Treasury Archives – Refinance – Mortgage Refinancing Rates And Information

Loan Modifications Alternatives: HAFA Starts Its New Program Today

April 5th, 2010 No comments

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.

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HAMPs Loan Modification Has Finally Got Moving

March 17th, 2010 No comments

The HAMP program has finally started to get some momentum and provide a substantial amount of troubled homeowners with a way out of foreclosure. Unfortunately, this help seems to be too little, too slow, and too late. However, one must accept that steps are being made and that although not all targets have been met, significant progress is finally occurring.

Let’s look at the hard data.

- After over a year since the program started 168,000 households now have permanently modified mortgage. This represents an increase of over 50,000 from January 2010 and 100,000 from December.

- There 92,000 trial modifications in the final stages before a permanent modification. According to Treasury the average saving for each homeowner is around $500.

This is good news, and it is certainly a help to those that have been fortunate enough to benefit from it. However, the truth is that it is a drop in the bucket when compared to the 6 million + troubled homeowners that are behind in their payments and are at risk of foreclosing on their mortgages.

When the program started it was hailed as the most aggressive plan the Government was enacting to control the housing crisis. Over a year later only a million people have entered the program, a far cry from the four million households the program set out to help.

A words batter has started over these claims. The Treasury is now claiming the goal was to provide help to 4 million homeowners not make sure they actually got it. If you accept this interpretation, HAMP is between 35 to 45 percent of the way to achieving its goal. Of course, critics claim that the Treasury is simply moving the goalposts.

What is even more worrying is how the borrowers that enter the program are being treated. Valparaiso University School of Law carried out some interesting research on the HAMP program and discovered that although 66% of all borrowers in the trial stage made all their payments, less than 25% have received a permanent modification to their mortgage. The reason for this is lack of paperwork and the loan modification limbo created by the complex and lengthy red tape.

Nevertheless, the Government remains confident, and a Treasury Department spokeswoman has claimed the rate of loan modification completions will rise in the next few months.

Another scary fact is that the number of people entering the program is actually slowing down. In February 73,000 signed up, which represents only half the number of homeowners that did so in October and November.

In conclusion, although the Government is starting to make a substantial dent in the number of homeowners it is offering help to; it is a far cry from the objectives the program set out to meet.

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Loan Modifications Are Going To Be Simpler, What Do You Need Now?

February 3rd, 2010 No comments

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.

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Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories

January 22nd, 2010 No comments

Last Friday Treasury revealed the latest data on HAMP, the Administration’s major foreclosure prevention program. The data has been sold as evidence of the significant progress made from pressuring mortgage servicers. Are loan modifications finally becoming the solution for the mortgage crisis as the Government has always claimed?

Let’s have a look at the figures.

Around 900,000 homeowners have entered the program with a trial loan modification. 66,465 homeowners have received permanent modifications as of December 31^st. That’s where the good news lies, November’s figures for permanent loan modifications were half that, at 31,382. This progress is being reported by Treasury as a “significant acceleration of the rate at which borrowers are being approved”. Hard to argue with that when the numbers doubled in a month, but is it enough?

Let’s have a closer look at the figures and the program as a whole.

The program is designed to allow homeowners to enter a three month trial loan modification, during which they are supposed to provide lenders with all the documentation required for a permanent modification. However trials are stretching for much longer. Servicers blame homeowners being slow at handing in paperwork; homeowners blame servicer of losing paperwork and making mistakes. Treasury’s response to this mess has been to allow for longer trial periods, up to 5 months. However mortgage servicers have kept homeowners in what is being called “trial purgatory” for up to nine months.

This seems to be one of the big issues the HAMP program faces, a complete gridlock of loan modification trials. Have a look at these figures:

In October Treasury reported that 487,081 trial modifications had been started. Three months later not even 24% of those trial modifications had been resolved one way or the other. Let’s put this another way 76% of the current trial loan modifications are in limbo. Treasury has pointed out that 46,000 homeowners have been approved for a permanent loan modification but are yet to sign the paperwork that will make it final. Even if this were true it would still mean that 66% are still waiting for a verdict on their loan modification.

Consumers are blaming big banks for creating this loan modification limbo and the figures seem to support that claim. The big four banks, Bank of America, JPMorgan Chase, CitiMortgage and Wells Fargo represent more than 60% of the 3.4 million mortgages eligible for the HAMP program. The best of the bunch Wells Fargo has only completed 13% of its eligible loan modifications. The rest are doing much worse. Bank of America the largest mortgage provider by far is performing the worst, converting only 3% of their 1 million eligible mortgages into permanent modifications.

No matter how Band of America tries to window decorate these figures advertising they have surpassed the 200,000 trial modifications barrier, this is all rather pathetic. We are not even saying they should convert more trials into permanent loan modifications but at least put homeowners out of their misery and tell them what the outcome is, one way or another.

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Obama Mortgage Plan, Pays For Paying Your Mortgage

August 3rd, 2009 No comments

Obama Mortgage Plan, Pays For Paying Your Mortgage
Home mortgage aid plans are hard to design. Because of how the ideologies behind open market and social responsibility are polarized no matter what you do with a mortgage aid plan pretty much half the nation is going to disagree with you.

Obama’s new mortgage plan is not perfect, not even his closest aides will say that. Its strongest opponents will point out that the new mortgage plan does not really cover for homes that have seriously dropped in value in the last months/years. Most of the families in trouble live in homes that have lost serious value, so there is a question mark in how effective this mortgage modification plan is going to be.
However the new plan has managed to incentivize the payment of mortgages and their previous modification so that it is worthwhile for banks and borrowers. This might not be enough to tip the scales on the millions of households that are at risk of losing their home this year but then again, it might.

If anything does help to tip the scales on the current crisis is to make it attractive for homeowners to pay their mortgage as well as reducing it’s principal and making it affordable on a monthly basis. Let’s face it, if your home is under water (it is worth less than what you owe on it) and there is no prospect of prices going up and you are struggling to pay the mortgage you might be inclined to cut your losses, give up and let the home go. Of course if someone is willing to give you some extra incentive to pay your mortgage and make it affordable, you might just give it a try.
What incentives does the Obama Mortgage Plan offer?
There are two main benefits or incentives homeowners that are in the red can take advantage of.
1) Once their mortgage has been modified and monthly payments begin the Treasury will pay an incentive for every mortgage payment a borrower pays on time that goes to pay the principal balance of the loan(The cash you actually borrowed, not the interest). This is interesting because it will help reduce the length of the loan and the amount of interest paid on it. Over a five year period this “incentive” could help reduce the principal on the loan by $5,000. Reducing the principal of the mortgage has of course even greater repercussions as years go by. If you have a 15 year mortgage and you reduce your principal by $5,000 in the first five years you will be actually saving yourself over $3,000 in interest by the end of your mortgage.
2) There is a trial period of three months before any modification is permanent. During those three months the homeowner must pay his mortgage on time. If he does he gets $1,000 from the government every year for next three years. If the mortgage isn’t paid on time there is no deal.
These are not huge benefits but they are something and they might just help people start thinking in a different way and help people dig themselves out of financial trouble.

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Home Loan Refinancing Anti-Foreclosure Effort Results Disclosed

July 7th, 2009 Comments off

Home Loan Refinancing Anti-Foreclosure Effort Results Disclosed

A lot has been said of the efforts of the Obama administration to curve the drop in the credit and real estate sector. You can love it or hate it but you can’t argue that an effort is being made. Our previous blogs discussed the changes in the eligibility requirements to include more borrowers but have they been enough?

What are the results of this broad effort to alleviate those hit the hardest by the crises and that are in risk of losing their homes?
The quick answer is that we don’t really know. The White House guesstimates that “over 50,000” at risk loans have been refinanced so that homeowners can keep their homes. The exact number is not available because a tracking system for refinanced mortgages is still to be set up.

This has not stopped the Treasury from “predicting” that 20,000 bad loans will be “saved” ever y week by September. That sounds great and will be a great help for many families. However if analysts’ predictions are correct seven million homes will foreclose this year and next year. Of these foreclosures 4.5 million are expected to be distress sales. If this were to really happen it would further drag the Real Estate sector, dropping prices and increasing inflation. When you are talking about 7 million foreclosures a year, 20,000 “rescues” a week (c. million a year) does not sound that great, especially when a lot of the worst cases will not be covered by the current plan.

The demand for mortgage refinancing relief has been so great that banks claim to struggle to meet demand. However there is no real incentive for Banks to go out of their way to speed up things. Current incentives measures provide up to $75 billion to banks to refinance mortgages without any penalty if loans are not modified. The mortgage modifications have focused on monthly payments reduction decreasing the monthly cost of a mortgage but making it a much more expensive product. Banks are lapping it up as these loans are also backed by Fannie and Freddie making it a win-win market for them.

These monthly payment reduction schemes sound great in principal but do not tackle the issue of home equity. As monthly payments drop the mortgage principal (amount borrowed) increases reducing further the equity (difference between the value of the home and the money owed on it). This reduces incentives to keep up to date with payments as the chance of being able to sell at a profit drop.

A potentially more useful measure would be to help reduce the principal of mortgages for borrowers in trouble to encourage monthly payments and avoiding foreclosure. If the current rise in foreclosures is not stopped it will create it’s own domino effect dragging prices down and further increasing inflation.

The effort to stop the crisis and impending doom some analysts predict this have been huge, the big question is have they or will they be enough to actually stop it from happening.

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