Equity Talks

AVOID FORECLOSURE

2011-04-02T14:04:00.000-07:00

First call a FREE HUD Counselor: 1.888.995.4673
http://www.hud.gov/offices/hsg/sfh/hcc/fc/

If you are financially distressed or in danger of getting behind on your mortgage payments, you may be able to obtain free counseling from a HUD approved counseling agency. They offer a basic advisory service to consumers. The counselor will schedule a phone appointment and ask you to assemble your financial and mortgage documents prior to the call. Ask lots of questions and write down their answers. If this person suggests you 'may qualify' this does not mean you are 'approved'. Getting approved can take months. Many months.

What IS Loan Modification?
A loan modification is basically reworking your existing loan with your current bank or ‘servicer’ to new terms you can afford. In many instances, modification may result in a temporary lowering of your interest rate. But first, you must demonstrate financial hardship and an ability to make a lower payment. Lenders have their own rules so your advocate needs to know what they consider acceptable.

Your bank may steer you away from hiring an advocate because, frankly it's in their interest to have you to themselves. However, you may choose to work with a non profit agency, an attorney or licensed loan officer. Any paid loan modification agent must be licensed to practice in the state in which you live.

How Can You Avoid Foreclosure?
There are many strategies you may be advised to consider if you don't qualify for Loan Modification. A Bankruptcy (specialist) Attorney, qualified Short Sale Agent or Accountant may need to be consulted about your best options.

To WHOM Do You Apply for Help?
Your bank (the name on your mortgage statement) is the servicer of your loan. They represent the investor who holds your loan in their portfolio. The servicer is paid by the investor to keep your loan ‘performing’. It is in their interest to explore options to keep you in your home. They really don't want your home back!

An advocate may intervene on your behalf with your lender after assessing your most likely options. In addition to HAMP, HARP and MHA federal programs, many banks have their own private programs.

Advocates Are Proactive Agents Working for YOU!
During the modification process your advocate will need to regularly update your income documents to build your case with your lender. They will petition your lender for an agreement that serves all parties. Your advocate will help explore every option open to you. An experienced advocate will know the lending guidelines and specific concerns of your lender as well as which program to apply to your situation. A consumer has very little ability to navigate this turf on their own.

We Urge You to Apply for Help
For every situation there is a different potential result depending on you and your lender. The key is success is to keep communicating with your lender to find a resolution within your means.

Choosing an Advocate
We know how important your home is to you. By understanding your situation, an expert advocate may help you find a mutually acceptable plan of action. In the State of Washington, besides free HUD counselors, only legitimate Licensed Attorneys or Licensed Loan Officers may represent you for a fee. As your advocate, they represent you to your lender. Our goal is to prevent foreclosure and empower others to avoid financial distress. We offer a free financial review to explore your potential finance options to Washington citizens.

Assessing Your Options:
After your review, if a mortgage solution is not possible, a good lender may refer you to a trusted advocate or attorney who are expert in this arena*.

Get Accurate Information and Develop a Plan!
Read Susan’s posts on rebuilding credit after modification, short sale or foreclosure. http://www.netcredit.blogspot.com/

Don’t Wait Until It’s Too Late!
Don’t wait until you have exhausted your resources before seeking help. You are not required you to miss a payment before you apply for modification. Your lender is not going to be very motivated to help you if you cannot also help yourself.

Help Your Advocate Help You!
Applying for a loan modification involves verifying your actual financial position throughout the application process. The process relies on your full participation. Be patient and consistently support the effort.

To your success! Loannetter

© 2011 susan templeton loannetter
*Loannetter is not a loan modification advocate. Our business is mortgage lending.

Loan Modification Budget Strategy -DTI Goals!

2010-11-14T00:41:00.000-08:00

How lenders interpret the loan modification guidelines and how to develop your modification budget strategy.

The key to a successful loan modification boils down to math. Of course, the banks won't tell you what their guidelines are because they are not out to help you. Different banks also interpret these guidelines differently. The main problem homeowners have in applying themselves is not knowing these rules. So get your budget out and work up your numbers. Drill them into your head and be prepared to deliver supporting documents every month that match your strategy if you expect to succeed.

After the hardship letter
As I have stated in previous posts, the number one qualification to apply for a loan modification must be financial hardship which has impacted your ability to meet your current payments using this Debt to Income test. These factors may be temporary or permanent so the hardship affidavit (letter) is your starting point, followed by your budget analysis.

Regardless of whether you are applying for a HAMP, MHA or HARP or private bank program; they all share one focus: a prescribed level of affordability. The basis is to quantify and verify your debt to income ratios fall into a safe zone of risk.

We use a simple calculation to calculate Debt to Income:

DTI = Monthly Mortgage Payment DIVIDED by Your Gross Monthly Income.

Front end debt to income ratio
Your 'front end ratio' is JUST your housing expenses, including mortgage, insurance and taxes. If you are distressed, your DTI will be between 35% and 60% to basically fall into the danger zone. Most lenders allow 45% for a mortgage. So if you are at 45% DTI now, and have experienced a financial hardship for a mortgage transaction that was completed prior to February 2010, congratulations -- you may qualify for a loan modification.

If it were just that simple. It isn't.

Example: current mortgage payment, including taxes and insurance, is $1,250 divided by monthly income of $4,000 per month = 31.25% DTI.

Most banks use gross monthly income to keep things simple.

It just so happens that according to the affordability indexes of these programs, 31% DTI is the safe zone target. So if this is your current situation, you are already living within your means and will not be considered for a loan modification. Save yourself the trouble, time and anxiety of trying to get help because you will be turned down. A lower number means you are even safer territory. Above 35% and its starting to approach a qualifying level, based on other compensating factors of your case.

Back end debt to income ratio
Next work up your scheduled debt to income ratio-- which includes your mortgage plus all your credit cards, car payments and regularly reported credit. This needs to be under 70% total. In other words if you have more than 70% going out the door every month they will worry how the heck you will survive even with a modification since these debts are not going to be paid down if you can only make your minimum payment.

Example: $1,250 mortgage payment + $300 car payment + $300 minimum credit card payments + $200 Student Loan = $2,050 divided by $4,000 = 51.25% DTI. This is considered a risky DTI. A 70% back end ratio would be considered EXTREMELY risky because when you add your scheduled credit payments, PLUS basic living expenses (all fixed costs which are unlikely to go down) a major car repair or injury could wipe you out.

Sometimes a dual strategy is employed to consolidate your debt--but that is another subject for another day. Depending on the lender, this may be a good thing or a bad thing.

What does DTI establish?
Risk. Essentially, your DTI establishes how much assistance or 'break' will be necessary to get you into a safer risk category. The current front end, current back end and cured front and back end DTI ratios are compared and negotiated once all your facts are established.

Imminent 'risk of default'
Your must basically PROVE you are in danger by showing DTI's currently over 35% and under 70%. Then you must make a case for lowering your front end DTI to 31%.

Example:
Loan amount $250,000 at an interest rate of 7.5% = PITI (principle, interest, taxes and insurance) of $2,008 per month divided by $4000 income = front end DTI of 50.20%. High by any standard.

Now reduce the interest rate to 2.5% = PITI of $1,248 per month = 31.2% DTI. Perfect!

You see where we are headed?
Getting your payment into a safe zone -- even for a few years so you can recover financially is the goal. Officially the HAMP and MHA programs aim for five years relief, but most banks allow to 30 year improved terms. They figure most people move on average every 7 years so they are just protecting their losses by keeping you in your home and paying them something on all their cheap TARP money. You will have to negotiate very strongly if you are representing yourself. Above all, keep your cool and be polite if firm.

The winning strategy:
The goal is to establish what level of risk is acceptable to your bank and head for that zone as your negotiating point. If you are too far over into the danger zone due to high debts or your income is unlikely to qualify (either too high or too low) then you may as well call it quits right now.

If your income is likely to improve, or you are recovering from injury, career change, etc., you may still have a chance to make your case and meet this zone. In some instances I know borrowers who merely stalled during the application process until their income was acceptable. You may just be buying time. It's pretty stressful work to negotiate this yourself while you are attempting to rebuild your business and career. I strongly recommend you hire an advisor.

The winning tactic:
Use an amortization chart and plot in your mortgage loan amount and fiddle with interest rates until you get your PITI payment down to 31% DTI using your current income. If you are short, you can see how much income you will need to qualfiy to get up to 31% DTI. Use 2.0 - 2.5% as a floor interest rate for starters.

Expect to see a rise over a 5-10 year period to say 4.5 - 5.0% and then argue to fix that for the remaining 20-35 years. Yes, they will offer 40 year terms if that's what it takes. In rare cases, if you are way over the save DTI zone, and they really don't want your underwater property, some lenders will set aside a chuck of your loan in an interest free second lien that must be paid when you sell or in a certain balloon time frame. Hey - it's free money!

Budget wizardry
If you are waged, it will be easier to show consistency of income by providing your pay stubs. If your hours are inconsistent, you can average your income over several months and include funds from liquidating any assets or extra cash work you may scrounge up to support your case. After all you are working on financial recovery. Show that!

If you are self employed, you must provide your corporate Profit and Loss and both corporate and personal bank account statements. Now might be a great time to hire a bookkeeper or take some Quick Books training. Naturally you need to show a clean separation between business and personal. If you need to show more of your net income going to yourself to meet the minimums, you can take owner draws. It's a balancing act. Just aim for consistency in your budget from the start. They do check along the way! You will be coughing up reams of account statements, tax returns, pay stubs and profit and loss statements every month. If anything show a little improvement. Going backwards scares the beejezus out of banks.

Did I mention this is not a great time to take a cruise or buy a new car? Any new debt or time off work will absolutely kill your chances of loan modification.

Extra hint!
To support your hardship, you should ideally show very little money left over every month after making all your combined living expense payments. Once your housing expenses and scheduled debt, including food, insurance utilities, clothing, etc are paid each month, you want maybe $100 left over. That's the goal. If you suddenly start stacking up extra money in your savings they could deny you! You lender will verify your bank account balances directly.

What about missed payments and arrears?
Since your bank has every legal right to expect those interest payments you agreed to pay back in your promissory note, any shortfall or 'arrears' will eventually arrive in the form of a higher loan balance or longer term. Normally they forgive any fees associated with late payments. Don't worry -- the goal is to keep you in your home and if your case is well documented and meets both hardship and DTI test, you have a good chance of being offered a loan modification.

What about your home equity?
Even if you think your home value is holding up, it's not a great idea to admit you have much equity when you are applying for a loan modification. You may mention any deferred maintenance and state your value close to or below your loan amount. It concerns me that certain banks have been VERY aggressive toward clients with obvious home equity.

You know you are getting close when
At some point when your application is nearing a decision, the lender will send an appraiser to perform a Broker Price Opinion or BPO and report back to the bank. I know one fellow who parked old junker cards in his yard and let the grass grow up to make it look really scary! By the way, I've had clients report people arriving without notice claiming to be from 'your bank'. It is likely they got your address from the county foreclosure list. A real bank appraiser will offer their card and know who your bank is -- they rarely ask to come inside. You can always refuse that intrusion.

If you decide to negotiate your own loan modification and these tips were useful I would be pleased to hear your results. Otherwise, your professional advisor will employ these or similar strategies on your behalf. You can appreciate their effort is not easy or clear cut.

All the best! equitytalks
© copyright 2010 susan templeton equity talks
Disclaimer: I do not negotiate loan modifications, nor do I charge for an initial consultation. I refer local clients to a licensed colleague or other financial/legal resources as indicated by their circumstances. My business is responsible lending.

How to Find Out Who Owns Your Mortgage!

2010-10-21T22:58:00.000-07:00

If, like many Americans, you are concerned about who actually owns your mortgage, write a letter to your bank and interested parties requesting this information.

Which Bank?
Just because Bank of Arizona is on your mortgage statement that does not mean they actually own your loan. They are the 'servicer'. Which means they collect your monies, take their fee and send the rest to the parties who own it. Since ownership changes the servicer may also change or may just keep track of where to send the money. If Fannie Mae or Freddie Mac are the 'owners' of your loan, well....many people invested a Mutual Fund in Iowa or pension fund in Norway could be 'fractional owners' of your loan.

It is rare these days that your local bank you may have gone to for a loan, actually owns your mortgage. The speed with which loans were packaged and sold on Wall Street into traunches of Mortgage Backed Securities (which were then traded and and retraded) is why ownership of individual home loans is proving hard to unravel. One mistake at any point along the way is like putting cement on the icing of a baked cake, forever freezing any imperfections.

Use this template letter to send to your servicing bank to find out who owns your loan:
Enter your name of all persons on your home title
Address of home and Loan Number

Address the letter to your Servicing Bank

Date

Re: Request for original mortgage note and additional information

To whom it may concern:

This is a Qualified Written Request under Section 6 of the Real Estate Settlement Procedures Act (RESPA). I/we own the property at the address listed above, and your bank services my/our mortgage.

Your company name is shown as the servicer on my monthly mortgage statement.

I am very concerned about recent news articles documenting that some banks have been foreclosing on homes without proof that they own the loan. I understand that in many cases, banks like yours do not even know who owns the loans you service.

I have read reports of bank staff admitting they allegedly falsified mortgage documents to cover up their mistakes while some parties have misrepresented their relationships with both the bank and the trustee assigned to handle the foreclosure.

There have been reports of two banks trying to foreclose on the same home, banks foreclosing on homeowners who were current on their payments, and even of a bank foreclosing on a home where the homeowner had never taken out a mortgage.

As a homeowner and a customer of your bank, I am horrified. I had always believed that if I played by the rules, I would be protected, but now I know that banks like yours think the rules don't apply to them.

To protect myself and my family, I need to know who owns my mortgage. Within sixty days, I would like to know the name, address, and phone number of the bank or investor that owns my mortgage.

Furthermore, in light of the recent allegations of foreclosure fraud, I demand to see the original mortgage note proving ownership over my home loan. If you fail to produce a mortgage note proving that you have a right to collect my mortgage payments, I will be forced to consider all options available to me to protect my interests.

I ask that I receive my response in writing. I understand that under Section 6 of RESPA you are legally required to acknowledge my request within twenty business days and must try to resolve the issue within sixty days.

Thank you for your urgent attention to this matter.
(all parties on title or party to the loan should sign the letter)

NOW GO TELL YOUR FRIENDS!
What the heck, send a copy to your local newspaper Editor and report on your progress. Email this to your friends and family and urge them to do the same. If more people did this -- imagine the response letters banks would have to write much less the research necessary to find out who exactly owns each loan they service.

Keep at it!
If you don't get a response within 20 days to the day, send it again, certified mail, with a cover letter, asking once again for this information relating to your first request on such and such a date and include a copy of the original letter.

This link takes you to a list of the main mortgage servicing banks and how to contact them online using a letter similar to the one above. http://tinyurl.com/26vntht

Frankly I prefer certified mail and a paper trail. If you write a letter yourself, just keep the language clear and to the point, no insults. You want a response!

Copy the letter to your State Attorney General, and your Congressional Representatives http://www.congress.org

You might also copy The The Federal Trade Commission: http://www.ftc.gov/bcp/index.shtml The FTC's Bureau of Consumer Protection is supposed to protect you against deception and fraud, should you feel deceived or defrauded.

If your loan is with a National Bank, send a copy of your letter to the Office of the Comptroller of the Currency. Here's their handy site: http://www.helpwithmybank.gov

Each organization you write to or cc: should ideally see on their copy the other parties you sent your letter to. The more eyes, the better!

Video Expose

Watch this shocking video of a "Robo Signer" who signed documents as a notary for Nationwide Title Clearing: http://tinyurl.com/robosigner

All the best! equitytalks
© copyright 2010 susan templeton equitytalks

Distressed Homeowners Get HELP!

2010-08-28T20:33:00.000-07:00

If you cannot afford your current financial commitments it may be time to get professional help. Below are some guidelines and resources:

The loss of their home's value has caught many people off guard. Even folks with good jobs and modest 80% LTV (loan amount to home value) now find their value may have dropped 20% or more in the last two or three years. As mortgage professionals, we have many resources, but we are not magicians! Fortunately, the same guidelines that lenders apply to mortgage lending (which we must know backwards and forwards) also apply to your new situation, although they are applied differently - you'll see how below. It is extremely and painfully obvious to banks that many homeowners simply would not now qualify for the same loan they now hold. Your mortgage balance represents their interest in your property -- which may now be greater than what the collateral (your home) is worth. So essentially you and your bank are both in trouble.

So what do you do?
Well for starters, (and I know this is boring and insulting), it really helps to sit down with your family budget and look at what you are now spending for basics, including your house, insurance, taxes, maintenance, cars, car insurance, food, health insurance. utilities, food...all the necessities. I can't tell you how many people have returned this form to me completely blank. Many of us live in denial about what our lifestyles are actually costing us. So get this: it's important and the starting point of your financial recovery.

This simple two page form Budget Form is available from the Washington Department of Financial Institutions. This same form is used by the Loan Modification agents and HUD Counseling Agencies to assess your situation. The exercise takes 20 minutes tops. If you find this hard to do perhaps there is something amiss in your relationship with money. Gather the relevant bills and just do it.

After you have completed the form: Divide your Expenses by your Income like so:

Distressed Example: Expenses $3,000 per month divided by Income of $5000 per month
             = .60 = Debt to Income Ratio of 60%

At 60% DTI you are well over what is considered a safe lending limit according to the Fannie Mae/Freddie Mac and FHA guidelines. The lending limits today allow DTI of 41-45% depending on the loan type. For some earners with very low expenses and good assets, they may be qualified for up to 55% DTI. The Loan Modification HAMP/MHA guidelines top out around 31% DTI. Translated:

Lending Example: Expenses $3,000 per month divided by Income of $7000 per month
             = .428 = Debt to Income Ratio of 42.8% (under 45% limit--this is considered 'safe')

Modification Example: Expenses $3,000 per month divided by Income of $9650 per month
            = .31 = Debt to Income Ratio of 31.%

In these examples above I used the same expenses to show how much more income is required to get into the 'safe zone'. In other words, something has to give. Either you make more money, or your expenses must be reduced. Since the largest item on most people's budget is their mortgage, that specific payment may be adjusted or conversely, your income may have to increase to sustain your current lifestyle.

What is possible depends entirely on you and your situation.
If you are over the DTI of 31% as outlined above, then you may be advised apply for a Loan Modification. A hardship situation is required to qualify for the government relief programs, HAMP or MHA. A hardship is defined as any event that has impacted your ability to meet your financial obligations outside your control including: loss of job, divorce, death of spouse, medical event, increased responsibilities (child or elderly care), disability, natural disaster, and a host of other ills that may have befallen your household.

If you find yourself in debt due to your own excess or poor judgement then legal help may be required. A combination approach may be called for if you have more than one cause.

Where to Start:
You will be told by all the public infomercials to call your bank first. Don't waste your breath and time on hold. The fact is not many banks are bothering to do much more than say they will help and stall you for a few months before saying no, sorry we can't help you. All the while you are sinking deeper in debt. Yes --they are supposed to help and no -- they aren't very good at it.

If you are already facing foreclosure you may seek first the Free HUD Counselors in Washington or you may seek professional help. First, share your Budget Form with your accountant or a family friend and put some ideas on the table.

Call a FREE HUD Counselor for starters: 1-888-995-4673.

I will say I have spoken with several HUD counselors and some are well trained and helpful. The only problem with their 'advice' if you can call it that is that once they determine you 'have a case' they will send you back to your lender to fend for yourself. If you are not very far behind, say less than 90 days in your mortgage payments- your bank may be able to help. Just don't count on it.

What you can count on is a long drawn out process. If you are more than 90 days behind on your payments and you have received a Notice of Default, your case has fallen into the 'loss mitigation department'. These are specialists working through a backlog of distressed cases on behalf of the lender. Just remember, they represent the bank and not you. In fact, they really don't want to speak with you at all. They simply cannot handle your angst and get their job done.

If you feel you need outside help, below are some resources:

Home Foreclosure Legal Aid Project: If you cannot afford a lawyer, this project is a partnership with the Washington State Bar and the Northwest Justice Project: 1-877-894-4663

Office of the Comptroller of the Currency http://www.occ.treas.gov/customer.htm
Homeowners may register complaints regarding their national banks here for investigation.

Congressional Representatives Your elected officials need to hear from you and may offer resources and assistance at both state and federal level http://www.congress.org

Washington State Department of Financial Institutions Hotline:
Homeowners may register complaints about state banks and modification agents as well as tips on how to proceed if you are facing foreclosure: http://www.dfi.wa.gov/consumers/homeownership/foreclosure_help.htm

Please note: It is best to seek the services of professionals with a demonstrated track record and expertise in their specific fields. We refer to trusted local colleagues in the areas of debt restructuring, bankruptcy law, accounting, loan modification, short sale negotiation, real estate sales and credit restoration. Our primary business is mortgage financing.

To your future prosperity! equitytalks
(c) copyright 2010 susan templeton equitytalks

Bouncing Back from Short Sale or Foreclosure

2010-08-22T13:43:00.000-07:00

Homeowners who have suffered a Short Sale or Foreclosure are advised to develop a recovery strategy from the day you decide to negotiate your settlement terms with your bank. The fact you have failed on a financial obligation, on the face of it, is an agreement to move forward with you life. Congratulations. Take a deep breath!

You may be able to qualify for an FHA home loan as your fastest track back to homeownership sooner than later. FHA currently has no minimum credit score, although most lenders do have their own underwriting overlays on what they will accept. 620 FICO is the starting point for most.

What about timing?
The clock starts ticking in your favor the day your home title is transferred to a new owner. NOT unfortunately, the date your foreclosure is registered. Since Short Sales keep you on title throughout the process, you could be putting off home ownership however long it takes to settle your sale. If you were able to keep making your payments or miraculously did not have months of ‘late payments’ pile up on your credit you could theoretically apply for a new mortgage right away. How an underwriter views your situation is very much up to your complete presentation and the lending bank’s mood (as always!)

FHA could be your ticket!
FHA Loans, the flagship of HUD (US Housing and Urban Development) are the most lenient with general underwriting compared to conventional lenders largely due to the government insured mortgage insurance paid for by the homeowner.

NOTE page 2 of the below HUD FHA Mortgagee Letter of December 2009. This outlines the ability of a Borrower to apply for an FHA insured Mortgage following a Short Sale of a previous property. (It is likely these standards will be revisited as they often are!)

“Borrowers are considered eligible for a new FHA-insured mortgage if
• they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and
• the proceeds from the short sale serve as payment in full.”

Both situations above are rare if your short sale lags more than 90 days. More commonly:
“Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Lenders may make exceptions to this rule under certain circumstances.”
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf

What about Conventional Loans?
Traditionally, Conventional Loans, i.e., those sold to Fannie Mae and Freddie Mac have pretty strict guidelines (now) that you won't really be considered 'fundable' for seven years after a foreclosure. This varies widely in practice!

If you live in a rural area or are a US Military Veteran:
USDA and VA usually defer to the HUD guidelines with some exceptions, usually established by the lending institution on a case by case basis. VA will officially consider a borrower after 2 years from Bankruptcy or Foreclosure and with some exceptions possibly sooner. These organizations are essentially charged with sponsoring home ownership for people needing assitance with no down payment. Search USDA properties: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
Don't fall for: "Short Sales have less effect on your credit"
This is a popular real estate myth! For anyone considering enduring months and months waiting for their home to sell as a distressed short sale; please understand: essentially a foreclosure or short sale has very similar effects on your credit. After 120 days the ‘lates’ register on your report with the same effect as a foreclosure. Since on average a short sale takes from 6 to 13 months imagine that month after month your credit continues to tank with each successive late and each late is fresher and fresher. Recent negative impacts have more effect than older ones. Your score can only start recovering when you do and the late payments stop. NOTE: one 120 day 'late' entry for a mortgage payment can have up to 130 -200 pts immediate negative effect on your score. Credit scores go down lke a rock (fast) with any negative impact and up like a feather in recovery mode (slow).

Bank Ratings on the Short Sale Process:
HousingWire magazine recently rated banks for their short sale negotiation timing. Surprisingly, Bank of America was rated at the bottom with 13 months on average. We must give BofA some credit for inheriting the famed Countrywide debacle and all their class action suits to unravel. They certainly had help getting the worst rating. Perhaps even more surprising is that GMAC was rated at the top of quick negotiators at 6 months on average. GMAC was formerly rated as a predatory lender in the United States (I was told this by a Calvert Funds advisor) This turn of events for 'tough banks' becoming quick negotiators may be a direct proportion to the amount of Federal Reserve TARP money they have put to good use rebuilding their staff levels and bottom line.

Build a Credit Recovery Strategy!
More on rebuilding your credit after a Short Sale or Foreclosure on our other blog: http://www.netcredit.blogspot.com/

To your prosperous future! equitytalks
© copyright 2010 susan templeton equitytalks

The Future of Distressed Homeowner Programs

2010-05-28T20:34:00.000-07:00

Should this home be 'saved'?
I read a wake up article today by a mortgage market advisor Mark Hanson, who suggested that unless foreclosures double from the April 2010 record, the 'shadow inventory' of homes on the market --it will take at least 8-years to clear the sales backlog of homes for sale. Wow.

Which suggests, by deduction, that our national housing markets will be affected by these lower priced distressed homes lagging if not languishing on the market beside new and non distressed homes, affecting their values for years. OK so that's the downside. But for every dark cloud there is a silver lining...right? What is the real effect of foreclosures in your local market? Are people who don't need to sell helping stabilize their local economies by staying put regardless of their paper 'losses' in value?

Mr. Hanson goes on to suggest: "Massive-scale home retention (mortgage mod) programs have truly helped only a small slice but primarily served to slow up the pace at which foreclosures have occurred over the past year. This has created a giant bubble of distressed homeowners in the pipeline that over time will be liquidated. "

Apparently Mr. Hanson feels many of those homes in distress mode will eventually be foreclosed because it is apparent that the buyers were unqualified to buy those homes (or have experienced financial barriers to keeping them). So if that is the case, are banks ready to accept their part in over-lending and start writing off seconds and writing down principal balances willingly? So far the assistance offered has leaned toward banks and not borrowers. Many of us in the front lines would like to see the balance shifted toward a more fair and equitable assistance for homeowners caught in the middle.

Fortunately, some programs on the horizon, notably the new Principle Write-down Program takes effect in June...just three days away. It's too early to tell how investors will apply the new guidelines and if this will actually lower many loan balances. The biggest proponent, Bank of America, is making news about Principle Write-downs as a good thing but what most people don't know is that their losses will be 'asssisted off their books' with more incentives. Paid for by us. A borrower has to make perfect payments for at least five years to qualify for these incentives --so if they suffer other financial setbacks they could still loose.

One just has to ask: who is really being helped here? I am happy to see someone who can't afford their loan get a better deal if it means less pain all around. In effect, keeping someone in their home who can't really afford it is lashing that person to a financial ball and chain. If a bank writes down the balance on an existing loan, this is essentially devaluating that home for that homeowner. Althought the lower loan balance is not immediatly obvious until someone tries to sell that lower liened home and that person can afford to take a lower sale price. Isn't that what foreclosures accomplish just faster? Lowering the property values by flooding the market with cheaper goods? It is confusing to me why taxpayers would be expected to pay for these losses to banks...while quite directly absorbing these losses of our neighbor's foreclosed homes devaluing our own home next door. It's a double whammy for solid citizens to be asked to help our neighbors while also watching our home values decline.

Recently I spoke with a bankruptcy attorney who wondered aloud if homeowners in financial distress realized that loan modification is not a silver bullet. There are no guarantees. Your lender could put you through a trial mod and still reject you at the end if your situation has changed. You see, these programs have a certain life, and an end to the funding programs. Which could mean that months and months of effort might result in those losses still happening via foreclosure, short sale or deed in lieu.

Most people are really concerned about the effects of walking away or suffering a foreclosure when--and I have recently formed this opinion--the effects of a long drawn out short sale may cause as much, if not more damage, to your psyche and your credit score than making an earlier decision to take the loss via foreclosures or deed in lieu. Heresy, I know. Realtors who handle short sales would be spared those sales. Never mind the cost to the borrowers of a year on the market and all that uncertainty and lost sleep. Would it be better to settle up and clear you mind of the financial burden and move to a place you can actually afford? Folks need to weight this up carefully. ('Deed in lieu' by the way is agreeing with your lender to simply hand the keys back and avoid the legal public foreclosure process.)

I am reminded of my photo safari in Kenya: driving across the Masai Mara we came upon a group of baboons migrating in a long line. Following them was a young cheetah and the male baboons were displaying quite an angry 'go away' stance on an anthill to scare him away, beating their chests and screaming at him. According to my driver, the cheetah probably didn't know that picking a fight with a baboon would be a bloody hard fight and at the end of it they don't make a very good meal.

There is a certain tendency of those of us who assist home owners in distress to want to 'fix it' and make the pain go away. Or to fight the fight because people feel so wronged. But some things just can't be fixed. Certainly we have tools at our disposal if a home owner can be assisted within reason. The point of modifying your loan may be to buy time, while accepting that you may eventually need to get out from under this level of debt.There is nothing like being decisive, making a tough decision and not fighting that fight for a bad meal.

Strategic Defaults ESCALATE!

2010-05-10T21:47:00.000-07:00

Are you willing to walk away from your mortgage and suffer the damage to your long term credit and future prospects? Weigh the facts!

Watch: 60 Minutes http://tinyurl.com/35wkqj7

You’ve done the math: Your house is worth less than you paid for it. You can afford to stay and keep making your payments. But you feel sick about your home’s depressed value. You feel like a chump for paying too much for your home. What do you do?

Morley Safer explores the new phenomenon of homeowners who are opting for ‘Strategic Default’ and walking away from their homes. These are people who can afford to pay their current mortgage-- people who are frustrated with the devaluation of their homes compared to how much they owe on them. NOT people in financial trouble. Their banks are saying ‘no deal’ to reducing their loan balance. A lot of people are making tough decisions about staying in homes now worth 40% or less than they paid for them. It may be logical to walk.

But is it ethical? After all you did borrow the money to buy your home. The seller is long gone. Where else can you hand something back to the person you borrowed the money from to buy that item? You signed a contractual agreement to pay them back over time. Certainly some of the loan products and contracts were flawed and you do have recourse if you were steered into a predatory or toxic loan. But these folks interviewed in the 60 Minutes Expose are not people who were duped or who can't afford to pay their loans. They feel cheated because their homes have lost value.

Is your home value loss temporary? More than 11 Million homeowners across the country are estimated to be ‘underwater’ and this number could double in 2010. Underwater means you owe more than your home is currently worth. It’s a bit like owning a major stock and watching it’s value drop overnight as many witnessed last week when Dow plunged dramatically in 16 minutes. The next day it regained most of the loss. Imagine those who sold stock at the bottom in panic mode. Having sold and taken a loss, they now have no way to recover that loss.

Why sell or abandon an investment at it’s lowest value point? Isn’t that the time to invest or and bide your time until its value recovers? Not everyone agrees on this point. It’s a good theory for investments: but applying this strategy to your home in which you have invested your life goals is very different from a stock you hoped to profit from. You can’t live in a stock!

The decision to ‘walk’ is not clear cut: Asking for mortgage reduction if you are not in financial trouble elicits a big fat “nice try” from your bank. The programs designed to help homeowners with demonstrable problems and hardships don't apply to you. Let me tell you the people who do get help from their banks seriously earn it. Loan modification is a very humbling experience. These folks have no where to walk to. Do you begrudge those in need being helped? Have we become that self centered?

The pitch to walk: Let’s say you walked away from your home in May 2007 when values first began to plummet. Let's say you had maintained a good rental and credit history for three years. While foreclosure has a very bad effect on your credit score, by demonstrating mortgage worthiness for three years hence, you could qualify for an FHA or VA loan. You could theoretically buy back your own home for the new lower value. Ironic? The nice folks in the 60 minutes episode who help people walk away will help you 'feel better' about defaulting for a modest fee.

At the risk of being seen to promote this comany--which is not my intention-- this calculator is a quick read on the 'financial benefit' of keeping your current home mortgage vs. renting. http://tinyurl.com/cjvtob

Consider the downside: First, I would never recommend you walk away from your home or any financial obligation. You have invested time and money and often sweat equity. Your home is a reflection of your life goals and that commitment to yourself and your family and community. The moral issue for many people has become secondary to the financial decision. If enough people do walk, their banks would be forced into greater losses in their portfolios by the cascading drop in values caused by more foreclosures, eroding the value of entire suburbs and towns. Naturally a foreclosure, short sale or deed in lieu process has an extremely damaging effect on your credit for up to ten years.

Programs designed to stem foreclosures are new. If your home value is underwater by more than 25% of your loan, the new Principal Write-down provisions may be offered. This is new. A few of the largest banks will subscribe to this program starting in July 2010. Naturally they are finding a way to be paid for their trouble via your tax dollars. At some point soon it is becoming apparent that we can't keep paying banks for their losses. At what point do we stop paying banks to help us? When enough people leave their homes? That is a very big question that could spell big trouble for our already fragile economy. The Banks who took so much TARP money should be shouldering at least some of the loss for their mistakes--but so far our congress just keeps forking money over to their side of the table.

I would urge anyone considering walking away from their home to reconsider all these points before jumping on the bandwagon. I imagine that there will be unseen repercussions for those who walk away based on pure economics and not actual hardship. Your neighbors will struggle to maintain their safety and values on a street littered with foreclosure signs. While I can fully understand the desire to be relieved of your financial woes: is it really the right thing to do? Do we want our local economies to fall like a house of cards? These are serious questions. Maybe, just maybe it would help to get some of neighbors together and find out how they are doing. Take a pulse and find out if others are willing to stick it out or take a group stance.

It's true that homeowners who can afford to pay are out of luck. Their banks and the Fannie Maes, Freddie Macs, FHAs and VAs of the world say you have an obligation to pay back the money you borrowed. Homeowners who in trouble are being helped in many instances by the Making Home Affordable and HAMP programs. Is it fair? Life isn’t fair. In case you forgot, the person who is in fear of losing their home and is struggling with foreclosure or loan modification has other real problems like loss of income, family illness, death or other setbacks. They need help just to survive.

The inequities of this situation are not lost on banking and real estate professionals. They don’t want people who can afford to pull their weight to default. A sudden drop in values presents a conundrum to which there is no easy solution. Too much inventory kills demand and the cycle spirals downward quickly. Banks don’t want to go on record about strategic defaults (none agreed to be interviewed on 60 Minutes). Investors are really really nervous. If their GOOD customers walk what will their entire portfolio of mortgages be worth?

Before you decide: why not go on record? Write or call your representatives and tell them your story in order to support stronger consumer protection legislation. It is our both right and our responsibility to speak up and be part of a solution in our democracy. Our lumbering government will only maintain the status quo if we let them. Our elected officials were hired by and are paid by us to officiate for us. Not for big banks. Our representatives are accountable to their constituents. At this stage, the creation of a Consumer Protection Agency with independent legal ability to actually hold banks accountable is a dim hope, struggling in committee.

In fact, I can recall at least three banks in Washington state subjected to criminal fraud proceedings by the State Attorney General: the first was against Household Finance Corp for inflating home values for the purpose of selling predatory loans. More recently Countrywide and Washington Mutual were found guilty of predatory lending and financial damages were levied via several class action suits. These actions have challenged the hubris of large banks to think they can act with impunity toward the borrrowing public.

Be a citizen and speak up. Click this link and plug in your zip code: http://www.congress.org and email, write or call your representatives or the entire financial services committee in the House and Senate. They need to hear from you. Your stories, your concerns, your ideas.

Remember: for every action, there is an equal and opposite reaction. You may feel very relieved if you walk away now and easily forget what you left behind. But rest assured: your city, suburb and most certainly your neighbors will be financially affected if you choose to leave and let your home become another sad statistic on their street. Think about it. The DOW’s slide of 1000 points in an hour may seem like chump change if the entire housing market collapses.

Equitytalks

© copyright 2010 susan templeton equity talks

Making Homes REALLY Affordable?

2010-04-12T20:16:00.000-07:00

Principal Writedowns + Help for Unemployed Homeowners:
HAMP and Making Home Affordable Guidelines updated today are sounding pretty progressive: The much touted PR about Principal Write downs is being implemented by the first subscribers to this: notably Bank of America, one of the most "hated companies in America" according to Huffington Post, right behind GM and Chrysler. If the idea of principal write downs (lowering your loan balance) has any goodguy points be aware that we, you and I, will be paying for this via more bailout funds.

Why Bank of America? In their assumption of failed Countrywide Bank, B of A has acquired the lion's share of Pay Option ARMS, and assorted sub prime loans famous for exploding one's principal balance. Many of these loans were sold to people who simply did not qualify for the full principal and interest payments. They became the embarassment of the 'stated' income loophole and essentially took Countrywide down when the adjustments to higher rates created a rash of predictable mortgage defaults.The new MHA guidelines seek to expand the use of principal write-downs during the modification process. As one option. There are many. The stipulations are equally tight --so we are not cheering just yet.

The approach will include incentive payments for each dollar of principal write-down, earned on a 'pay for successs' basis. Naturally lenders who are in danger of losing all via foreclosure might well breathe a collective sigh of relief. It's also good for 2nd Lienholders if the 1st Lien is brought in line to 80% of value rather than 120% thereby insuring they have a decent chance of collecting on the second. Eventually.

Unemployed Borrower Boon: The best news in this release is the consideration of reduced repayment terms for unemployed people while they are in job seeking mode. Up to 6 months break is being bandied about. So you could theoretically qualify for this using your unemployment insurance. If you find a job making less, the permanent terms would use HAMP guidelines to determine your new payment. Perhaps also lowering the principal in line with what you can now afford if your value has also dropped.

Another HAMP initiative suggests of this annoucement promise 'clear performance timeframes" when a borrower is in the modification period. Indeed this is good news. We have seen some clients still struggling for help one year or more into their modification process.

HAMP will also now apply to FHA loans. Hint: any FHA lender who is worth their salt is already applying HAMP or better guidelines to their troubled assets.

Other help includes financial assistance (up to $3,000) to move to more affordable housing and extinguishment of subordinate liens (2nd and 3rd lines and loans). Several such programs already exist (notably Cash for Keys) but this release suggests more will be done to prevent foreclosures.

Perhaps now more than ever, it's important that homeowners in financial distress seek a trusted advisor to help them understand which programs may be of assitance. Seek out a bankruptcy attorney. Get your CPA on board. Ask your mortgage professional who is handling these programs. Speak with your State Attorney General, and HUD counselors.. The implications for individuals of which path they choose may have lasting effects on their financial future.

Download this document: http://makinghomeaffordable.gov/docs/HAMP%20Improvements_Fact_%20Sheet_032510%20FINAL2.pdf

Please continue to write your congressional representatives and express your views and news about people in your locale: http://www.congress.org

Equitytalks
© copyright 2010 susan templeton equity talks

Principal Reduction & 2nd Modifications

2010-03-28T13:03:00.000-07:00

Is this for real or just clever Big Box Bank PR?

1st and 2nd Loan Modifications have always been an option for homeowners in distress on a private direct level. Ever try to negotiate with your 2nd Loan or HELOC holder? They may offer you a very high fixed rate from your variable ARM or extend your amortization period (from 10 to 30 years for example) or offer a forbearance (no payment for a short time) but so far the offers we've seen have been temporary at best.

Until recently, 2nd Mortgages were not covered by the Home Affordable Mortgage Program. We have successfully re-negotiated 2nd liens in the course of modifying combined loans. It's not exactly a picnic. Even with the same servicer, it is common to have different investors between the 1st and 2nd mortgage. So you are appealing to two different parties to assist you. Two parties with very different risks and attitudes.

This new 2MP directive is good news. But how helpful will it be in practice?

The Directive to Modify 2nd Liens Was Issued in August 2009
Until January 2010, no banks had adopted this program leading many to think it was dead. Now Bank of America, Wells Fargo, Chase (others mooted) are participating: Of course, Banks interpret the official guidelines liberally as do the investors. The fact they are being PAID by Treasury (that means us, folks) is their incentive to modify your second mortgage.

Modifying 2nd liens is not something they are happy about. Far from it. Most 2nd lenders face doubtful odds of getting repaid in the case of short sale, foreclosure or bankruptcy. For many homeowners, the 2nd they offered you in 2006 was the 20% you need for your down payment or to pay off consumer debt. Considering many USA homes have dropped at least 20% in value since the 2008 plummet that second may be 'uncollectable', as in the case of foreclosure or short sale. If you walk, they can chase you (and they will). As it stands, 2nd lien holders face a significant write down or a 'go away offer' for pennies on their dollar to allow a transfer of title to a new owner. 2MP will set a specific amount they can expect to clear; which should--in theory--encourage cooperation rather than drag out the foreclosure or short sale agony for all concerned.

According to a local Bankruptcy Attorney "This is good news for some of my clients. In some Chapter 13 cases we are able to void the second mortgage if there is no equity in the home above the amount owed on the first."

The 2MP Directive reads:
"Under 2MP, when a borrower's first lien is modified under HAMP and the servicer of the second lien is a 2MP participant, that servicer must offer either to modify the borrower's second lien according to a defined protocol or to accept a lump sum payment from Treasury in exchange for full extinguishment of the second lien. The 2MP offer will be made in reliance on the financial information provided by the borrower in conjunction with the HAMP modification and without additional evaluation by the second lien servicer."

Notice the 2nd lien bank may be paid off in a 'lump sum payment from Treasury" to go away. The verbiage suggests the 2nd lien servicer is cut OUT of the conversation. This will be interesting in practice. The final document is still being edited so click this link http://www.hmpadmin.com/ and select 'Second Lien Modification Program' under the PROGRAMS dropdown menu.

Enter Principle Reductions: BIG NEWS!
http://www.housingwire.com/2010/03/24/bofa-to-reduce-principal-in-hamp-mortgage-modifications/

This much touted program will land June 2010. Bank of America is all over this one in the press. It applies to homeowners with 1st Mortgages that are more than 120% under water and over 60 days delinquent; add a host of other disclaimers on who qualifies. According to the news reports we've read, less than 2% of modified loans have involved principal reductions to date. This could change!

By the time June 2010 rolls around even more homes will be underwater in the Subprime/Alt-A/Pay Option arenas so watch how well they handle the inundation. Considering that Bank of America is also now servicing most of the failed bank Countrywide loans (one of the minds behind the Pay Option ARMs) they could be under water themselves. The terms for principal reductions are being bandied about. Expect a maximum of 30% of your loan value set aside in a bank note 'on hold' pending a market recovery over a five year term. Many caveats on this one --the ink is not yet dry on the new guidelines.

Who's Minding the Store?
Enter the white knight, the Comptroller of the Currency: (take a close look at the facial expressions in this photo): http://www.nytimes.com/2010/03/28/business/28dugan.html?8dpc

Is anyone really policing consumer complaints about the Big Box Banks? Harvard Professor, Elizabeth Warren, chair of the House oversight panel, has called the consumer protection agency the 'red headed stepchild' of about seven different Federal agencies. None of these agencies wish to take on this role due to the unpopularity of helping consumers over their minders. (BBB's run the Federal Reserve, by they way).

How (Will) 2MP Work?
At the first mention of the 2MP program, the financial press starting issuing their concerns those “silent” second liens pose extra risk to first lien bond holders in residential mortgage-backed securities (RMBS). This raises the question of whether there will be even less investment in US Bonds or Securities by foreign investors. (Translate: any investor). Predictably the one investor buying fixed equities right now are those who lost value in the stock market plunge last year: small private investors like you and your parents. Keep a close eye on the bond markets.

Bill Cara, noted trader and blogger on equity markets notes in today's Week in Review:
"The US government 20+year bonds (TLT –2.53% W/W) dropped from Monday’s close of 91.36 to a low of 88.37 on Thursday, closing at 88.95 on Friday. For those who don’t understand the notion of volatility, that was a 2-1/2 day plunge of –3.27% in Treasury bonds."

Meanwhile, House Financial Services Committee chairman Barney Frank (D-Mass.) urges Banks to "write down second mortgages." Mr. Frank chairs the very same House Committee that handed out our tax dollars to these very BBB's to stay afloat and pay themselves huge bonuses. Furthermore, the Banks whom Mr. Frank implores are the pals of many a congressional representative who accepted contributions to their campaigns from these BBB's. One mouth says they "should do this" while another official directive says "do this and we will pay you" and the Banks get to take credit for 'doing the right thing'....while being paid by us. Kinda funny if it wasn't so serious.

ARE Interest Rates headed UP?
Well ask yourself this: If you own a company being asked to take a haircut to 'do the right thing' -- would YOU raise the price of your goods or service somewhere else to fund this act of kindness?

It has been suggested by many Fed watchers than when the Feds pull out of the Mortgage Backed Securites market that interest rates will go up. So far the rise has been manageable...about 1/4 point higher for a conventional fixed rate over the previous period. It all depends on who else wants to buy them...China perhaps?

According to more recent reports, the Fed is concerned about hyperinflation and the potential of a 'double dip' in the market -- meaning they know they printed too much funny money. It seems the props are slowly being pulled back to see if markets and businesses can survive.
Speak up about your concerns: http://www.congress.org

4.12.2010 UPDATE: HAMP Guidelines updated today are sounding pretty progressive: To expand the use of principal write-downs an modification approach will include incentive payments for each dollar of principal write-down, earned on a 'pay for successs' basis.

Download this document: http://makinghomeaffordable.gov/docs/HAMP%20Improvements_Fact_%20Sheet_032510%20FINAL2.pdf

Equitytalks

© copyright 2010 susan templeton equity talks

HARPing about HAMP and MHA?

2010-03-04T01:18:00.000-08:00

Good news! H.A.R.P, the Home Affordable Refinance Program and H.A.M.P the Home Affordable Modification Program are working hard to earn trust from distressed homeowners. Or so they say. Fortunately, the Stimulus funds for HARP will be extended at least until June 2011. HAMP has been working a bit harder for people with underwater homes -- that is if you owe more than your home is worth up to 25% negative value.

Define underwater: You see, if you owe more than your home is worth, your lender takes a rather dim view of the risk factors for your likely ability to keep making the payments. And if you are going for HARP i.e., to refinance, those risk factors weigh rather heavily against you -- so the terms (rates) are less than exciting. In fact, less than 220,000 of the supposedly 4.5 million people who would be eligible for HARP have qualified. Most people are either in arrears (having missed payments) or in a position of eminent default if they have lost income and realize they can't sell for a profit...then they are facing the next most likely options. Short Sales, Foreclosure, Deed in Lieu and 'strategic defaults' i.e., simply walking away.

What about the Guidelines? The actual problem is far more complicated than just a set of government guidelines and labels. Your lender is not a government institution. Sure, Congress has passed bills adopting these terms and recommending them. But please understand: Banks are private companies charged with delivering a profit to their shareholders. While some would rightfully argue that our government owns a large share of the biggest banks, the fact is the banks still get the decision making power to deliver a profit. The 'guidelines' for HAMP, HARP and MHA (Making Home Affordable) are just that. Guidelines. They are not laws. Banks get to interpret them if and when they feel justified. Naturally a bank that took more TARP money has a certain obligation to consider the guidelines more so than a bank that did not. Many local Banks, Savings and Loans and Credit Unions who did not receive TARP funds are flatly saying no to modification, forbearance or distressed refinances with impunity. There is more pressure on the TARP recipients to at least pretend to be complying with these guidelines. They will say you didn't qualify when in fact you might very well qualify if you got a reasonable negotiator to understand your predicament.

Which brings up the biggest problem of all: Inept modification and loan mitigation staff. This is a new arena and the people being hired by these servicing arms of banks may be freelance staff, who do not have a grasp of what your family budget and work situation really indicates in terms of likelihood to keep paying your mortgage. They may barely understand financial documents. We see a lot of gross errors on the lendrers financials. Naturally, they err on the side of caution --so it's really hard to convince such a person you WILL keep paying your reduced mortgage if you have been in bankruptcy for a year and made no payments during that time. They are very 'bottom line' motivated so it's important to keep coming back to what that means. DO they want to explain to their superiors the decision to foreclose on someone who was wiling to pay more than their house was worth or DO they prefer to take their losses at auction? This is a very grey area.

Most people who have experienced some income loss or family financial pressures would technically qualify for either HAMP or HARP if they make enough now to afford a reduced payment totaling no more than 31% of their gross loan to value. Certainly there are limits to how low a bank will go and for how long. It's important to show that your hardship is both real and temporary. The luck of the draw is which bank or servicing lender is handling your loan and how motivated is that servicer to assist you. There are so many factors: How long have you been in arrears? Do you have stable income now, and not least: Have you alienated you lender with a long drawn out process?

Are these programs just for your Freddie or Fannie Loans? Freddie Mac loans are negotiated slightly differently than Fannie Mae loans and so on. FHA and VA depend on the lender's own interpretations in addition to the standard government guidelines (most have their own investor guidelines or overlay) and all rely on the very different situations a borrower will present. For example, is your hardship a continuing issue? For how long? Do you have sufficient income now to afford a lower payment and for how long? Will your income recover quickly or take years? Is your financial pressure time frame yet known? Etc., etc. Each lender has their own ideas. There are literally thousands of options!

Are these programs just political? You be the judge. You can bet these new and extended programs are being used to stump for votes by politicians. So you would be naturally be wise to keep your particular representatives apprised of your progress.

Success story: Recently a client received a wrongful denial of permanent terms after four months in a trial modification program. It was quickly determined that an error was made figuring their income but no reasoning seemed to get the desired result to convert the temporary modification into a permanent term. They were being stonewalled. So they wrote seeking help from their Congressional Representatives, including the President, at http://www.congress.org

This very frustrated home owner had been getting the run around. They lodged complaints with whomever would listen. One Senator actually called the CEO of the National Bank involved on their behalf. Another Senator offered helpful advice on which agencies could assist. The same borrower wrote a complaint letter to the State Attorney General who also reported their concerns to the State Attorney General of New York who forwarded the complaint to the Comptroller of the Currency, the overseer for National Banks. I guess you could say they realized they were all on notice. Magically the corrected permanent modification papers arrived by courier...right on cue! So it pays to know your rights and due process.

WATCH THIS! Charlie Rose conducts this interview with Elizabeth Warren, our official congressional oversight 'watchdog' on the subject of Consumer Protection. She refers to this agency the unwanted stepchild. Nobody wants to police banks on loan and credit card fairness-- even if it is their 'job'. http://www.charlierose.com/view/interview/10895

Until the consumer protection laws are actually implemented and fairly, the current state of our consumer protection is: borrower beware!

Equitytalks

© copyright 2010 susan templeton equity talks

Homeowners Subjected to Fake Appraisers

2010-01-21T20:17:00.000-08:00

local impostors are claiming to be appraisers to gain entry to distressed homes

We have heard from distressed homeowners who, after having the Notice of Default letters taped to their door, (pre-foreclosure) had unannounced individuals arriving at their door with cameras claiming to be the appraiser sent by 'their bank'.

These people are imposters.

They are getting names off the county bulletin boards of homes in arrears pending foreclosure proceedings. It is apparent some foreclosure buyers use this tactic to gain entry and qualify homes prior to auction. One homeowner just called to say a person arrived with a camera, without a business card, asking for information (she didn't give out) about her loan, her property, etc. They didn't know the name of the Bank or Trustee and asked how much was owed and other private information. She had the presence of mind to tell them to leave and call her trustee.

Unfortunately a skilled impostor would have a lot of this information. They may even have fake cards made up. Really no one should just show up wanting access without having called first so you can check them out and schedule a time that suits you.

If someone arrives claiming to be an appraiser:

Ask who sent them
Offer NO information whatsoever.
Ask for a card. If no card, have them write down their name, phone number and sign it.
If you have a cell phone with a camera, take their picture.
Take down their vehicle license plate number, or photograph with your camera cell phone
If they park in a position where you cannot see the vehicle this is a tip-off.
Ask which bank they are representing (or the Trustee).
DO NOT LET THEM IN unless they provide correct information and you feel comfortable with them.
BETTER: Tell them they must make an appointment at your convenience'

If the person seems fishy, ask them to leave. Dial 911

Then call your Trustee and ask if they sent an appraiser and explain what happened

Our homeowner's Trustee verified they had NOTsent an appraiser and had no intention to. In most cases, a lender or Trustee does not ask for a Broker Price Opinion until well down in the negotiation process, if ever. Loan modification applicants (who may be in default) are rarely subjected to an appraisal unless there is considerable doubt about a property's value or condition.

To misrepresent oneself and demand entry is criminal trespass not to mention a breach of privacy and common courtesy. If an appraiser cannot properly identify themselves and asks for information (they should have on their person) they should not be allowed to enter your property. Period. A legitimate appraiser would call first and make an appointment.

NOTE: One homeowner's 12 year old daughter was at home alone when a man arrived at the door and demanded entry. Then he went through the house taking pictures. Imagine the outrage of her parents to realize this was probably a local investor posing as a bank appraiser. Imagine if that child had been harmed or there was any question of improper behavior by the intruder.

Express your concerns and support to your congress persons http://www.congress.org

For more information on your consomer rights, check out the WA State Attorney General's site: http://www.atg.wa.gov or call your state attorney general.

Stay safe and sane!

equitytalks

© copyright 2010 susan templeton equity talks

Do You know WHO Owns Your Mortgage?

2010-01-01T19:20:00.000-08:00

How do you find out who your mortgage 'investor' is?

If you need to contact your lender about applying for loan modification based on genuine hardship or disaster relief grounds, you have several starting points. You may be surprised to learn that find out exactly who owns your mortgage is not something your lender (servicing bank) may know or be willing to share!

Who do you call? First you call your servicer; the phone number on your mortgage statement will take you to the account management department of that bank who services your loan. They should be able to tell you if your loan is a Fannie Mae or Freddie Mac loan. Most banks, even local banks, sell their loans to these Government Sponsored Enterprises who own the lion's share of mortgages in America. Make that 'manage'. Who really owns them is the big mystery.

Why would your lender hide from you? Banks and investors simply don't want to have anything to do with the person they are receiving income from. They only care about your interest payments arriving on the plus side of their account sheet every month. If your funds don't arrive, they send the collections department out to collect, literally or else they start foreclosure proceedings. These days you can be less than one month late for the calls to start. Heaven help you if your bank has your cellphone number.

Sure you can look up your home address and find out if your loan is a Fannie Mae or a Freddie Mac but that's just the portfolio manager. Knowing this will establish which form of Making Home Affordable or HAMP program you qualify for. The lender (you are told) is somebody like Bank of America or Chase. When in fact the actual investor is Goldman Sachs or a Mutual Fund or the country of Norway! No kidding. The bank on your mortgage papers and monthly statement is just the servicer. A nice tidy anonymous face for your actual lender.

What does having a Fannie or Freddie Loan mean? Actually, which lender owns your mortgage you own has no real bearing on whether you will qualify for a loan modification. The main reason you may or may not qualify for help is proving that you have a temporary hardship and that you have sufficient income to afford a lower payment using basic debt to income ratio of 31% against the mortgage payment. Fannie and Freddie loans do get monetary incentives to help you via the Stimulus funds to those loan portfolios. This fact seems to have little bearing on whether your bank is WILLING to assist you.

Do you know where your mortgage is at night? If some obscure arm of Goldman Sachs or AIG or the country of Norway owns your mortgage, chances are it's of part of a much larger portfolio of loans. You could be buried in a pile of other homeowner's loans now woven into some complex trading instruments. You've heard of Credit Derivatives and Credit Default Swaps?

"Financial Weapons of Mass Destruction" was the name given to Credit Default Swaps by none other than Warren Buffet. If you wonder why your 401K tanked last March, Wall Street allowed these instruments to be created and traded with no regulation whatsoever creating enormous losses by such banks as WaMU, Indymac and Bear Stearns. Many Mutual funds and banks are heavily invested in Mortgage Backed Securities which took heavy losses as a result of these 'bets'. The Fed Chairman at the time this all began, Alan Greenspan, allowed self regulation by the banks on credit derivatives. They are traded so often it's hard to keep up with who actually owns them. Hardly anyone can explain how they work.

More on Credit Default Swaps: http://en.wikipedia.org/wiki/Credit_default_swap

One couple took on Goldman Sachs and won: Read this riveting story about Tony and Celia Becker, a couple who took on Goldman Sachs, the owner of their Subprime Mortgage and won court assistance and a modified mortgage, which took them three years: http://www.mcclatchydc.com/100/story/77841.html

Distressed borrowers know your rights! You need to know where to start. READ THE FINE PRINT on all your loan documents. You may find some information in your loan papers that will help you understand your rights in case you need to seek legal representation. Take heed from the Becker's story (link above) who found out they had the right to appeal for assistance in the case of disaster (they suffered wildfires and related financial loss).

Banks accused of harassing borrowers? What a shock. The very institutions charged with legally managing your money have been found to turn nasty when the going gets tough. According to this McClatchy article link "mortgage servicers, have been cited for badgering, manipulating or lying to their customers; sticking them with bogus fees, or improperly foreclosing on them." http://www.mcclatchydc.com/336/story/76418.html

If you suspect fraud on your loan: Look carefully: anything on your loan papers that doesn't match your application or the terms you were originally offered is suspect. If you were 'steered' into a high cost Sub Prime loan in spite of good credit, this might indicate predatory action on the part of your lender. (Sub Prime loans paid higher commissions). In either case, contact your State Attorney General right away to file a free consumer complaint. They will advise if any suits or claims are pending against your lender. And don't wait. If you are facing imminent loan default (missed payments) you may not have much time to lose.

You CAN file a complaint yourself. Fraud is a federal crime, investigated by the FBI. If you need help with your loan, ask your local bankruptcy attorney for a referral.

equitytalks
© copyright 2010 susan templeton equity talks

Holiday Reflections: WRITE YOUR REPRESENTATIVES!

2009-12-23T20:39:00.000-08:00

This evening, with a Winter Soltice votive candle flickering at my desk and the evening light fading on the year, I wrote these words below to my elected officials.

By the time my congressional representatives read this, they could be home and hosed after a few late nights voting on the latest version of the Healthcare Bill. Good for them. Our representatives should be sweating out the details they have before them. Thousands of pages of legislation will impact how many good people make it in the coming year. And how many do not.

I implore every citizen, if you have a story you feel needs to be heard by someone higher up in our rulemaking process, please write your elected officials.

Go to http://www.congress.org/ and type in your zip code and a list of your state and national representatives will pop up with instructions on how to contact them. Here’s an edited version of mine. (I left out identifying details).

"Dear Mr. President,

I hope as you enjoy your holiday break you will reflect for a moment upon the millions of Americans axiously waiting to find out if they will be evicted from their homes in the New Year.

As a licensed loan officer in the state of Washington, part of my job is helping homeowners in distress. I prequalify homeowners with underwater mortgages for modification and refer them to a professional negotiator, a fellow loan officer whom I respect. The process is arduous. We get results. The process we use is sanctioned by our WA State Attorney General and DFI. Most loan officers, and in fact, my broker, think I'm crazy for doing this work for a modest referral fee. I do this because people deserve help. I am trying to help save my community in the process.

You may ask why, with all the wonderful stimulus programs including your own MHA and HAMP that clients come to us instead of approaching their bank directly. It is clear they are not being helped. In fact, they are being patently ignored. If they do manage to break through to a person, they find themselves at a loss for tools. You see, they don't know the rules of the game. Besides the rules change. Different lenders make their own rules in fact. The banks lord over them, lose their paperwork, say yes, then no, then yes, then no, really no. In short, the process of applying for loan modification is in a word, humiliating. Humiliating and debilitating.

I will tell you the angst in people's voices and faces is more than I can bear some days. I can only imagine how they feel. Helpless mostly. Many are angry and fearful. They never imagined themselves in this position. These are not freeloaders but hard working individuals and families from all walks of life for whom life has tossed a curveball. They deserve better.

I will say that while our State Attorney General has done a great job shutting down some illegal operations in our state, I know their public scare tactics have made many people feel they have nowhere to turn. It is a huge misconception that banks and non profits are are the only 'safe' loan modification resource. Our clients report to us that the non profit counselors give them a false sense of hope. They run a few numbers, then refer you back to your bank on your own. There the grinding begins. I asked the lead SAG attorney why he referred people to the non profit agencies and he said "because it's free". I asked if he had ever called the non profits to see how it works. He had not. I then explained the realities of free help. Their effort equates to useless head patting. I was not seeking a referral. I was suggesting to this attorney that we either train our non profits to actually work for the client or stop handing out useless free advice.

I have asked my clients to contact their representatives and speak up about their loan modification experiences to their elected officials. Naturally, people in financial distress don't like being seen in this light. Several folks referred to us by a local bankruptcy attorney have been earnestly attempting to get help from their banks for over a year. They are near wits end. Many have already claimed bankruptcy or are now facing foreclosure. Modification has helped save many homes. We negotiate personally for a solution. We are not limited by HAMP, which is in essence a set of guidelines any investor can choose to ignore. And they do.

Don't get me wrong: I think it's great we have some guidelines in place. It's just frustrating that most banks use the guidelines to say no rather than to help us make sense on behalf of the homeowner. You see, every situation is complex and different. Nobody fits a convenient box so there is often no simple solution. What banks have failed to do is hire people who know how to use a cacluator to analyze a person's real income and come up with a workable solution. Our role has been to make the presentation understandable without the emotion of the homeowner entering into their equation. It's not rocket science. This process should not take so long. 90 days is the average for a 'result' but I can tell you that is just the first step. Most people are still at it 6 months later. Do you know how much a year of financial agony take out of a family?

I am also writing you today to ask why in heaven's name many of our local Banks and Savings and Loans seem to think they are exempt from helping people? One such bank has offered a mere one year's forbearance to a client for whom one year is only forestalling the inevitable. If we do get a year, then it is likely we will have to renegotiate and renegotiate until they finally recover financially. In the process most people have seriously impacted credit while the banks report their mortgage arrears as late payments. Hardly sporting. Do you think the fact any bank did not receive TARP funds a justification for ignoring the obvious facts of their borrowers in distress? How are they rationalizing this? How do you, as our President rationalize this?

Please bring this matter to the forefront in the New Year as you craft legislation to combat the heavy financial hits so many Americans will continue to feel for years to come. Thank you."

Later, I contacted some homeowners to suggest they send their stories to their congressional representatives. After all I'm in the business of mortgages and easy to ignore. Actual case histories are not so easy to forget.

As I signed off my computer, I thought out loud:

Dear Mr. President, May you never experience the loss of your job, your dignity, your spouse's health, your business, a loved one, or your home, as many of your constituents are losing as I write. We need you up to the job of protecting them.

To prosperity and joy in 2010

equitytalks
© copyright 2009 susan templeton equity talks

BEATING the 'Tricks and Traps' of Banking!

2009-11-19T21:09:00.000-08:00

Congress has set aside more funds to help homeowners avoid foreclosure -- because it's good for banks!

We are not complaining about a promise of more than $100 Billion in TARP money going to banks to help homeowners avoid foreclosure right now. These funds are sorely needed to stop this train now wrecking many American homes. The TARP Congressional Oversight Chairman, Elizabeth Warren, has been keenly advocating for transparency in this regard. She and her Harvard team have a pretty big job.

Watch this fascinating interview with Professor Warren as she explains why the 'tricks and traps' model of banking must come to an end if we are to survive the shift in our economy. Warren is spearheading a new Consumer Finance Protection Agency, whose charge is to be the champion and watchdog for consumers and keep taps on banking instruments: http://link.brightcove.com/services/player/bcpid1827871374?bctid=50351536001

She boils down the jargon and muses on how the family has been abused by this economic crisis. Since most people can't figure out the difference between loan and credit products it stands to reason there is no real ability to make wise choices. For example, have you tried to make sense of the recent letters your credit card companies are sending out advising how they are going to raise your rates and fees? Warren proposes this new CFPA demand short readable contracts that people can understand in four minutes, not forty pages.

A Consumer Financial Protection Agency as a watchdog organization is all well and good if we set up oversight panels outside the banking system. Unfortunately, our banking system is propped up by the Federal Reserve, who are in control. Banks and Brokers are after all, the the minds who created the complicated Credit Deriviative Swaps with NO oversight that got us into this mess. Who do you think makes the biggest contributions to your Senators and Representatives politcal campaigns? Big Banks ARE the decision makers and they ARE the Federal Reserve. Many argue the Federal Reserve is an illegal institution. Many argue that such decision making powers should never be in the hands of the very institutions who are benefitting from those decisions. So who set this up? Your Congress. Your Representatives, who in many cases are very close to, or are themselves wealthy insiders in our government and private institutions. The principle of checks and balances of separate powers has gone awry.

Meanwhile, in a kind of slight of hand, some very interesting ideas to benefit small business are being floated by the likes of Goldman Sachs and Warren Buffet. They have recognized a gap in available funding (by banks) and are proposing to create loan funds to help small business because of how banks have turned their back on the little guy. Sounds great, huh! You can bet your booty their generosity is being funded by our tax dollars. And while this sounds like very needed help for small businesses, please appreciate the only reason a Goldman Sachs or Warren Buffet does anything is to make money. Fine. They should make money, just as anyone should, for providing a valuable service. Let's just keep a close eye on this one, shall we?

Warren asked: "How do we liquidate 'too big to fail' Banks?" One way would be to simply cut them off. We become wise to their game. We understand the price of our decisions to borrow money. We don't let the system enslave us. We take control of our money. We use our money to serve our reasonable needs, not bad decsions that enslave us to a kind of debt death.

Rest assured: America's most highly paid crafty minds are working on the next method to 'trick and trap' people into paying more for something than necessary so they can get richer. How do we avoid being the trapee? It's up to every citizen to make an effort to learn about every financial decision they make. About every credit card, every car loan and every checking account statement. Yes, it's come to this. Either we become aware of what we are 'buying' when we agree to such repayment systems, or we will have to stop using these things and return to a cash or barter economy.

Fortunately, there are many easy ways to get a grip. Everyone can establish a budget. A plan to keep an eye on where our money is going is the first step to better choices. A colleague mentioned his '7 jars' system. You literally use seven jars to save and budget your funds in a cash system. It's very visual and powerful. Or try this free Monthly Spending Planner: http://www.mgichome.com/pdf/monthlyspendingplanner.pdf

Of course, once you do get a grip on where your money is going, if you are serious about it, you can really take control of your money. There are lots of more sophisticated ways to manage your money. You could hire a bookkeeper or learn a financial software program. For homeowners, we highly recommend Speed Equity, an online system designed to show you the power of your decisions in paying down your mortgage and saving thousands of interest. The principle is very simple. The practice takes practice! Susan's offer is for a one year trial and a copy of Mr. Gills book: How to Own Your Home Years Sooner. It's a departure on this blog to offer a product. It's so good we want everyone to know about it. We'd be very pleased to hear your success stories!

Ahhhh, success! Remember the good old days when Banks and Building and Loans were seen as a means for individuals to pool their resources and grow their communities for the common good? Remember the old Frank Capra Christmas movie: It's a Wonderful life? I watch that movie very year. I never fail to cry with joy at the end. Jimmy Stewart as the beloved country banker who is rescued from financial ruin as his community comes forward to save him in gratitude for his generosity...and all is well.

Wouldn't that be wonderful? Equity Talks
© 2009 susan templeton equitytalks

More Money to the Big Banks to Help Home Owners Avoid Foreclosure

2009-10-22T18:07:00.000-07:00

Recently, Congress identified another $4.7 Billion to assist loan modifications.

Who benefits? You do, hopefully! Home owners in distress who are either in default or eminent default on their home loans (different lenders see this differently) should take heart that our congressional representatives understand the need for home owners to modify rather than risk losing their homes. Currently, banks are being paid up to $5,000 to successfully modify your loan via the Stimulus Plan.

They are being paid to help you, help them to have a 'performing' borrower again and hopefully save everyone a stack of legal fees and corresponding loss of equity and local property values. These additional funds will be used to hire more staff to clear the backlog of applications and provide a smoother and more efficient system of loan modification.

Is loan modification working? As long as they are making more of an effort to assisting homeowners in distress--let's consider this good news, indeed! I would be tempted (if I were mean) to publish a hit list of 'those banks' we have found to be less than constructive in the loan modification process. Suffice it to say, when some folks call and start explaining their circumstances, we may audibly suck air when they mention 'which bank' they are dealing with. Government programs or not, the fact is, once you are in trouble your bank sends your application to their debt mitigators in another department or on the other side of the country (preferably) who may not have 'nice guy' tattooed on their foreheads.

Can you do this yourself? Sure. Go right ahead. Call the non profit Credit Counseling agencies and have them prequalify you on the phone. They will send you along to your bank with a big check on your paperwork. No charge for that. You have every right to modify your loan yourself according to MAA, HAMP, HUD and all the other government acronyms. If you have succeeded yourself, you should shout it from the rooftops!

Why is loan modification failing? I'd have to guess one reason is if you are in trouble now, you may be feeling behind the eight ball in more ways than one. It's very very difficult to negotiate from a position of weakness. The other guy knows they have the upper hand, so to speak and they use that psychological factor to their advantage. The other factor is simply time. The process can take three months or more, so if you anticipate your situation is getting worse, don't wait to start the modification process. If you wait until you are truly financially exhausted, you may not qualify.

If at first you don't succeed, can you try try again? Yes. In many cases, people arrive on the doorstep of a home retention expert after months of attempting to negotiate for themselves with their bank. In a way, it's good you have made the effort. Heck, you realize just getting someone to return your call is a victory. The problem is, once you have started the process, unless you can catch up on your payments right away, the letters from your bank continue to itensify along with the late fees.

Whatever happened to your banking relationship? It may surprise many people to know that while you may have had a relationship with your bank for 20 years and never missed a payment in your life, once you do, you learn the awful truth. The bank you thought regarded you as a valued customer, is NOT even the owner of your loan. They are the 'servicer' and may have sold it to Fannie, Freddie, Ginnie, Sallie or some guy in Hong Kong, and the 'investor' who actually owns your note, is not available to you. Your bank servicing department won't even admit to a home owner that such people exist --so you, the homeowner have no access to the decision maker.

Investors have many faces. They are not in the mood to negotiate with someone who is not making payments. They purposely turn over the messy stuff to their attorneys and collection agencies. These folks will be working some huge stack of paperwork under pressure to move along. That's were the professional can get results where you can't. A fellow professional who knows how to communicate on their level will make better use of their time. '

How does a negotiator get results when you can't? First of all, we are in the lending business and we know the ropes and the motivations of these folks. There's nothing secret about it. We understand they are overworked, underpaid employees of the investor. We get it they want to say yes or no and move on. Check that box. Take a lunch break. Maybe sleep at night.

We make it easier for them to say yes! Your modifier should provide a very concise case, in their language, that demonstrates what you can realistically afford. We enlist their interest in working constructively on your behalf. Our negotiator is a true professional who actually cares about helping folks who deserve a break. As professionals, we also value our reputations and we are bound to operate under very strict regulations: saving your home is a very serious business.

Who do you trust? Now please don't take my blather as advice to head on down to the spammer that sent you a 'save your home' email today. Check out your local home retention expert with the regulatory bodies in your state. In Washington state, loan modifiers must be licensed loan officers or attorneys licensed to practice in Washington. Not all states have this protection. Ask your State Attorney General, Bar Association or local bankruptcy attorney or accountant for a referral.

And hey hey hey...be careful out there! Equity Talks

© 2009 susan templeton equity talks

Making Home Affordable RAISED to 125%!

2009-07-11T17:25:00.000-07:00

Making Home Affordable 105% Loans were introduced just this spring and the program has simply not been meeting the public need.

Homeowners seeking to refinance their Fannie Mae or Freddie Mac Mortgages quickly found that the new 105% loans were helping a minority of people teetering on the edge of collapse. While it may seem obvious to people in trouble, here is why the limit was increased to 125% last week.

1. Many homeowners simply cannot meet the required 33% debt to income limits necessary to refinance their loans due primarily to a job loss or cutback or other change in their financial situation. You see, many people purchased or refinanced their homes with much higher housing ratios: in many cases over 45%. So unless your income went up, the chances of a lower ratio will be slim even with a fixed interest rate.

2. A careful look at the rates on the much touted 'DU Refinance' Programs our lenders are offering are just not so hot. Given you have to be in 'financial distress' to qualify; incredibly the pricing adjustments for lower credit scores and higher debt to income limits on these loans are making them pretty pricey. NOT the great low rate you were hoping for. The interest rates, after all those adjustments may be no better than that 8%- to 10% rate your note is going to adjust to anyway! And since you clearly need a lower rate to afford to keep your home...well, what's the point?

3. The third, and possibly biggest reason for MHA failures to date is due to the lower property values all across the country. Homeowners seeking to refinance their Fannie Mae or Freddie Mac Mortgage are so underwater on their mortgage to home values, 105% has been deemed pretty irrelevant. In places where property values have dropped 10% (most of the country is worse off than this now). If you originally had a 100% mortgage or combination of 80/20%, you can see you can see how 105% would be less than what you owe now unless you have paid down your principal. It's not rocket science!

Thankfully, the higher loan limit of 125% of Making Home Affordable loans should help more people stay in their homes. In most cases, if your loan is already being modified (due to financial distress) your lender will first test your case to see if they can apply the new Stimulus 125% loan program so they get to make more money. Naturally this is in their interest!

In all cases, to qualify for this program, you must

1. be in financial distress

2. demonstrate income to support the new mortgage, and

3. have a Fannie Mae or Freddie Mac Loan now. Your lender can verify that fact --just call the number on your bill and ask if you have a Fannie or a Freddie loan.

Now that this higher LTV (loan to value) is allowed, even if home value has gone down 25%, depending on how much you borrowed, you may still qualify to refinance up to 125% of the current value of your home within a new first mortgage. If you have a second mortgage now, it stays in place and must fall within that total of 125% loan to value. (Depends on Fannie or Freddie how they handle this) The second mortgage holder is being asked to 're-subordinate' their lien after the new first mortgage is recorded. These things, like modifications are taking time to accomplish. So patience is a very important aspect of working out a loan modification program, be it via this program or a straight modification.

Please bear in mind that if you borrowed more than you could afford to begin with, a higher loan amount certainly won't solve your problem. Homeowners who have lost that much of their home's equity are making some tough decisions. Unless you are really in love with your home, many homeowners are saying, hey--why get stuck with this high mortgage when we can buy a home for 30% less right now in our town? Yes, folks are still walking away from their homes in droves.

And by the way, anyone in financial distress is likely to be leaning on their credit cards, which causes your credit score to drop. The 'price adjustments' for FICO scores under 620 is 4 points. No kidding. So if you want to fund that 4 points because, being distressed, you don't have 4% lying around now do you--your new interest rate just hit the roof!

Another thing home owners don't realize: the Stimulus Refinance program is ONLY GOOD FOR FIVE YEARS. If you are offered a Refinance, the fixed terms will only be for five years and after that --either the loan will adjust again (read the fine print of your offer) or you will have a balloon note that you may have to refinance again in five years if you intend to keep your home. While the average homeowner only stays in their home five to seven years this may work fine for a lot of people.

OK, admittedly we are promoting private modification over these quasi government programs. Why? (I won't say what I think of the bank's hired guns.) The process is frustrating and time consuming but we have witnessed very solid results on behalf of our clients. The private modification seeks to fix your rate for as long as 40 years (so far). We have seen some very flexible terms offered, allowing folks to negotiate what they can actually afford to pay now, while projecting their own financial recovery down the road.

Huh. Affordable mortgages...how novel?

Happy Stimulus! Equitytalks
© 2009 susan templeton equitytalks

Do I Refi or Do I Mod?

2009-06-04T22:42:00.000-07:00

Loan Modification and Stimulus Programs are the hot buzz words for distressed homeowners. But exactly what are they and who qualifies for help?

Mortgage loan modification as a means to help folks in financial distress has always been an option --just not widely known. The basic premise is to renegotiate the terms of your existing loan contract with your mortgage holder. Generally, modifications are considered if your financial circumstances have changed, or you simply cannot afford the new adjustable rate reset. Most lenders want a hardship letter that holds water. (Not a good idea to complain that your stated income loan was a sham!)

The key word is 'negotiation'. Few of us have the understanding of win win in a delicate balancing act with that creature we fondly refer to as 'The Bank'. Those friendly folks who loaned you money to buy or refinance just a few years ago, have built a very effective and impenetrable wall built of endless automated phone systems and people who will put you on hold to appreciate just how important they are and how insignificant you are in their view. Sad but true.

Where Do You Start? For starters, the phone number on your Mortgage Statement will direct you the accounts payable department who have access to your payment history. In many cases, if your loan was sold or being serviced by say, the contract agency assigned by a defunct bank-- good luck to you! If your loan is in some state of default your case may have been escalated to the not quite so nice folks in 'loss mitigation'.

Debt or Loss Mitigators are hired guns who may never have darkened the door of a bank...they are collection agents hired by your bank to make you pay...or as we fondly refer to them, the fear police. These are the animals who will call you at work and harass you at home after dinner and send you the most anxiety producing letters on attorney's letterheads. They will stop at nothing to get your money or else frankly, they don't get paid. Many of the debt mitigation firms are paid on commission or performance bonuses. And if your bank was kind enough to hire (maybe even train?) their own staff for the task, they are likely using contractors who have a similar goal: keep you in the highest possible loan instrument so the bank makes the most money ad infinitum.

Naturally this is not the most conducive place to be if you happen to be distressed by life's other challenges, like work, family, health or income issues. The one person you need help from to save your home is in many cases, just not that motivated so see your side of the story. It's even harder to negotiate for yourself when you are feeling less than enthusiastic and strong.

Enter: The Loan Modifier! If the level of spam in your inbox offering to "Reduce your interest rate to just 2% in just 10 Days" is any indication...there are scammers seeking to take advantage of desperate home owners. We have seen the service advertised for up to $5000 making outrageous promises. Like most things there are good modifiers and bad modifiers.

So what's a home owner in distress to do? Well first of all don't wait until you are in serious trouble. Contrary to popular opinion, you DON'T have to be behind on your payments to get the ball rolling. Start by finding someone you trust for a professional opinion of your financial circumstances. Your accountant or bookkeeper can help you work up a household budget of what is really going on. This is essentially the first step in credit counseling. It requires you look at the basic facts to explore what measures may be open to you. After all, if you have insufficient income to meet your current obligations, no amount of financing in the world will take away the pain.

Will My Loan Size Be Reduced? Imagine a bank giving money bank? 95 times out of 100, your loan amount will not be reduced unless by some miracle of having fraud or bankruptcy or a serious legal issue involving possible lawsuits or court claims against your bank. A recently proposed congressional bill to allow bankruptcy judges to adjust loan amounts was soundly defeated...no surprise there.

Expect Interest Rate Reduction = Lower Payments: The main tool of modification is to lower your interest rate for a period of years and/or extend the length of time of your new loan bring your monthly payment in line with what you can actually afford. We have seen up to 600 month terms. No kidding. Do you have any idea how much MORE you would pay for your home if you took 50 years to pay it off? The mind boggles.

If a 45 year old couple gets a 50 year loan they would literally have to live to 95 years to pay it off. Hmmmm. Chances are slim you will be saving for retirement with that endless ball and chain. Of course, if you are in your 20's and your upward career track will make the payment look easier as you get older and richer, you can opt to pay more down as you go. Naturally your bank will never suggest such a thing as early payoff of your loan. That would save you too much money. The Bank wants you paying your mortgage as LOOOONG as they can have you.

Non Profit Counseling via HUD: You can opt for a free counseling session through the Home Preservation Foundation Foundation (originally labeled 'Hope For Homeowners'). To date the BILLIONS of dollars spent setting up Hope for Homeowners has only resulted in 51 loans being negotiated, and only one of those was deemed successful or legal, i.e., 50 of these loans failed. With all that fresh money from the Stimulus Plan, the non profit counseling agencies are booming. But are the programs working? You be the judge.

As Always: Buyer Beware: Several very 'governmental' looking websites are being taken down for passing off as government sponsored and they are actually private companies!

Here's how it works: you call the hot line and a counselor is assigned to you. That person will review your entire household budget with you on the phone: including your income, debts, monthly payments, all costs, maintenance, child care, etc, and all mortgage information about your loan. Expect an hour session. Have your documents handy. The counselor records your information and explores the big picture. They will let you know which program may work for you and they send the recommendation to the lender for either a repayment plan, modification or refinance. You will be asked to fax a lot of information - an astounding pile of tax returns, pay stubs, profit and loss, statements, bank statements, medical bills, you name it --to support your case. Everything has to be updated as you go along. Keep a journal of what you send to whom and when.

After your phone session, your counselor makes a proposal to the servicing company and the servicing company sends your request on to the investor. The decision is batted back and forth and eventually returned from the investor to the servicer, who may present the counter offer to you.

Essentially, modification is an appeal to you lender, though a channel of communication to the actual end investor. According to the counselor I spoke with, "Every investor has their own rules". If you are not behind on your loan payment normally, you only get as far as customer service who tell you you must pay or else. Once you are behind on your payments you are sent to loss mitigation where they have more power to work with you. The shame of this system is how it encourages people to default on their payments in order to be taken seriously!

There may be different workouts and modifications programs with the same loan servicing company. You could have different investors within the same bank; for example, the loan may be owned by Fannie Mae, Freddie Mac, some giant Mutual Fund or a private group in Utah or China for that matter.

The Home Preservation Foundation is essentially a consumer clearing house who refers you to a counselor. I spoke with a counselor at Springboard, one of ten non profit HUD certified counselors nationwide: 1-800-449-9392. This counselor was better informed than the person I spoke with in December, so that suggests they have hired experienced staff! She told me that whoever secured the loan may be an individual or group in another country...and that party has the power to say yes or no to her proposal. She explained that because investors want insulation from the end-borrower they have a 'servicer' like Chase or Countrywide service their loans.

After your session, you may be contacted by the lender, who may or may not know anything or be helpful. That person is a paper jockey with orders from the bank to protect their interests first. Unfortunately, no one is actually negotiating on your behalf once your counselor steps aside...and you will have no idea what is going on for perhaps months. According to the Springboard counselor, the government Modification program is only good for 5 years because they expect a recovery in the economy during which time "most people in distress would eventually be able to refinance". The Stimulus Refinance version (if you qualify for that) could be good for 30- 40 years. "There is no set time frame or method". Once your proposal goes to the lender you are on your own to either accept their offer or decline it. Then the clock starts ticking again.

What if you are already on the edge? As long as you are registered with the loan servicer in a pending review or default situation, your bank would not normally proceed with foreclosure; but again there is no set standard and this varies lender to lender. We have seen banks negotiating repayment terms from one department, while the same bank was posting foreclosure notices on the home owner's door.

Private Loan Modification: Good news in our state, Washington has officially formalized the Loan Modification process, due to the dedication of Rob McKenna, our State Attorney General, in concert with our Department of Financial Institutions, the governing body of mortgage banks and brokers. After investigating the modifiers and scammers, they have come down hard on the predators making false claims for big bucks. We now have a clear set of what can be done by whom (licensed brokers, loan officers or attorneys) and for how much. $1,500 is a typical broker's fee in Washington for what can be a three month negotiation process (fee and timing depend on many factors).

Modifiers employ the DFI's household budget and standard legal disclosures informing consumers of their rights. Your deposit for the first half of the process ($750) must be held in a Trust fund or Escrow account with the balance due on successful completion. If for any reason, the terms offered are not acceptable or the request is denied, the borrower will be refunded all but $300 for administration costs before submission to the lender. No closing costs or origination fees or appraisals or hidden funny business. Once prequalified and submitted to the lender your request may or may not be accepted so there are no guarantees.

A private modifier must document every contact and keep hounding your lender. Not something your average working person has the energy or knowledge to handle on their own. In spite of your legally assigning a modifier, your lender may contact you behind their back to work a deal.This is not always in your best interest so any contact from your lender should be shared ver batim with your modifier. Likewise, if you receive paperwork from your lender don't sign anything until it has been reviewed by your modifier.

You may also choose to work with your own attorney. Some legal firms offer this service as part of their bankruptcy practice. Expect legal fees in line with their other professional services. Note: Attorneys who represent Washington residents in matters involving real property in Washington must be licensed to practice law in Washington. Check with your State Attorney General if the firm you are working with is licensed!

ARE Modifications Successful? Our anecdotal evidence suggests that private loan modifications are working because your personal negotiator is not motivated by commission or the bank's interest. Your private modifier considers your real situation and will try to find something that works for you. That person is also, in our state, a licensed loan officer who is very familiar with how banks think. Now that the banks are getting PAID to modify your loan with the Stimulus funds they are motivated to make this work and are hiring staff to help clear the backlog of applications. That's right...The bank receives up to $5,000 for successfully modifying your loan and making sure you stay on track for the five year Stimulus plan.

Making Home Affordable Refinance Vs Modification: Thankfully your mortgage professional and your bank have a new choice of Stimulus Refinance programs introduced by Fannie/Freddie called "Making Home Affordable" just now hitting the streets. You must have a have a Fannie Mae or Freddie Mac loan and your lender can verify that over the phone or look up up your home online: http://www.makinghomeaffordable.gov/loan_lookup.html

The good news with this program is if your home value has gone down, you can still refinance up to 105% of the current value of your home with the first mortgage. If you have a second mortgage now, it stays in place allowing you to go over 105%. The second mortgage holder has to be willing to 're-subordinate' their lien after the new first mortgage is recorded...which most will if they want you to keep paying them!

There is a hitch: MHA programs require the borrower to absolutely fall into what they term a safe range of debt to income (31-33% maximum). Very few people in financial distress will meet that target. Many folks borrowed originally at 45-50% debt to income ratios. Many may not qualify for these programs. Back to square one: what can you afford and who can help. (With rates going up you may not qualify for an improvement over your current loan!)

If you qualify for the Obama Stimulus Refinance, Pricing your loan has become something of a nightmare with the lenders offering this program. You see, these are 'conventional' loans after all, so the lenders are using the tighter conventional pricing guidelines. For folks with impaired credit due to hardship, you are often priced right out of the ballpark. Unfortunately, some of the advantages of this program are hard to justify, given recent rate increases. This program works best for folks whose loan is higher than their home value in areas hardest hit by property value declines.

The devil's in the details for sure! A long chat with your accountant or mortgage professional is a good start to explore your options.

You are NOT alone: Even celebrities are having some of their homes foreclosed. Nicholas Cage just let his 8.5M mansion go for half what he paid for it in 2006.

http://www.zillow.com/blog/nicolas-cages-vegas-home-sells-for-half-his-purchase-price/2010/01/26/#{scid=new-site-rightlink1}

Happy Stimulus! Equitytalks

© 2008 susan templeton equitytalks

Loan Modification FACTS

2008-12-16T17:27:00.000-08:00

Folks with good credit are finding it harder to get a decent Home Equity Line or Refinance terms these days. The current market is very challenging for many who had previously relied on their investments for income or cannot sell real estate in this market. Below are some options:

First Step: Explore Loan Workout: If you have an Adjustable Rate Mortgage that is adjusting, have missed mortgage payments, or may simply be financially stressed by a change of circumstances, you may negotiate new new terms with your current mortgage holder. Your lender may offer several options including but not limited to: reinstatement, forbearance or a new repayment plan to suit your situation. When you call your lender directly ask for a supervisor for best result! As a consumer, you have every right to negotiate with your lender for better terms. Making your case to lower your rate or extend your loan requires a very solid plan and documents to back up your ability to meet your proposed new terms. Your up to date financials are essential.

FHA Rescue and Secure Plans FHA: Officially, these plans were rolled out to offer help for people needing to get out of ARM loans or who may be in arrears. Not all lenders offer these plans. FHA manages the higher risk of default with pricing hits (translated: higher interest rates) to encourage lenders to fund these loans. Certainly you should speak with an FHA licensed broker or bank about whether you will qualify. Officially FHA prefers a minimum FICO score of 500. However, the banks who fund FHA loans have very strict loan limits (by city/county) and very few will fund under 580 FICO. Unfortunately, with guidelines tightening on all fronts, alternative credit reports are no longer acceptable in this market. Officially, the FHA Secure Plan expires December 31st, so we are not sure if any new plans will take effect in 2009. FHA loan limits are established by county so be sure your loan is allowed. Generally all government loans require lower debt to income ratios and very stiff documentation levels (paperwork).

Mortgage Modification For longer term issues impacting your ability to afford your current mortgage, you are advised to pursue mortgage modification with your current lender. Mortgage modification may help by adding missed payments to your current loan balance while adjusting the adjustable rate to a fixed rate. This may be accomplished by extending the number of years on your loan, thereby lowering the payment within your means.Mortgage Insurance Loan: If your mortgage is insured (via Mortgage Insurance) you may qualify for a one-time interest-free loan from your MI guarantor to bring your account current and pay it back within a certain time frame. Your lender handles this process since they are essentially the insured party.

Modification Resources: There are some specialist companies and attorneys who will help you work with your lender to modify your loan for a fee. These firms usually charge a flat fee from $1000 to $4,000 or more. Your success depends on your circumstances and you ability to build your case with your lender. Modifiers are professionals who have the inside story with lenders and are skilled negotiatiors.

In Washington State, our Dept of Financial Institutions has proposed a (pending) rule that only Licensed Loan Officers and Brokers or Attorneys can offer this service to protect consumers. You should not have to pay more than $1000 up front, and a completion fee that depends on what extra work may have been required. If they don't get an acceptable result, you should get your money back less an application fee of around $300. Please undstand that in this market, lenders are very motivated to keeping people in homes. They do NOT want your house back. Saying that, banks are less likely to help you out if they think a minimal effort will keep your business.

Private Options: Several private lenders offer refinance terms. Generally, they are very strict on minimum 580 to 600 FICO Scores in this market. Most private lenders want hefty fees up front and interest rates starting at 10-12% for higher risk loans. Since some ARM loans are already adjusting higher than that, a private lender could be a very decent option if you are in too deep to have your loan modified.

Non Profit Counseling Hotline: For borrowers in arrears call your local HUD sponsored counseling organization who will help you determine the parameters of your situation. After which, they will refer you to the appropriate party at your bank. The bank will then respond directly to you-- and you are on your own to negotiate.

The Making Home Affordable program offers information and resources about the current programs http://www.makinghomeaffordable.gov

If you are not sure how to proceed, the first step is to ask your lender directly about potentially working out a solution. Before you call, read about your options online at the HUD site. http://portal.hud.gov/portal/page?_pageid=73,1827467&_dad=portal&_schema=PORTAL

12/17/2008 Hope For Homeowners HUD's new program has been deemed an utter failure since it's launch earlier this year. The program is very user unfriendly so the average consumer is confused. HFH has not funded a single loan modification to date according to National Public Radio release yesterday. Weigh your options carefully and if you have questions, contact your State Attorney General or or just ask around. Lots of people have tried working with lenders themselves with mixed results.

03/04/09 UPDATE: U.S.Treasury Summary of the new program: Making Home Affordable http://www.treas.gov/press/releases/reports/guidelines_summary.pdf

Unfortunately, the money going to banks to assist homeonwers will take time to implement. Some banks are reporting 30000 requests daily. Lenders are hamstrung with untrained staff who can actually help the consumer. Given most consumers are so stressed it seems they do need an independent representative. Unfortunately the HUD counselors give you 40 minutes and hand you over to your lender. I know people going this route now who are 3 months in arrears... and their making contact via the Hope Alliance did NOT stop the notice servers from arriving and letting the entire neighborhood know they were in default...taking pictures and being obvious about it...stapling notices on their doors like criminals.
Note: Loan Modification only applies to folks having difficulty --so if you are just trying to lower your rate and you are managing within your means, you may consider refinancing.

Success to you! Equity Talks

© 2008 susan templeton equitytalks

Staying Home?

2008-11-21T22:38:00.000-08:00

Baby Boomers buck the trend and live longer!

Our great grandparents often lived in the same house for a generation or more. As our families spread around the globe, caring for our parents in our homes as they age is less common. Boomers, the trend setters and the greatest mass of adults in America, are setting new trends in just how they age. Not only are boomers more educated, traveling more and enjoy more lifestyle choices, they are accustomed to having it 'their way'.

Aging in Place:
If you or someone you know was shortly born after World War II, then chances are you grew up in an exciting time of change including mini skirts and long hair. Baby boomers are accustomed to taking life in stride. Rather than accepting the traditional concept of retirement homes, many seniors (55 is hardly old!) are choosing to stay at home and enjoy the lives they have built, among friends and community, in the style to which they have become accustomed.

Renovation Boom:
Many seniors choosing this path are adapting their homes to accommodate less stair climbing or more in-home help. Minor changes may solve the solve your changing lifestyle needs. Converting a seldom used upstairs into a home help suite or enlarging a bed/bath suite on the ground floor with wider doorways and ADA access is a common theme. Widening walkways, adding a sun/exercise area or creating easy care landscapes nearer the house with native plants (less mowing) may be ways to prepare for a less active lifestyle. After all your home holds so many memories of your life. Consider the idea of subdividing your property if zoning allows to cut down on the space you must manage. Easing your home life, costs and maintenance issues makes perfect sense. Younger couples are building second homes with these ideas in mind also!

Financial Comfort Zone:
If money to pay for home upgrades or ease your retirement is the issue you have even more reason to stay put than sell your home and move. If you are 62 years old, your home is paid for, or you have a modest mortgage, a Reverse Mortgage is a great way to help you maintain your present lifestyle and live more comfortably. Reverse Mortgages allow a homeowner to pay off their existing mortgage without having a payment. You can take the available equity as monthly income, an open line of credit, withdraw lump sums-- or a combination of the three. FHA insured Reverse Mortgages are only offered by certified and accredited FHA lenders and banks and are monitored by HUD so you can be sure you will be treated fairly and with respect.

Another option is a Home Equity Line used as an available emergency fund. You can keep the line 'open' and just use what you need when you need it. This option works as long as you are have sufficient income should you withdraw the total balance. The nice thing about Reverse Mortgages over Equity Lines is that you will never have a mortgage payment as long as you live in the home. At any time you can either sell the home or pay your Reverse Mortgage off, just like any other mortgage, and your remaining equity is still yours and stays with your estate.

Caring for Your Heirs:
It's not uncommon for your family to express concerns about whatever action you take --even if living in your home seems overwhelming now. Some family members will resist your selling or refinancing...in fact any change made by one's parents can seem a little unsettling. Ask a Senior Advisor to can sit down with you and discuss your options with a family member for support. After all, these are big decisions that may effect how your estate is managed and your heirs will appreciate being taken into consideration.

If discussing these issues brings up resisitance, find a family member willing to get real with you about how you choose to live. It's important you find support for whatever you choose for your self. Consider your willingness to mow huge expanses of lawn and maintain an empty home as you get older just to keep your family happy. You just might be happier in a city apartment near art galleries and museums with a few potted plants!

Research Local Options:
Naturally, your ability to live a happy life in your own home is your first choice. Still, it's a good idea to check around the Senior facilities in your area and go visit friends who live in retirement homes and to see what they are like. Most senior designed villages have amenities like golf and swimming or community activities and proximity to shopping and health facilities that you might enjoy. Contact your local senior center for references.

Your local library will have information about the city and county resources. Ask a family member to take you on a tour and compare notes together of several places before you make up your mind. Having done your homework, you will have a better feel for what situation works best for you and your family.

Enjoy your retirement...you've earned it! Loannetter
© 2008 susan templeton loannetter