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California Homeowners Can Stop Foreclosure with Loan Modifications, Forensic Loan Audits and Negotiated Mortgage Loan Modification Terms.
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21 Jul 09 Loan Modification 101

What do homeowners need if they are considering working with a loan modification company in an effort to reduce their mortgage payment that they are 2 months behind on?… Gathering the necessary documentation for a loan modification submission is imperative for the Lender to grant a loan workout.

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.

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21 Jul 09 FTC Shuts Down Loan Modification Scams

The U.S. Federal Trade Commission and authorities in 20 states have sued dozens of individuals and companies as part of what they said on Wednesday was a crackdown on loan modification scams that have multiplied in the housing meltdown.  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 rescue homeowners in troubled financial waters but after they take their money they throw them an anchor instead of a lifeline.”

U.S. 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.  Leibowitz said that many who offer loan modification schemes deceive homeowners by posing as quasi-governmental agencies or implying that they are working with federal agencies and cautioned consumers to be aware of the scams.

According to Real Estate News Publication, Housing Crisis Under Fire, California loan modification scams lead the nation in loss mitigation fraud.  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.” 

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24 Jun 09 Foreclosure Moratorium California Loan Modifications

The State of California announced a new state law imposing a 90-day moratorium on foreclosures is in effect. Under this mortgage relief initiative, California lenders must prove that they made an effort to provide a loan modification with delinquent mortgages before they begin the foreclosure process. During that time home loan servicers can carry on with business as usual, including foreclosing on delinquent accounts. The State announced the California foreclosure moratorium would go into effect immediately, but will the major mortgage lenders fall into line with it?

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

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01 Jun 09 California Loan Modification & Mortgage Relief Law Updates

In November 2007, Gov. Arnold Schwarzenegger and several mortgage lenders announced a voluntary agreement meant to encourage loan modifications for borrowers facing foreclosure. Mortgage relief remains a top priority for legislators from the State of California.

SB 1137: Created a 30-day waiting period before lenders could file a notice of default; required lenders to maintain foreclosed properties; notification for renters in foreclosed properties.

AB/SB 7 (Second Extraordinary Session): Enacts a 90-day foreclosure moratorium, except for mortgage lenders and loan servicers that have entered into a loan modification program.

Local Lenders from Wells Fargo and Bank of America have reported a surge in FHA mortgage refinance applications and new home purchase inquiries for short sale and bank owner REO properties.

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01 Jun 09 Home Loan Defaults Rise

Home foreclosures have been a major burden on the Inland economy for Southern California. In April, there were almost 5,000 notices of default filed in Riverside County, according to ForeclosureRadar, a tracking service. The notices are the first step in the foreclosure process. The county had the fourth-highest rate of foreclosure sales last month. San Diego and orange County reported an increase in loan modification and default activity as well.  Mortgage relief measures continue to  be a top priority for government officials in California.

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.

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18 Dec 08 Streamlined Mortgage Modification Program Eligibility Requirements


  -- Conforming conventional and jumbo mortgage loans originated on or before January 1, 2008;

  -- Borrowers who are at least three or more payments past due and are not currently in bankruptcy;

  -- Only 1-unit, owner-occupied, primary residences; 

  -- Current mark-to-market loan-to-value ratio of 90 % or more.

Mortgage service companies will be sending mortgage modification solicitation letters beginning this month to thousands of homeowners believed to be eligible for this loan workout program. It is critical that eligible borrowers seeking mortgage relief respond to these letters and reach out to their servicers to determine if they can receive streamlined loan modification assistance. Also, borrowers who don't receive a letter are encouraged to contact their servicer to see if they may be eligible for SMP help. Fannie Mae will be working with servicers to monitor and improve implementation of the program as necessary. 

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage loan market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. In 2008, we mark our 70th year of service to America's housing market. Our job is to help those who house America.  - Source Fannie Mae 
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10 Nov 08 What to Expect with a Good Loan Modification Company

The good loan modification companies already have a system for dealing with the loss and mitigation departments for all the major mortgage lender. Great mortgage modification firms have the system perfected and that they know works with the specific lending companies. They typically have a loan modification package for you that include things like a financial worksheet, hardship letter template and a checklist of the requiring documentation. Many homeowners have found out the hard way that trying to provide a complete package for the under-staffed lenders is easier said than done.

Homeowners will need to Fax specific documentation like W2s, most recent pay-stub, and for self- employed customers, bank statements and sometimes tax returns. Make sure that you get your loan modifier everything at once. It is very difficult for loan modifications companies to achieve loan work-outs for their clients who “piece mail” their documentation.

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10 Nov 08 Best Ways to Stop Home Foreclosure

These days’ homeowners have many methods to delay or stop the foreclosure proceedings.

Loan Modification or Loan Work-Out-This is when the mortgage lender modifies your current mortgage in order to work with you and make your mortgage more affordable. In the past this was only used when a borrower was delinquent but now it is being used before someone is delinquent. This will be the hottest term and way to help people avoid foreclosure.

Forbearance- This is the most popular option prior to the sub-prime mortgage crisis of 2006. Forbearance was commonly used when a Notice of Default had been filed by the mortgage lender. With forbearance, the borrower is typically offered reduced monthly payments for a 3- 6 months.

Short Sale Transaction- When a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. A short sale is typically executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. Definition from Wikipedia

Refinance Loan – Is a new mortgage loan in which the defaulted mortgage is paid off. In most cases this is a sub-prime, hard money, or FHA Secure mortgage. The sub-prime and hard money financing typically offer high interest rates which make the affordability very difficult. The key component for refinancing out of foreclosure is equity. In most cases lenders will require Loan-to-Value at or below 60%.

Deed-in-lieu - is a deed instrument in which the borrower conveys all interest in a real property back to the mortgage lender. The homeowner does this in an effort to satisfy the past due for the mortgage to stop current or potential foreclosure proceedings. The deed in lieu of foreclosure enables the borrower to be immediately released from most or all deficiencies associated with the loan in default. It should be noted that this option is rarely agreed to by most lenders today.

Chapter 13 Bankruptcy –is a popular option used by foreclosure lawyers to stop the process of home loan defaults. In most case, the bankruptcy petition must be completed and filed prior to the sale date of your home. After filing, your bankruptcy attorney will propose a payment plan for the mortgage and debt to be repaid. The filing of a Chapter 13 bankruptcy ceases all collection activity though the “automatic stay”. The automatic stay continues for the life of the bankruptcy case unless otherwise ordered by the BK court. Some homeowners will try and sell their home while under Chapter 13 if you wish to apply the gains from the sale towards the bankruptcy debts. In most cases, a Chapter 13 bankruptcy stops the foreclosure immediately.

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07 Nov 08 Loan Modification – Frequently Asked Mortgage Relief Questions

What is a Loan Modification and How is this Mortgage Relief?
A loan modification is the process of changing mortgage terms with your lender in a revised agreement called a mortgage note modification.  Typically a loan modification will see an interest rate reduction and or a stretched amortization schedule. (ie. 7% 30 year adjustable rate mortgage gets modified to a 5% 40 year mortgage with a fixed interest rate. ) It is important to note that a mortgage loan modification is different than forbearance in that with a loan modification, your mortgage terms are completely changes, whereas forbearance only provides mortgage relief for a few months before your loan terms revert back to the original agreement.

How Long Does the Loan Modification Agreement Typically Take to Complete?
It can be done in as little as 30 days, but typically it will take about 45 to 60 days, however 90 days is not uncommon depending on which mortgage lender holds that note for the loan you are attempting to modify.

How Does the Loan Modification Process Work?
The Loan Modification process starts with a forensic loan audit and a professional analysis completed by an experienced loan negotiator.  They review your current mortgage loan’s terms (ie. Mortgage rate, ARM or Fixed, Debt to Income Ratio and the hardship letter) They look for opportunities to lower your monthly mortgage payment then present the affordable loan proposal to your mortgage lender.

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07 Nov 08 Truth in Lending Violations, Predatory Lenders and Forensic Loan Audits

The Truth In Lending Act also called TILA and the Real Estate Settlement Procedures Act, also called RESPA are frequently violated by mortgage lenders across the country. Predatory lending continues to be practiced by reckless mortgage brokers and careless lenders. These lending laws were created to protect consumers against predatory lenders; however a lot of flagrant violations continue to occur today.  Homeowners need to request a forensic loan audit from the loan modification company. The Legal Loan Relief performs a forensic audit when our mortgage relief clients first comes on board because uncovering lending violations can expedite loan work-outs, forbearance and sometimes principal reductions.

The penalties for failure to comply with the Truth In Lending Act can be substantial. Banks who violates the disclosure requirements can be sued for two times the amount of the total amount financed over the life of the loan. In the case of a home mortgage, this can be a very significant amount. In most cases, lawsuits must brought on by the consumer within 1 year of the violation, but certain courts have been known to consider predatory lending cases up to 3 years after the violation. If you are facing the prospects of foreclosure, uncovering Truth In Lending Act violations can delay and even stop the foreclosure process.This term can apply to all aspects of the mortgage industry and refers to the practice whereby a creditor put a borrower into a loan that the borrower will probably not be able to repay. Federal laws like the Truth In Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”), as well as many state laws, require that creditors disclose certain terms of loans to borrowers, and when those terms are not disclosed or are inaccurately disclosed these laws provide severe monetary penalties against these creditors.

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