Hot Mortgage Deals

Today HAFA, also known as the Home Affordable Foreclosure Alternatives starts to work. What will it mean for troubled homeowners? For a start the program increases Treasury’s contribution to homeowners from $1,500 to $3,000, while the contribution for junior lien holders gets a rise from $3,000 to $6,000.

Why is Treasury looking for different ways to give money away? Because the previous ways do not seem to be working. Loan modifications sponsored by the HOPE program also include juicy contributions by Treasury to both homeowners and servicers, but that does not seem to have made much of a difference. The government is now trying to look into short sales as a more pragmatic way of dealing with the wave of foreclosures that is hitting the housing market.

HAFA is designed to speed up the process for homeowners that are seeking for alternative ways to foreclosure, but do not qualify for a loan modification. It is also a smart option for homeowners that are so underwater they do not want to even apply for a loan modification, and just want to get rid of a bad investment with the minimum damage to their credit rating.

What does the program offer? The program principally provides extra incentives to homeowners, servicers and junior lien holders to fast track a short sale application. For instance a homeowners that undergoes a short sale on their home can receive up to $3,000 for their trouble. However, this is not the most interesting feature of this new scheme. Short sales has always been a better option than foreclosing on your home, most homeowners can be helped to understand that it is in their best interest to short sale if they cannot get a loan modification and are going to foreclose on their home.

The problem is that troubled homeowners often have a second mortgage on their property. These secondary mortgage lenders are called junior lien holders. They can stall the short sale process, and often do if they feel there will not be enough money to pay them once the house or property is sold. HAFA looks to give junior lien holders an extra incentive by giving them up to $6,000 if they agree to let the short sale proceed.

This program indicates two things. First the government seems to be changing gears in their pursuit of stabilizing the housing market. The initial focus on providing loan modifications to eligible homeowners is changing. The HOPE loan modification program continues, but the government seeks to complement it by encouraging alternatives like short sales to those that are not eligible for a loan modification. Second, the Obama administration is finally looking at the real issue, most troubled homeowners are in trouble not because their mortgage interests are too high, but because they do not have a job, or enough income to pay a mortgage. It also takes into account solvent homeowners that simply want to let their homes go, and provides them a cleaner way to break their mortgage contract.

Related posts:

1. More than Half of Completed Loan Modifications Re-Default; Why?
2. Loan Modification Alternatives: Short Sale Your Home
3. The Obama Administration Has a Brainstorming Session with the Hardest Hit States; What Should the TARP Fund Be Spent On?

Related posts:

1. More than Half of Completed Loan Modifications Re-Default; Why?
2. Loan Modification Alternatives: Short Sale Your Home
3. The Obama Administration Has a Brainstorming Session with the Hardest Hit States; What Should the TARP Fund Be Spent On?

The Obama administration and all the agencies at its disposal are working around the clock to save troubled loans but it is simply not good or fast enough.

In the third quarter there was a 6.2% rise of all seriously delinquent (i.e. 60 days or more past due) and 3.2% increase of all loans in the process of foreclosure.

What is even scarier is that even prime mortgages, those loans with the best interest rates and conditions also rose heavily.

However banks and loan servicers do seem to have stepped on the gas a little and supported the government’s efforts through the HAMP program, or Home Affordable Modification Program. Out of every 6 troubled homeowner one received a permanent or trial loan modification. Unfortunately the homeowners that get a trial but don’t get a permanent modification make up most of that figure. The bad news is that even those who do get a permanent loan modification (31,000 out of 750,000 in the last count) half tend to re-default with 6 months. The good news is that that loan mods done in the second quarter show a lower initial re-default rate. This could be because lenders are making more generous loan modification and reducing monthly payments more aggressively to make payments more likely.

So how are mortgages performing? Badly seems to be the sad consensus. 87 percent of all US home loans are listed as performing, which obviously means 13% aren’t. Government backed mortgages are not faring much better, in some cases worse. Only 83% of the Veterans Benefits Administration loans are “performing”. Fannie and Freddie mortgages (with government backing) are not celebrating with 8% of their mortgages “not performing.

It is not all bad news. The housing market with low interest rates and a large portfolio of “cheap” homes is attracting buyers. This large inventory is likely to stay with us for a while as banks continue to try to unload their distressed properties and troubled homeowners continue to agree to “short sales”.

According to First American CoreLogic one in four home loans is still “under water” or has a mortgage that is worth more than its current value.

What is the government doing to fight this situation?

Two main strategies: 1) Keep the housing market stable by keeping the interest rates low.

2) Loan Modifications.

The first strategy does seem to be helping by encouraging buyers to invest in a new home. Loan modifications are not meeting with the expectations but the latest figures do show that re-defaulting has dropped with the latest more generous mods.

Related posts:

1. Despite Loan Modifications, Foreclosures Will Continue To Rise Through 2010
2. Loan Modifications No Match For Rising US Foreclosures.
3. Loan Modifications No Match For Rising US Foreclosures.

Related posts:

1. Despite Loan Modifications, Foreclosures Will Continue To Rise Through 2010
2. Loan Modifications No Match For Rising US Foreclosures.
3. Loan Modifications No Match For Rising US Foreclosures.

One of my latest articles suggested that the best advice you can get on loan modifications is free and supplied by  the Government and that the Government has a vested interest in loan modifications to work, that is to stop families from losing their homes. This elicited an anonymous comment that I feel can be helpful as I believe it touches on many of the issues people are thinking about. The comment is copied in full even though some of the sentiments expressed may have hurt my fragile ego. The readers’ comments are in italics.

“The best advice comes from the government and they have a vested interest in your success.” Really?  The best advice comes from the government????  Based on the terrible advice that you are giving I can believe that you may actually believe this but that does not make it true. 

Yes, I agree Obama wouldn’t lose sleep over me foreclosing on my home, but I do think he wants this credit crisis to be behind him, to get re-elected and because most people like to do well in a job, few of us like to fail miserably. This does not mean I think he will succeed. I personally believe the whole problem we have now is not so much a mortgage issue, as a credit culture crisis. In many cases mortgage payments are one of the smaller loans borrowers have to worry about. Think credit cards, car loans, refinance mortgages, etc…

The government is not littered with the sharpest minds in America.  It is a bunch of people who are trying to get re-elected. Do you really think they are looking out for my best interest?  Did you ever stop to think that the banking lobby has the politicians in their back pocket?    When you call HUD all they do is give you the number at the bank to call and answer some basic questions.  Wow, what a great service they provide. 

Again I would have to agree that not all government employees have a Mensa membership card in their wallets. And yes, I am sure the banking lobby has plenty of leverage on this government, just look at how quickly the Government bailed them out when they needed it.

However HUD does provide more information than your banks number. Foreclosure prevention counseling services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government. These agencies are funded, in part, by HUD and NeighborWorks® America. There is no need to pay a private company for these services. http://www.hud.gov/offices/hsg/sfh/hcc/fc/

However if you feel it is all a big conspiracy and that all these counseling agencies are out to get you and don’t want to help you with your mortgage then it might be a good idea to get your own loan modification “guru”. You know what though? Not all of them are the brightest minds of America either.

Politicians tell people not to use loan mod companies because the banks don’t want people to help them out.  Wouldn’t it be great if the person that was suing you for something was representing them self and you had a great attorney to help you out?? 

Have you ever spent 6 months getting the run around from the bank while you stress out over the possibility of losing your home?  Who has the time or mental energy or mortgage knowledge to negotiate with the banks?  Do people know how to calculate their DTI or surplus/deficit?  Did you know that most lenders have guidelines that are based on the monthly surplus/deficit and if you give them numbers that fall outside of those guidelines at any time during the 3-6 month negotiations or during the 3-6 month trial modification you will be DENIED?   

Can you imagine how somebody would feel if they went through hell for 6 months and then when they went through the final financial review after the trial mod they got denied because they got a bonus check or saw their income dip or had an unexpected expense pop up?  Who is going to counsel them on how to manage their finances throughout this process and hold their hand in a great time of need… the government….yeah right.  At least they have your great articles to fall back on.  If you truly want to help people please educate yourself on what you are writing about before you start writing.  Which bank do you work for?

I think the key of the issue is that our friend feels (for completely altruistic reasons I’m sure) that loan modification agents are the way to go. We are too ignorant to work it all out ourselves, and the Government is not to be trusted. That is a feeling many share, which is why they will pay thousands of dollars to a loan modification agency to do the work for them.

It is true that for many of us the paperwork required is just too much to deal with when we have work, family and a hundred other things on our mind, but just because you pay for that help doesn’t mean it is going to be better.

The truth is that nobody can really guarantee you anything. Loan modification agencies can’t guarantee success, although they do have vested interests in delivering the goods, because it is the bank that approves or drops the loan modification application.

You need to decide if loan modifications are worth the trouble at all, some just see them as a trick banks play to get 3 extra months out borrowers.

You also need to decide if paying for a loan modification agency or using a free government issued counselor is the smart thing for you.

Related posts:

1. Shady Loan Modification Companies Told To Get Out Of Town By AG
2. Mortgage Modification Crackdown: Operation Loan Lies
3. Loan Modification Help: Get Your Loan Modification Approved

Related posts:

1. Shady Loan Modification Companies Told To Get Out Of Town By AG
2. Mortgage Modification Crackdown: Operation Loan Lies
3. Loan Modification Help: Get Your Loan Modification Approved