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It is no secret that the Obama administration has a lot vested in the success of the Loan Modification Program, also called the Home Affordable Modification Program (H.A.M.P). In order to help the program along the government has provided a long list of incentives, bonuses and other methods in order to encourage lenders and banks to do their part in making the program work.

First it was financial incentives in the form of cash payments for every completed loan modification of up to $4,000 over three years. This didn’t have the result they hoped for so the administration started naming and shaming tactics where underperforming banks or lenders were published on a list of the worst loan modifiers in the industry while the better performing banks were prized with kudos and positive publicity for “helping troubled homeowners”.

Recently the government has also added to the prize generous capital risk-weightings for banks that perform well with their loan modification application to completion rates.

Those tactics didn’t really lift the program off the floor, of the 750,000 applicants that have entered the loan modification program three month trial only 31,000 have to date actually received a permanent modification to their loan.

This is why the administration started to show its meaner side. Banks and lenders that did not support the cause have been threatened with fines, increased government scrutiny and recently even lawsuits.

Blown Mortgage readers will remember the lawsuit Ohio Attorney General Richard Cordray filed against New York based Barclays Capital Real Estate, doing business as HomeEq Servicing.

The lawsuit details that HomeEq / Barclays has been accused of issuing unfair loan modification agreements and providing inadequate and incompetent customer service to Ohioans who were at risk to losing their homes to foreclosures. HomeEq is accused of forcing troubled homeowners to sign one sided agreements that were unfair and deceptive. Homeowners were required, for instance, to realease HomeEq of all liabilities (which you can’t really do), pay extra fees (not supposed to that either) and waive their own right to defense (not a very popular measure with the Attorney General).

In addition to this Barclays was accused of breaking Ohio’s Consumer Sales Practices Act (CSPA) through their unsatisfactory customer service by not returning calls or responding to enquiries.

The question is this the real reason Ohio Attorney General is suing Barclays. I would say no. If you read carefully the statement of Mr. Cordray it is clear that the main complaint is “unfair” and “indadequate” customer service with loan modifications. Cordray is further reported to say:

There has been ample time for loan servicers to strengthen their efforts and start making a significant difference in preventing home foreclosures,” Cordray said. “Unfortunately, many servicers have instead repeatedly chosen to aggravate the crisis through noncompliance and excuses. As I see it, for every excuse, hundreds of families become more vulnerable to losing their homes. In Ohio, we have zero tolerance for any more excuses.”

If you check the latest servicers loan modification performance lists you will quickly see that HomeEq was way down there with 657 trial loan modifications and zero completed permanent loan modifications.

It doesn’t take a leap of imagination to see that the Obama administration has decided to start suing underperforming servicers and has started with a British company that has recently entered the industry. Targeting a foreign company could be seen as a warning shot to big banks like JP Morgan and Wells Fargo that have a measly conversion rate of 3 to 4 percent on their loan modifications.

Related posts:

1. Rogue Loan Modification Servicers, What Are The Signs?
2. Loan Modification Low Numbers, Why?
3. Loan Modification Success Report, The Truth Is Far Worse

Related posts:

1. Rogue Loan Modification Servicers, What Are The Signs?
2. Loan Modification Low Numbers, Why?
3. Loan Modification Success Report, The Truth Is Far Worse

If you are considering taking on a loan modification the chances are this is your first loan modification and you have many questions you need answered. The problem when you are doing something for the first time is that often you don’t even know what are the smart questions to ask. This series of articles on Blown Mortgage is designed to ask the questions you should be asking yourself and provide the simplest possible answers.

Fees.

Loan Modifications have an option to bring an asset current. Can I use this option to include all fees and corporate advances?

This option is designed to consolidate all expenses and fees related to the mortgage in as much as it is reasonable. This means you can include in your loan modification any legal fees and related foreclosure costs for any work that has already been done and is applicable to the current default event. This is great news for homeowners that have accrued significant amounts of money in loan modification costs and fees as these can be capitalized into the modified principal balance of the loan modification and therefore enjoy the benefits this affords in principal reduction and monthly income / payment cap.

Inspections.

Mortgagees are always concerned that their loan is secured and that the collateral on the loan is sufficient. Can mortgagees (banks and mortgage providers) carry out an interior inspection on your property if they are worried about the condition of the property?

As annoying as having an inspector check out your home is the mortgagee may conduct any review it finds necessary in order to verify the physical conditions of the property and make sure the value of the property is still sufficient to support the modified mortgage payment.

This is especially important if the loan modification actually increases the amount a homeowner borrows from the loan provider as the bank must make sure the security (i.e. the home) is still good to cover the principal (plus costs) of the loan.

Late Charges

If you are looking for a loan modification you are probably struggling to pay your mortgage or are already behind in your monthly payments. Late payments accrue late charges which carry hefty interest payments. Can a mortgagee include late charges in the loan modifications?

Mortgage letter 2008-21 clearly indicates that “accrued late charges should be waived by the mortgagee at the time of the loan modification.” The key word here is “should”. As we all know what should happen does not always occur by itself,  it often needs a gentle (or not so gentle) push for it to materialize.

Make sure you ask your bank or mortgage provider for a breakdown of what is included in the modified principal balance. If your late charges are not waived then they could be charged separately from your modified monthly payments.

I hope the answer to these questions were useful. Our next blog in this series will cover escrow advances, partial claims and interest rates.

Related posts:

1. Loan Modification Questions: Escrow advances, Partial Claims and Interest Rates.
2. Loan Modifications Questions: escrow analysis, unemployed homeowners and upfront premiums.
3. Are Loan Modifications Worth the Hassle

Related posts:

1. Loan Modification Questions: Escrow advances, Partial Claims and Interest Rates.
2. Loan Modifications Questions: escrow analysis, unemployed homeowners and upfront premiums.
3. Are Loan Modifications Worth the Hassle

Edit Post ‹ Blown Mortgage — WordPressIf you are going through hard times you better get ready to receive unsolicited phone calls with questions along the lines of: Are you in debt? Would you like us to reduce your debt by cents to the dollar? You have been pre-approved for a 20%, 30%, %50 or whatever percentage is the flavor of the month reduction of your mortgage and other debts.

These forms of debt relief companies are in the best cases suspect in the success rate they can produce and in the worst cases out and out conmen whose only purpose is to milk you from the little cash you have left.

However Debt Relief methods can be very effective so it is not a great idea to simply ignore debt relief altogether or even all debt relief companies which in some cases can provide valuable information to people in financial trouble.

So what can you do to find useful help in today’s financial crisis? This article turns the question on its head and answers 3 things that you shouldn’t do instead.

Don’t believe everything you hear. If it sounds too good IT IS.

If your prospective debt relief company says things like these:
-    Creditors don’t sue people if they don’t pay their credit cards
-    Nothing negative will appear on our credit card if we use debt relief companies.
-    And my favorite, the company can have negative information deleted from your credit report.

Unfortunately all three statements are completely wrong and wishing them to be so will not be too productive.  This is pretty basic stuff but I think it is worth detailing why all three claims are impossible to keep.

1) Banks need to sue delinquent credit card or mortgage debtors or they create a dangerous precedent that further increases the cost of their services.

2) Debt relief companies can negotiate a settlement for your loan but cannot change the law. Credit and loan providers are required by law to inform about any delinquent payers and no debt relief company is going to bypass that.

3) This one is quite amazing. The next claim debt relief companies need to make is that they can cure cancer. Time is of course the only thing that can get information deleted; generally five years will need to go by before previous credit misdemeanors are forgotten.

Debt Relief companies do have a place as a tool in the debt relief management toolbox especially for inexperienced borrowers that are not comfortable negotiating with their banks and are intimidated by paperwork and banks but it should be by no means the first option as they tend to be expensive and devastating for your credit record.

The truth is that everything a debt relief company can do for you, you can do better with some research and effort. Debt relief companies will talk to your bank and explain that you can’t afford to pay the loan and require a reduction in order to make that possible. Banks understand that it is sometimes better to reduce a loan and get paid than keeping it the same and not see a dime so they are sometimes willing to negotiate. There is no reason why you can’t do that yourself especially considering the “real” cost of debt relief companies.

Related posts:

1. Debt Relief Companies Under Scrutiny, New Regulations Could Rock The Industry
2. Debt Relief DIY: 3 smart things you can do yourself
3. Tax Relief for Mortgage Debt Forgiveness

Related posts:

1. Debt Relief Companies Under Scrutiny, New Regulations Could Rock The Industry
2. Debt Relief DIY: 3 smart things you can do yourself
3. Tax Relief for Mortgage Debt Forgiveness