Loan Modifications are going through an interesting stage. Enormous efforts are being made to save homes from foreclosure, and while some results seem to be made, millions are still heading straight to a foreclosure. The government has increased the pressure on loan servicers and lender, and relaxed the requirements for a HAMP modification. What have been the results? Is there any good news to share? This short article will look into the good news, and the bad, of loan modifications at the end of March 2010, and try and separate the spin (a.k.a propaganda) from the real news.

The Spin: There has been a 45% increase in the number of permanent loan modifications in February 2010, according to HAMP.

The Truth: The total number of permanent loan modifications is still only around 170,000 loan modifications.

The Spin: Homeowners that receive a loan modification will enjoy much lower mortgage payments because they are granted a fixed 2% interest rate for five years.

The Truth: This is true, payments can be lower for borrowers that receive a modification. Unfortunately there are still more than 830,000 homeowners that are awaiting a decision on their temporary loan modification, and are languishing in loan modification limbo.

The Spin: The figures look worse than they are because there are over 91,000 troubled borrowers that have been approved for a permanent modification, but has not signed the final paperwork yet.

The Truth: Granted, however there were also 90,000 trial loan mods cancelled.

The Spin: More than 1.35 million trial loan mods have been extended, which includes over a million HAMP modifications.

The Truth: The vast majority of these mods are trial loan modifications, and in any case, only represent a 35% of the troubled homeowners the Obama administration predicted the plan would help. It must also be noted that half a million of these troubled homeowners could easily lose their trial modifications. A even more worrying fact is that more than half a million of borrowers on a trial modification have already made the three monthly payments. Why? Apparently many will not receive the permanent modification because lenders have finally decided their income is too high, or too low, to justify a modification. The benchmark for qualifying, or not, is set in such a way that having just a few hundred dollars more or less in your banking account can make the difference between approval or denial.

This had created in many the feeling that trial loans are often just a way for banks to squeeze a few months mortgage payments out borrowers that either had no hope of qualifying or the bank feels they are hopeless cases that will most likely re-default whatever measures are taken.

In conclusion, and to be fair, there has been some progress in the last months. However, this is too little, too late for most homeowners. However, a new problem now arises. Now a new wave of unemployed troubled homeowners with prime mortgages is hitting the housing crisis shore. It is unclear what solution loan modifications can provide when the mortgage already has low interest rates and a long tenure.

Share At:

Hide Sites

Related posts:

1. Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories
2. Loan Modifications, The Truth Behind The Spin
3. Loan Modifications Cannot Stop the Rise in Foreclosures

1. Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories
2. Loan Modifications, The Truth Behind The Spin
3. Loan Modifications Cannot Stop the Rise in Foreclosures

HAMP, the Government’s Loan Modification Program is changing their tune about the paperwork required to apply for a loan modification. Homeowners applying for a loan modification must now include their paperwork before even entering the trial stage.

Previously troubled homeowners could apply for a loan modification trial by simply providing proof of income over the phone. The problems arose when some troubled homeowners either took too long to send the paperwork or could not prove the claims they had made. The Treasury and many servicers claim that this is the cause that the conversion of trials to completed modifications has been so slow.

The Treasury’s response has been to simplify the paperwork required for HAMP conforming loan modifications and require that it is provided before a trial can start. The goal is to accelerate the process and help homeowners to start paying lower mortgage payments sooner.

What are the requirements?

Homeowners that want to apply for a HAMP mortgage modification must provide:

-          Two pay stubs. If they have a job.

-          A completed form that gives permission to the servicer to pull up a tax return.

-          A modification request with a hardship letter included. Hardship letters are documents that explain why you need a modification for your mortgage. The hardship letter must explain what has changed in your circumstances so as to no longer afford your mortgage payments.

When will these changes occur?

The first of June is the official starting date but servicers are allowed to start sooner if they want to. If you are going to apply for a modification you will need the documentation detailed above.

The Benefits.

The plan is that these changes will increase the conversion rate of homeowners on trial modifications to those on completed modifications.

This has been a bone of contention between servicers and homeowners. Servicers complaining at how bad homeowners were at providing the required paperwork and homeowners claiming it was only an excuse.

It must be said that banks that required paperwork for the trial process to start, like GMAC, had much better trial to modification conversion rates. Herb Allison, assistant secretary at Treasury believes that these changes will help all servicers to speed up the whole process.

Let us hope these changes work because HAMP has a long way to go to fulfill its goal of helping 4 million homeowners with affordable mortgages by 2012. Up to date the program has more than 90,000 homeowners on trials and 66,000 homeowners have signed their mortgage modification papers with average savings of around $500 a month.

Although the simplified paperwork requirements will in all likelihood help speed up the process it does seem like speed is the least of HAMP’s troubles, helping the 3,800,000+ troubled homeowners that are neither on trials or have completed modifications does seem to be more of an issue.

Share At:

Hide Sites

Related posts:

1. Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories
2. Wachovia Loan Modifications Help Only 3% and May Damage Your Credit Rating
3. Loan Modifications Double, Treasury And The Obama Administration Optimistic

1. Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories
2. Wachovia Loan Modifications Help Only 3% and May Damage Your Credit Rating
3. Loan Modifications Double, Treasury And The Obama Administration Optimistic

CitiGroup is busy advertising an alternative to HAMP loan modifications. The alternative is nothing new, the refinancing of mortgages with a 30 year fixed rate mortgage. What makes this option attractive is that interest rates are currently low. Homeowners that bought their house with a high interest rate can benefit from refinancing with improved conditions.

The mortgage refinancing offered by CitiGroup includes 30 year fixed rate mortgages with interest rates as low as 5%. The benefits the international banking group advertises include lower mortgage payments, access to home equity and even a reduction in the length of the loan’s tenure.

If you qualify for a mortgage refinance your mortgage is completed and paid for by a new mortgage with new conditions. If the new conditions are an improvement from your previous loan you could enjoy substantial savings.

However that is one big IF. Refinancing has been around for a long time, some even suggest that refinancing had a hand in creating the mortgage crisis we are now experiencing. In order to refinance a mortgage the new mortgage must be large enough to pay for the previous mortgage and still provide some kind of savings to the homeowner as well as pay for the expenses incurred in the process.

Unfortunately most troubled homeowners are stuck with underwater homes that are worth less than the mortgage. CitiGroup, or any other bank, are unlikely to refinance a home that is worth much less than the current loan.

Refinancing remains a solution for homeowners that are struggling to pay their mortgage, have a high interest rate mortgage and still have some equity on their home. For the vast majority of troubled homeowners out there this is simply not an option.

However if you circumstances comply with the scenario mentioned above you would be well advised to act quickly. Interest rates could rise soon and a 30 year fixed rate mortgage at 5% is a sweet deal.

If your house is underwater then the options are very different. Your first decision must be if it is worthwhile for you to keep the house. This decision will depend on your moral view of loans,  you’re your projection for the housing market is and what you can afford towards monthly mortgage payments.

HAMP loan modifications provide help for underwater borrowers but require that mortgage payments remain below 31% of the household’s income. Another requirement is that the mortgage passes the NPV (Net Present Value) test which measures the profitability for the lender of granting a loan modification. Although these are only two of the requirements for a loan modification they illustrate how difficult it is for homeowners to comply with them. Reducing mortgage payments can only be done by reducing interest rates, extending loan tenures, reducing loan balances or rolling interest payments to the end of the loans lifetime. Reducing interest rates and loan balances are not very popular with lenders while lengthening a loans tenure and paying extra interest at the end of the loan are not very good options for already struggling homeowners.

Share At:

Hide Sites

Related posts:

1. Loan Modifications: Why Is Citigroup Optimistic About Future Loan Delinquencies
2. Loan Modification And Loan Refinancing What Is The Difference
3. Loan Refinance Simple Answers: Profitable Refinancing and Underwater Loans

1. Loan Modifications: Why Is Citigroup Optimistic About Future Loan Delinquencies
2. Loan Modification And Loan Refinancing What Is The Difference
3. Loan Refinance Simple Answers: Profitable Refinancing and Underwater Loans