fact it would seem that the number of small banks is disproportionate.
One could reasonably expect that larger banks with a higher volume of loan modifications would be better at putting into play the government’s loan modification process. After all, at least in theory the government is covering the cost (and more) for these modifications. However the opposite seems to be true. Smaller operations seem to have done a better job of redesigning their business to face the increase in loan modification requests.

It is also noteworthy that smaller banks with less loan modifications may have to work less to have a higher success rate. If you have 10 loans to modify you only need to carry out 8 to have an 80 percent rate. However if you have 100,000 to modify… the picture changes. Whatever the case, there does seem to be a lot of room for improvement for the big names in banking that have received so much help from government bailouts.

Those were the winners, what about the losers?
The losers are banks and providers that have not modified any loans at all.

HAMP Losers
1.    American Home Mortgage Servicing, Coppell, Texas
2.    HomeEq Servicing, Sacramento, California
3.    Home Loan Services Inc., Pittsburgh, Pennsylvania
4.    MorEquity, Inc., Evansville, Illinois

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Sales of newly built homes fell unexpectedly in September after rising for five straight months, according to government figures released Wednesday.

Confused about whether lawmakers will extend the $8,000 first-time homebuyer credit and what it would look like?

The U.S. Senate has reached broad agreement on a bill to extend the $8,000 first-time homebuyer tax credit and offer a credit to existing homeowners as well, according to numerous media sources.

While foreclosure rates are easing in some of the hardest-hit cities, the crisis is beginning to expand into new metro areas.

Mortgage applications fell last week for the third week in a row, even as interest rates edged lower, an industry group said Wednesday.

Virtually all credit cards offered online by major banks still include abusive practices that will be outlawed early next year, according to a new report from the Pew Charitable Trust.

Last Thursday the big news was Obama’s Loan Modification program, Making Home Affordable. The first target the program set out for itself, reaching 500,000 trial loan modifications by November was reached nearly a month early.

Critics stated that the target was of little importance in the big picture of things with foreclosures continuing to affect more and more homeowners. Mark Zandi, chief economist for Moody’s Economy.com said the help provided by HAMP was a help on the margin. “But it is not going to end the foreclosure crisis”.
So what should we think of Obama’s HAMP? Is it a success or failure story?

The Good.
Reaching the target was no mean feat. The first months were painfully slow in reaping loan modifications and many did not think even this first target would be met. The fact that it was is proof of Obama’s administration skill at cajoling and bullying banks and providers into meeting their expectations.

Whatever we think of the “Big Picture” 500,000 families have lower monthly mortgage payments, that has to be good news, right?
According to Timothy F. Geithner mortgage payments are now being lowered faster than homes are being sold in foreclosure proceedings and 40 percent of eligible homeowners (1.2 million of them) have been helped. Here the figures vary, other put this figure at 16% of eligible homeowners, but that just represents differences on the definition of what an eligible homeowner it.

The Bad.
Economists say the program and its current success will not be enough to prevent many millions from losing their homes before the Great Recession ends.
By Mr. Zandi’s calculations from this year to the next over 4 million households will go through foreclosure or short sales.

The 500,000 loan modifications are only trial loan modifications. If the homeowners fail to pay one of the first 3 months in the trial, the modification is void. Even if the homeowner completes the trial period they then have to supply more paperwork which opens the doors for loans not being modified due to bureaucratic slips.

We don’t know how many of the loan modifications actually modified the principal balance of the loan and how many simply lengthened the loan or reduced the interest rate to reduce mortgage payments. Reducing the principle is an important factor if you want to reduce the rates of re-default on mortgage payments.

The problem HAMP was designed to attack, subprime mortgages that cannot benefit from current low interest rates because the value of the home has dropped is no longer the main type of mortgage going through foreclosure. It is not only subprime mortgage that are suffering now. Prime mortgages with 30 year fixed interest at low interest rates are also defaulting because of the increase in unemployment. Loan modifications cannot help much on good mortgages with owners that cannot afford any payment because they are out of work.

So whatever your view is, this issue is still far from being solved and playing with loans is just not going to fix it. The question is do you try to use tax dollars to bail people out of the mess or just let the economy weed itself out of bad loans?

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1. Loan Modification Success Report, The Truth Is Far Worse
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2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
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