In the recent past, the Obama administration has attempted to help the struggling housing market but most of mortgage relief initiatives have failed. Refinancing underwater mortgage loans has certainly become a common challenge that thousands of homeowners appear to be ready to embrace.  This new FHA program which started last week is often referred to as the FHA short refinance because the 1^st mortgage balance is written down to the present market value, thus “short refinance.“

The government has placed aside $14 billion in TARP funds to help support this new program. But the question of the foreclosure day is, “Will lenders and mortgage servicers cooperate?”  Qualifying for the Emergency Homeowner Loan Program or FHA short refinance may be difficult but the financial rewards are significant so we recommend that you attempt to get qualified.  Getting your mortgage balance reduced and your monthly payment lowered are two amazing feats worth striving for.

Are You Eligible for a Government Loan Modification Plan?

Are You Eligible for Obama’s Loan Modification Program?   To be eligible for mortgage loan modification options under the federal initiative, borrowers should be able to meet the following basic requirements:

o    The home for which the loan being modified must be the primary residence of the applicant.

o    The value of the present home mortgage cannot exceed $ 729,250 for a 1-unit property.

o    The existing home loan should have been approved before 1st January, 2009.

Sam Khater, senior economist, First American CoreLogic. “To say there is a second wave implies the existing wave has receded,” Khater told me. “I don’t see that the wave has receded.”  Khater shared his historical data of 90-day delinquency rates for Orange County, as well as the foreclosure-in-process rates and rates of REOs, or foreclosures on banks’ books. The 90-day rate includes all outstanding 1st mortgages at least three months late but not yet foreclosed. The foreclosure rate is just 1st mortgages with a notice of default or trustee’s sale filing.

If you look at the 90-day rate it has been heading straight up it has not scaled back. Khater also said the California foreclosure rate and REO rates have been impacted by government tinkering in the market. He said federal and state efforts have mostly delayed foreclosures, preventing few.

In Khater’s view it shows “one giant wave.”  Local State and Federal loan modification programs have helped thousands of borrowers keep their homes, but in some cases the mortgage relief was simply delaying the inevitable loan default that will push the homeowners out with a legal foreclosure.

Mathew Padilla elaborated more the 2nd-wave of foreclosures looming for so-Cal neighborhoods. He said it’s based on the idea that there has been a lull in home “foreclosures and the big second and maybe third or fourth waves will come as low introductory payments end on various types of adjustable-rate loans.” Credit Suisse released reports with graphs highlighting significant of resets and interest rate recasts in 2010, 2011 and 2012. 

Industry insiders have already discussed that defaults remain high for negative amortization option ARMs.  The report reminds us that we need not wait for the adjustable rate loans to adjust, because many of them are already defaulting.  If you are a homeowner seeking a loan workout make sure that you contract with a reputable law firm or loan modification company.  Ask about their refund policy, in case the lender rejects your request for a loan modification.

The U.S. Federal Trade Commission and authorities in 20 states have sued dozens of individuals and loan modification companies as part of what they said on Wednesday was a crackdown on loan modification scams that have accelerated the home foreclosure crisis.  The 189 lawsuits and other court actions target the “con artists” who offer to help homeowners facing foreclosure, only to take up-front fees and perform little or no service.  “It’s an operation full of hollow promises designed to fatten the pockets of criminals and con artists,” FTC Chairman Jon Leibowitz said in announcing the move at a press conference in Los Angeles.  “These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” Leibowitz said. “They promise to provide mortgage relief for troubled homeowners but after they take their money they throw them an anchor instead of a lifeline.”

United States mortgage fraud reports jumped 36% last year as desperate homeowners and industry professionals tried to maintain their standard of living from the boom years, the U.S. Federal Bureau of Investigation said last week, calling fraud rampant and growing.  California Attorney General Jerry Brown said his office had sued 21 individuals and 14 companies accused of scamming homeowners, saying that many of the operations were based in Orange County, south of Los Angeles. Also Brown said that bogus loan modification scams had proliferated widely following the subprime meltdown and housing crash, to the point where authorities with limited resources were unable to effectively pursue all of them.  “We’re going to do everything we can to stop it, realizing that there are more of these rats that come out of their holes than we can stomp on,” Brown said. “This is one of the more egregious wrongs we see committed in society and we are going to fight it.” 

Adrian Sainz wrote an article a few days ago, that I wanted to share with you. Homeowners worried about missing mortgage payments and entering foreclosure may have another option: a loan modification. Despite some signs of stability in the housing market, foreclosures remain a major obstacle to a meaningful recovery. And more borrowers in good standing are likely to miss their mortgage payments as the recession claims more jobs.  That’s why some people have gone for a loan modification — a permanent change in a mortgage that results in more affordable payments for the borrower.

Efforts to modify home loans have been easily outpaced by the number of new delinquencies, according to a Treasury Department report released in late June. In the first quarter, loan companies modified 185,156 mortgages, up 55 percent from the previous quarter, while the number of foreclosures in process increased to 844,389, up 22 percent.  Still, modification has been an option for many troubled homeowners. Lenders have been overwhelmed by calls from people seeking to modify their home loan, leading to reports of frustration and delays, according to mortgage finance giant Freddie Mac, which recently released an Internet video discussing this topic.  In the face of these delays, it’s important to start the loan modification process fully prepared. That means having the correct paperwork handy before calling or meeting with a loan servicer or housing counselor.  Here are some questions and answers about what you should have on hand.

Question: What are some basic documents to gather ahead of a loan modification meeting?

Answer: First, the servicer will want to quickly find the file in question, so have the monthly mortgage statement in hand.  Next, find the most recent statement for any homeowners’ or condominium association fees. Some borrowers have seen association fees increase in light of more home vacancies brought on by foreclosures, stressing monthly budgets — so you’ll want evidence of what you’ve been paying each month.  Also, borrowers who took out home equity lines of credit, and second or third mortgages, should have paperwork for those loans handy.  All of these documents go a long way in displaying a troubled borrower’s financial situation and determining their eligibility for a loan modification. Borrowers should also enter the process with a budget plan that includes how much they can actually afford to pay in monthly housing expenses, including insurance and taxes.

Question: Are there any documents not specifically related to the home that should be nearby during the meeting with the loan servicer?

Answer: Yes. Bring along statements showing balances and minimum monthly payments on active credit cards, car loans, student loans and other debts or obligations, Freddie Mac says.  These documents give the servicer a sense of the borrower’s monthly expenses outside of housing-related expenditures, to come up with a manageable monthly mortgage payment that will be sustainable.

Question: Is that all?

Answer: Actually, no. Freddie Mac recommends that homeowners write a statement that discusses the financial problems that are or could be leading to foreclosure.  This should be an honest account — the writer should set pride aside and give the servicer a sense of how bad the situation really is.

Loss mitigation and mortgage relief can be a complex decision for some mortgage lender, so remeber that you have the opportunity to make another 1st impression, so don’t blow it…process. In most cases, homeowners should have an attorney guide them through the loan modification process to work through any technicalities and make sure the lender is taking the correct steps.

Frustration is going back and forth from homeowners to lenders.  Unfortunately, Washington, is not helping much either. The Obama administration set up a $75 billion Making Home Affordable program to pay mortgage lenders to modify home loans, but a Treasury Department spokeswoman couldn’t even say whether lenders and banks have to reveal how many mortgage loans have been changed.  So why bother trying to get an unaffordable loan modified?  John Ulzheimer, president of consumer education for Credit.com, points out that a loan modification, if you can get it, won’t damage your credit the way a foreclosure or a short sale would.  And he notes: This process, although difficult, is free.

You don’t have to use those law firms and companies that are advertising heavily, saying they can pull off a modification for a fee, usually of a few thousand dollars.  To learn more about the Obama’s loan workout program and mortgage relief in general, go to www.makinghomeaffordable.gov.  Homeowners Hope Hotline, 888-995-HOPE.  Article was written by Harriet Johnson Brackey for the South Florida Sun-Sentinel.

www.youtube.com/watch?v=TX_-nTtNXfU

California Foreclosure Moratorium Guidelines:

ü  The moratorium applies to first mortgages made from 2003 through 2007.

ü  The home loan must be for your principal residence.

ü  The homeowner must have received a notice of default.

ü  The home loan servicer does not have a California loan modification program in place.

ü  Because many homeowners are upside down on their home loans

There is a concern that the 90-day negotiating period will only postpone the inevitable because so far the banks are not reducing the principal.  Read the complete Article from the Loan Modification Outlet.> Loan Modification Plans and California Foreclosure Moratorium

San Bernardino County had about 4,000 notices of default and the seventh-highest rate of foreclosure sales in April.  The main state foreclosure law to emerge last year was SB 1137. It requires lenders and loan servicers to talk with borrowers before starting foreclosure proceedings. The goal is to get more mortgage loan modifications.  This year, lawmakers introduced more than 30 foreclosure- and mortgage-related bills. Nearly all of the authors are members of the Legislature’s Democratic majority.  About two-dozen measures are still pending, with most facing a Friday deadline to clear the Legislature’s appropriations panels.

Some of the bills would put the state in compliance with the federal Secure and Fair Enforcement of Mortgage Licensing Act approved in July 2008.  The law requires mortgage loan originators to be licensed and complete 20 hours of pre-licensing legislation, along with other requirements.

Let’s not forget that Wells Fargo never offered 2-year adjustable mortgages and high risk option ARM’s with the 1% teaser rates that  Chase, WAMU, IndyMac, Countrywide, World Savings and pretty much every other subprime mortgage company offered a years back.

Here is the unsubstantiated comment:  “Knowing that it would probably be unlikely that Wells Fargo could comment publicly on the mortgage issues facing the Kropkowski family, I still asked the company for a response early Monday. This came in Monday night, just after my column deadline:

“During a time of financial hardship, various workout options are explored and may be available to customers.  If a homeowner can’t demonstrate financial ability to afford a loan modification under the investor guidelines, Wells Fargo is unable to extend a loan modification.  Due to customer confidentiality and other privacy considerations, Wells Fargo cannot share specific customer loan information beyond what the customer has chosen to make public.”  Debora Blume, in the Communications Dept. of Wells Fargo Home Mortgage. Original Blog Post >

There were 2,808 notices of default in the county last month, a drop of 8% from the previous month and nearly 10% from January 2008. Such notices mark the start of the foreclosure process. Mortgage lenders are hoping that Obama’s $75 billion foreclosure-prevention program will help them avoid the expense of taking back homes and reselling them at reduced prices during the housing slump. Many San Diego homeowners have missed mortgage loan payments for several months without receiving default notices, analysts say. When mortgage lenders reclaim numerous defaulted homes, they place downward pressure on property values and reduce their own profits from foreclosure re-sales.

The Federal Government continues to put pressure on lenders to provide harder to keep people in their homes has been building since before the November election.  I think we are going to see February numbers artificially low and we will see how the nation responds as the foreclosure-prevention proposals kick in  March.” DataQuick analyst Andrew LePage said many home loan lenders will likely delay foreclosures even without the Obama plan, because finding alternatives to default is in their own best interest.

Federally controlled mortgage giants Fannie Mae and Freddie Mac and major banks JPMorgan Chase, Citigroup, Morgan Stanley and Bank of America are delaying foreclosures through March 6, Sharga said. Obama’s foreclosure program got under way March 4^th, but little progress has been made. Fannie Mae and Freddie Mac had suspended foreclosure sales during the winter holidays and stopped evictions from foreclosed properties through the end of this month. Together, they own or guarantee about half of all U.S. home loans.  Many California homeowners have jumbo mortgage loans that exceed the loan amount limit that is targeted for relief with mortgage modification programs and mortgage refinancing for borrowers up to 105% loan to value.

According to RealtyTrac, increased efforts to loan workouts and foreclosure prevention haven’t kept pace with the deepening housing market decline. Nationally, more than 2.3 million homeowners faced foreclosure proceedings in 2008, up more than 80% from 2007, Distressed borrower Brendan Klein, 33, of San Marcos is skeptical of federal stimulus efforts. “Politicians are running around saying, ‘We are going to set this up for people in trouble,’ but none of it is happening,” Klein said. Klein, a skateboard shop manager, is trying to negotiate a loan modification to avoid foreclosure on a two-bedroom condominium he shares with his wife and 1-year-old son. Klein said he took out a risky stated-income loan to buy the home in 2004. Now that his home loan payments have adjusted higher, his budget is stretched to the limit.  Unfortunately, he has been unable refinance because the home is worth $150,000 less than he paid.  Klein said he doesn’t want to walk away from his debt, but he has cut back spending as far as he can.  “I don’t have a gambling debt,” he said.   Critics say such borrowers may receive little help from the $75 billion foreclosure-prevention program.