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U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed

October 15th, 2009 No comments

When HAMP started functioning just a few months ago everybody said it was working too slow that it would never come close to Its ambitious goals. Last Thursday nearly a month before the deadline self imposed by the administration HAMP has enrolled 50,000 troubled home loans for trial loan modifications. Whatever your view on the credit crisis and the angle the Government is dealing with it you have to grant that they have really given this scheme all they have.

After a slow start where few banks were even pretending to try to provide loan modifications and trial loans modifications were trickling few Obama’s Administration got tough on mortgage providers and banks. This was carried out through the friendly diplomacy Obama is becoming famous for and some good old fashioned leaking to the press the dismal figures of the worst service providers at providing loan modifications.

The question now is if the initial success at least in numbers of the loan modification is enough to allow for optimism. Let’s have a brief look at what loan modification programs have done and compare it with what is needed.

An estimated 16 percent of troubled borrowers, which is someone that is 60 days behind in his payments, have been placed into trial modifications. Trial modifications are a three month period where the homeowner is expected to keep up with his payments without a glitch. If the borrower is regular in his payments he can keep the loan modification for the term of the loan with some extra bonuses thrown in. All HAMP loan modifications must provide affordable monthly payments to homeowners. By affordable we mean monthly mortgage payments must be below 31 percent of their monthly income.

HAMP and other loan modification programs were designed to help homeowners locked into subprime mortgages with high interests they couldn’t get out of or modify because the value of their homes had fallen drastically taking away all leverage for a possible change of loan or modification.

That was the situation 6 months ago when loan modification programs were starting. According to economists the issue now is not so much that borrowers are locked in subprime mortgages and are defaulting on their payments. It is prime mortgages that are defaulting and prime borrowers that are becoming delinquent on their payments. The loan modification programs now in place provide little help for borrowers that can’t pay their mortgage payments but have excellent interest rates. The only real aid these programs can afford is if the service providers are willing to defer or forgive some of the principal. The former option leads to balloon payments, not always a great deal for the borrower and the latter is unlikely to say the least.

If this analysis is correct we would be dealing with a set of loan modification programs that might or might not be good at what they were set out to do but are no longer needed or at least the main problems cannot be addressed with them. This is unfortunate considering how many billions of dollars are being thrown at them. A lot of this cash is not even going towards the borrowers which could be seen as a way to inject cash into the economy directly to the families that need it but is paid to corporate banks as compensation for rewiring their business to speed up loan modifications.

Obama’s administration response to this argument is that loan modifications is only one of the ways they are fighting the credit crisis and that it is doing the job is was set out for and is on target to help up to 4 million troubled loans.

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Loan Modifications, Judges Frustrated by Banks Nonchalant Attitude

September 19th, 2009 No comments

Nationwide Judges are receiving complaints against banks and mortgage providers for dragging their feet and not providing the customer service that is to be reasonably expected. Especially since the government is paying for mortgage providers to deal with loan modifications as fast as possible.

Unfortunately Banks and service providers are not carrying out loan modifications as fast as was expected by the government or hoped by homeowners. I find this hardly surprising. If I had a business and was asked to spend money to reduce the monthly income I receive from a debtor I would make sure I was suitably compensated. The fact is that in some cases banks end up worse off when they modify a loan.

What is not so easy to empathize with is when banks systematically stall procedures, lose paperwork and change their requirements systematically. This has been the story that has been told nationwide and some judges are starting to tire of it all.

One case that has hit the news is that of Bobbi Giguere, initially published on the New York Times. Mrs Giguere submitted her paperwork three times to no avail. Last Thursday an interesting turn of events occurred at Judge Randolph J. Haines courtroom. Judge Haines instructed Mrs Giguere to question a Wells Fargo high ranking executive on the bank’s lack of response towards her loan modification.

Judge Haines explained the irregular procedure as a response to the growing concerns about Wells Fargo’s mortgage modifications practice.
The problem is that this is not an isolated case. Consumers nationwide are complaining (that is certainly not new) about the difficulty of getting a response from their mortgage servicers. This is threatening the success of the Obama Administration’s loan modification plan. While banks and mortgage servicers stall their response many homeowners foreclose on their mortgages and lose their homes which in many cases is good news, or the least of two evils for banks and loan providers.

The questioning of Mr. Ohayon the Wells Fargo executive was carried dramatic enough to be part of any lawyer movie. Mr Ohayon initially stated that Mrs. Giguere had repeatedly failed to provide a financial worksheet, a critical document for the loan modification to be processed.

Then came the fun part, what courtroom dramas are all about. Under cross examination Mrs. Giguere produced the letters Wells Fargo sent requesting the paperwork required for the loan modification. She asked Mr. Ohayon to read the letter and he was forced to concede that the letter did not ask for a financial worksheet.

This irregular procedure in which a Judge requires a large bank corporation like Wells Fargo to place an executive on the witness bench shows the federal frustration on the way loan modifications are being carried out throughout the United States.

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Loan Modifications: Three Mistakes That Will Cost You

September 7th, 2009 No comments

There are things you need to be careful you choose right, your spouse, your health insurance, your home and mortgage. If you got the wrong wife, husband or health insurance there’s not much help to be found here.

However if you are struggling to pay your mortgage, the value of your home has dropped to the basement or your bank is ignoring your calls then there might be something we can help with.

In a perfect world loan modifications would not be necessary. We would get things right the first time. Inflation wouldn’t cheapen money, workers wouldn’t lose their jobs, houses wouldn’t lose value and we would all have perfect credit rating. That of course is not the real world. Unfortunately those or only a few of the many things that can go wrong when owning a home and a mortgage.

Loan Modifications seek to remedy some of the problems that can sour a mortgage and make it impossible for home owners to pay monthly payments. Loan Modifications are not a financial holy grail that can solve all problems; it is a tool that if used wisely can help some borrowers in difficulties.

The U.S government has made an effort to make loan modifications available to as many home owners as possible by creating incentives both for service providers (lenders) and home owners (borrowers). The incentives include bonuses for paying your mortgage on time and for borrowers and cash per loan modification for banks and service providers.

However even the Obama Administration has made it clear that loan modifications are not for everyone. They are not for home owners that have no chance of being able to meet their financial responsibilities. Foreclosure is the only way for them. Loan Modifications are for those that are going through hardship but can find a solution with the right kind of help.

You will hear a lot of information on loan modification and how to take advantage of the opportunities the Government is offering we are going to look at three things you very probably don’t want to do.

Pay Someone To Do The Loan Modification For You.
It might seem counterintuitive to say it is best not to get a professional to do it for you and some loan modification consultants do provide a good service. However loan modifications are not that complex you can’t do it yourself. Loan modifications can be very expensive if you get a third party to do them for you. Besides there are so many scammers out there it could spell disaster if you choose the wrong company.

Ignore Your Bank Or Service Provider
Whether you choose to do your Loan Modification by yourself or get a “professional” it always pays to contact your bank and explain your situation before you become delinquent on your mortgage. It might seem strange but banks like to be told when they aren’t going to be paid. Negotiating a loan modification or any other option is much easier if you are still not behind in your payments.

Fall Into A Spiral Of Debt
Many actually see loan modifications as a way to get some extra cash or to allow them to borrow more. The main problem people have with their debt is not that their mortgages are too high but that they have so many other debts to pay. Learning how to save and avoid unnecessary debt is one of the most valuable financial lessons we can learn and that so many of us have to learn the hard way.

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Loan Modification, DIY or Professionals, which is the best route.

August 31st, 2009 No comments

Finding a loan modification you can live with and getting your bank to accept it is no easy task. It requires a lot of time, large amounts of patience and determination.

Banks are swamped with more loan modifications than they have ever had to handle and the dilemma of some loan modifications costing them more money than they are worth. Bringing all kinds of issues, like why would a bank provide help to a borrower through a loan modification if it is more cost effective to foreclose the mortgage?

The complexities behind a loan modification can be scary and frustrating but if you jump through the hoops and stick to your guns you have a good chance of reducing your monthly bills and even saving some money.

To get us started lets answer some basic questions most borrowers that are looking for a loan modification ask?

Do I need to have a job to get a loan modification?
Not necessarily. You can apply for a loan modification even if you don´t have a job as long as you can prove you can pay for the modified mortgage payments in some way or are likely to be able to do so soon. The details of your case will condition what response you get. For instance if you have recently been sacked or laid off from a well paid job and have the skills to get one soon you are more likely to get a loan modification than if you have been unemployed for a year.

Do you have to pay someone to manage your loan modification application?
Not at all. The government is backing a variety of loan modification programs that are designed to incentivize banks and service providers to supply sustainable loan modifications. Government websites and helplines are in place to guide you through the mortgage modification process.
It is true that loan modification consultants can provide you specialized advice on how to fill in applications to maximize your chances of being approved but you can do just as well with a little patience and by reading the instructions carefully.
If you do decide to hire someone make sure they are not one of the many con artists and scammers that are so common now. Stay clear from companies that guarantee successful applications and ask for upfront fees. There is no way to guarantee a bank will accept a loan modification and it is illegal to pay for services that have not been provided.

How do you get the ball rolling?
Call your bank and ask to be put through to the mitigation department. You will then be asked to jump through a few hundred loops and explain your situation. It is a good idea to find out first what paperwork you need and make sure it is all correct before starting your application process.
What kind of information do you need?
You will need W-2s from your employer, a pay sub and details on your savings and investments. You will then be asked to provide an income to expenses ratio and basic paperwork to support your claims. Don´t forget to be honest, any discrepancy that is picked up by the service provider will cause your application to be dropped.

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The Obama Loan Modification Aid Program, What Are The Benefits?

August 31st, 2009 No comments

The objectives of the Obama Loan Modifications program are rather ambitious, to help 7 million people (the number is also quoted as 9 million, depending who you ask) modify their loan in order to afford monthly mortgage payments. In fact the way the program is designed you can save money by modifying your loan. The government is seriously backing this program with their big guns, namely $75 billion of funding. As always with these programs there are technicalities to deal with but the gist is rather simple to understand.

The loan modification program provides incentives to banks and service providers to modify your loan to a more sustainable monthly payment if you qualify through the trial period. The three month trial period tests if you are on time with your payments.

If you are, you receive a bonus that goes towards paying the principal of your loan. After that, every year you pay your mortgage without being delinquent on any payment another bonus is paid towards your mortgage principal.

These bonuses are worth extra because they pay the actual cash you initially borrowed, on which you will not have to pay interest. Who qualifies? This is one of the prickly areas of the program. The Loan modification aid program was designed to be as open as possible. You don´t have to be behind in your payments to qualify, just struggling to meet the monthly payments with your current income.

However the issue gets a little complicated due to a clause that limits a lot of home owners that are struggling. You can only qualify if your mortgage represents more than 30% of your monthly income. If it is less you will not qualify. This clause is actually under revision due to the fact that most borrowers don´t only owe on their mortgage but on their car, their credit cards, etc… This causes some of the most desperate home owners that owe money from various lenders not to qualify for the help they need. There are two main groups that can qualify for loan modification.

Those that want a loan modification but that didn´t qualify because the value of their home dropped and those that are on the brink of foreclosure. Either of these groups can get a loan modification if they comply with the programs requirements.

Don’t forget.

It is free to apply for a loan modifications. What is more, the government is paying banks to give you loan modifications. It is therefore a great idea to not trust companies who ask for expensive fees to get your loan modification processed. The best advice you can get is for a change free. Contact the Home Affordable Mortgage Program or any of the other government housing departments.

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