Flip Side Archives – Refinance – Mortgage Refinancing Rates And Information

HAMP’s March Loan Modification Report; A Review

April 15th, 2010 No comments

Obama’s Loan Modification programs have been criticized for their lack of results. But what are these results? The March Servicer Performance Report is fresh off the press, so let us have a quick look at what it has to say.

The highlights for HAMP are that more than 230,000 mortgages have been permanently modified. 108,000 loans have been approved by the lender and are simply waiting for the borrower to sign the final papers. That gives us a total 338,000 loans with permanent modifications. The other big newsbyte is that over 1.1 million trial loan modifications are active under the HAMP program. As you all know these trial loan modifications last for three months. If at the end of this period the borrower has provided all the relevant documentation and is up-to-date with his mortgage payments he is given a permanent loan modification. That is, of course, the theory.

According to MHA these loan modifications represent over $3 billion dollars in savings for monthly mortgage payments. The bad news on the report is the number of trial modifications added in the March has dropped to 57,000 from 72,000 in February. The reason for this, according to HAMP’s spin, is that servicers and lenders are requiring upfront documentation before trial modifications start. This has been a bone of contention with critics of the program that see the trial loan modification (without prequalifying the necessary documents) as a way of getting troubled borrowers to pay for three extra months and then deny them the loan modification on the basis of pending paperwork .

The flip side on the reduction of new trial modifications is there has been an increase of 15% in the number of permanent loan modifications approved in March. The story MHA is spinning is that numbers are dropping because of prequalifying filters servicers are introducing. The biggest issue with the Making Home Affordable Program is it doesn’t tackle the real issues of the housing crisis. Interest rate reductions of loans can substantially reduce the cost of a mortgage. A drop of 1% translates into savings $1,500 in most cases. The problem is that high interest mortgages are not the biggest problem any longer. Unemployment is.

MHA understands this and is providing alternatives programs to HAMP that provide specific aid to unemployed homeowners. The latest program for unemployed started this month. It provides loan modifications of mortgage payments to 31% of the unemployed worker’s income for a 3 to 6-month period. The question is will these measures provide real aid to those that need it and not just throw good money at lenders and servicers with little long term benefits for borrowers.

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The Good Side of Loan Modification’s Failure, A Buoyant Foreclosure Market

March 9th, 2010 No comments

Despite the Government’s best efforts and greatest intentions the wave of foreclosures continues to increase. The borrowers that are now defaulting on their mortgages and not qualifying for loan modifications are no longer people with subprime loans and bad credit rating. The fastest growing demographic in foreclosures are prime borrowers with prime loans that have lost their jobs and cannot afford any kind of deal on their mortgage.

This is a tragedy for the millions of families that face losing their homes. However there is a flip side to the crisis in the housing market. The flip side is that the foreclosure market is doing great. More and more buyers with cash in their pockets are looking for bargains among the millions of homes that are going through a foreclosure.

Many have the idea that the only homes that are on the foreclosure market are located in crime-ridden areas and are run down shacks. This is simply not true, during economic crisis like the one we are now going through all kinds of homes can be found, from beachfront luxury homes to shacks in the ghetto.

There is another myth a serious buyer must forget about as soon as possible. You are not going to find a great property selling at pennies on the dollar. Sometimes you can find amazing deals but this is probably because there are other circumstances that reduce the value of the home besides being on the foreclosure market.

However, you can get some great deals and discounts. A typical discount is probably around 5% less than the market value, although you can sometimes pay up to 30% or 40% less.

If you are savvy enough, this could only be the beginning of your savings. If you buy the property from the lender you could ask/demand for some of the buying costs to be waivered. If you ask nicely you might even get a discount on the interest rate or a break on the down payment.

Buying a home, whether on the foreclosure market or not, is a huge investment for most of us. It is therefore worth us spending some time doing our research and due diligence before we spend tens or even hundreds of thousands of dollars.

The foreclosure ball begins to roll when a borrowers falls behind on mortgage payments. A homeowner that loves his home will try his best to keep his home, making some payments, looking for a loan modification, or any other measure he can. However, if the home still forecloses the chances are that maintenance has not been carried out for some time on the home. Include the costs of bring maintenance up-to-date in your investment research.

What this might include will depend on the property. Some just need some gentle manicuring, while others have underlying structural damage that is prohibitively expensive to fix. It is true that homes in need of some tender lover and care will come at a discount, but it is important to make sure you can afford the cost of providing it.

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