Advice on Foreclosure Rescue Scams

Here is some information released by California Association of Realtors. Note the advice about foreclosure rescue scams.

 

Home Refinance and Loan Modification Plan
Presented by the California Association of Realtors

On March 4, 2009, the Obama Administration released detailed guidelines for homeowners to help them determine if they qualify for the Administration’s new Making Home Affordable plan.  This is a follow up to the Administration’s announcement on February 18 outlining their plan to stem the current tide of foreclosures and stabilize the nation’s housing markets.  

The plan has two primary goals:

1.To help homeowners in existing Fannie Mae or Freddie Mac loans that are current on their mortgage payments to refinance and take advantage of today’s lower interest rates.  Many of these homeowners are unable to refinance because of lost appreciation in their homes due to the continuing decline in home prices.  These homeowners still have equity in their home, just not the necessary 20% to get a refinance.  Under the Administration’s plan, Fannie and Freddie will be allowed to refinance qualified homeowners up to a 105 percent loan-to-value of the current value of the home.

2. To help homeowners who are at risk of foreclosure. The Administration is offering loan servicers and investors government assistance to help offset the cost of modifying qualified homeowners into affordable mortgages that will allow them to keep their homes. This may be done by reducing the mortgage interest rate, extending the term of the loan, principal forbearance, and/or principal cram down. This program is voluntary and the servicers must agree to contracts with the Treasury to participate.

In addition, the Government warns homeowners to beware of foreclosure rescue scams:

 - There should never be a fee charged for information or assistance regarding the Making Home Affordable Program.

 - Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your home. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.

 - Never make your mortgage payment to anyone other than your mortgage company without their approval.

Thanks,
CAROL PERDEW
Prudential California Realty
(209) 239-7979
www.CentralValleyHomes.co

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New Home Loan Disclosures to Protect Consumers

HUD: Consumers will shop for loans

Rule changes could cut into industry profits

BY MATT CARTER, INMAN NEWS

 

Consumers will be less likely to accept overpriced loans, title insurance and other services — including those offered by businesses affiliated with real estate brokerages and builders — once new loan disclosure forms and settlement procedures are fully in place at the end of next year.

That’s according to a lengthy review by the Department of Housing and Urban Development of its proposed rule changes governing enforcement of the Real Estate Settlement Procedures Act.

In publishing a final rule in Monday’s Federal Register, HUD detailed numerous “significant” changes to its proposed overhaul of RESPA in response to feedback from industry and consumer groups.

When they announced the new rule last week, HUD officials emphasized concessions they made to the real estate industry trade groups, who were highly critical of the rule changes as first proposed in March. Industry critics said HUD has overestimated the extent to which consumers will comparison shop, and underestimated the unintended consequences of the rule change, such as consolidation.

HUD’s response to the criticism included dropping a requirement that consumers be read a lengthy script at the closing table, and shortening the standardized good faith estimate (GFE) from four pages to three.

More crucially, perhaps, HUD toned down but did not abandon measures intended to encourage consumers to shop for the best deal and create more competition between lenders and settlement services providers. The measures still in place could have a dramatic impact on the way those products are marketed and sold to consumers.

The overall goal of the new, standardized GFE is helping consumers compare different loan packages, HUD said. The new disclosures and procedures will empower consumers to compare not only the rates and terms of different mortgage offers, but the price services required by most lenders, such as title insurance.

Slack on tolerances

HUD said one way it is helping consumers comparison shop is by imposing tolerances on how much prices and fees quoted in the GFE can change before borrowers reach the closing table. Loan origination fees can’t change at all, and fees for required services won’t be permitted to change by more than 10 percent when they are provided by a company selected by the lender.

Trade groups representing lenders and settlement service providers were generally opposed to tolerances when they were proposed by HUD in March. In order to minimize the risk of violating the tolerances, some said, big lenders would have to contract with large settlement service providers, driving small companies out of business and reducing competition.

HUD said accurate estimates are crucial to empowering consumers to shop for the best deal, protecting them from “low-ball” offers that change at the last minute. But HUD said it did not intend to punish loan originators for unforeseen changes in a borrower’s circumstances or other factors beyond their control, such as government recording charges.

HUD says the final rule provides some additional leeway for fees to change due to unforeseen circumstances. If there are changes in the tax rate or the price of the property after the good faith estimate is provided, for example, originators can provide a revised estimate.

While transfer taxes will still subject to a “zero tolerance,” HUD acknowledged that government recording charges may not be be known until closing, and will instead be categorized with other settlement services that can change by 10 percent overall.

HUD will cut lenders some additional slack by giving them up to a month after a closing to correct any failure to achieve the tolerances. The final rule would give loan originators 30 days to “cure” violations by reimbursing the borrower by the amount the tolerances were exceeded.

If that sounds like a slap on the wrist that won’t deter loan originators from engaging in bait-and-switch tactics, HUD says that until Congress grants it additional power to enforce RESPA, it can’t legally impose fines for such violations.

But lenders won’t be able to break the rules with impunity, HUD says, because federal and state banking regulators can punish the companies they license for RESPA violations. In addition, aggrieved borrowers can bring civil suits under RESPA seeking redress, and lenders who sell loans on the secondary market can also be held liable by the investors who buy them if they break rules governing mortgage originations.

In its handling of tolerances, HUD says the final RESPA rule “seeks to balance the borrower’s interest in receiving an accurate GFE early in the application process … with the lender’s interest in maintaining flexibility to address the many issues that can arise in a complex process such as loan origination.”

Presented by
CAROL PERDEW
(209) 239-7979
wwwCentralValleyHomes.com

HOPE NOW Program Is Helping Home Owners

Despite difficulties, homeowners finding relief with HOPE NOW program

By Jack Guttentag,
Inman News|  

Editor’s note: A previous version of this story erroneously stated that the HOPE NOW Alliance of loan servicers charges borrowers for consultations. The consultations are free.

Q: “I have been giving my clients an article you wrote about a year ago advising borrowers having payment problems how to request a modification in their loan contract … Could you bring it up to date?”

A: A lot has happened since that article was written. Very shortly thereafter, the HOPE NOW program promoted by Treasury Secretary Henry Paulson began as an effort by housing counseling agencies and mortgage servicers to modify loans on a strictly voluntary basis. Since then, the first recourse of borrowers in trouble has been to call them at 1-888-995-HOPE. I have sent many people to HOPE NOW, with mixed feedback.

House prices have declined further in the last year, turning more borrowers “upside down” where they owe more on their mortgage than their house is worth. This induces some borrowers to stop making payments, which increases foreclosures. But price declines also reduce the amounts that investors recover from sale of the house following a foreclosure, which should increase the attractiveness of loan modifications as an alternative.

In addition, a full-fledged financial crisis has erupted, forcing the Federal Reserve to act as the lender of last resort to a series of weakened financial firms unable to meet their cash needs. The coverage of deposit insurance has been broadened and money market funds are now insured. In the works, furthermore, are plans to purchase mortgage assets from investors, to make direct equity investments in banks, and even to insure payment of principal and interest on mortgages and other assets.

An excellent study by Alan M. White provides some indications of what has happened to modifications during this tumultuous period. In a sample of subprime loans he examined, the mortgage payment was reduced in only about half the modifications, and the balance was reduced in very few cases. In many cases, the modification consisted of adding the amounts past due (“arrearages”) to the balance, which raises the payment. It is no wonder that during the annual period he examined, the number of foreclosures swamped the number of modifications.

Borrowers having payment trouble have choices. The rational choices are either to seek help immediately, or to take immediate action themselves. Those who put their heads in the sand will lose their home in a foreclosure.

I suggest that those who elect to seek help go to HOPE NOW first, and if that does not work out, to try a HUD-approved counselor. Before seeing a counselor, prepare yourself by pulling together all the data that the counselor will need; the form at Genworth Financial can be used for this purpose.

Responding to a solicitation from one of the many modification consultants who have emerged over the last year is extremely risky. They charge $1,000 and up, usually payable in advance. Some may do a good job, but many are hustlers looking to garner upfront fees.

If you elect to handle the matter yourself, you must get to the servicer’s loss mitigation department, which may take some persistence. The burden of proof is on you to demonstrate and document that, for the reasons you lay out, you can no longer make the required payment. You must also demonstrate and document that you can make a smaller payment that you specify.

Under the new FHA program called H4H (“Hope for Homeowners”), FHA will refinance loans of borrowers having payment problems if the existing investor will write down the loan balance to 90 percent of current market value. HUD publishes a list of lenders participating in this program. I am not sure whether there is any benefit to a borrower contacting one of them before the firm servicing their existing loan has agreed to pay down the balance. But it can’t hurt to get that lender on your side.

Aside from the possible increased risk exposure under FHA, the federal government has not channeled any crisis money directly to borrowers. The new programs referred to earlier will direct $700 billion or more to financial institutions, but none to households. A strong case can be made that this is unbalanced.

The root cause of the crisis is the decline in home prices, which will continue so long as the foreclosure problem isn’t solved. Arguably, dealing directly with this problem is more effective than dealing with it indirectly. The Treasury recently put out a request for proposals on a mortgage payment insurance plan, which could be the perfect vehicle for providing direct assistance to borrowers. Stay tuned.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

Presented by
CAROL PERDEW
Prudential California Realty
(209) 239-7979
wwwCentralValleyHomes.com

 

Can Home Buyers Get Help When Still Making Their Payments?

Must a Borrower Stop Paying in Order to Get Help?

by Jack M. Guttentag
Inman News

“Is it true that mortgage servicers will not help borrowers who are in trouble until they stop making their payments? I am a home retention counselor, and I keep hearing from people referred to me that they have received no response from their servicer because they have not yet missed a payment. I would hate to advise people that they have to stop paying if they expect to get any help if it is not true.”

There is certainly much truth to this because I have heard the same story from numerous people I have counseled, whose stories I have no reason to doubt. The most common thing I hear is that they were told by the servicer to come back when they were two payments behind.

There are understandable reasons why borrowers who are delinquent on their payments receive more prompt consideration than those who are current. To the degree that servicers are faced with more requests for help than they can handle at one time, they have to set priorities. The number of borrowers in trouble has ballooned over the past year, outstripping the efforts of servicers to expand their capacity to deal with them.

Setting Priorities

A plausible way to set priorities is in terms of the degree of urgency of the problem. A borrower 60 days behind in his payment is closer to foreclosure, and if he is going to be saved, he needs faster action than a borrower who is current. So borrowers who are current get placed at the bottom of the list of borrowers requiring special treatment, if they are even placed on the list at all.

This tendency is reinforced by the fear of free-riders. All borrowers would like to get a better deal on their mortgages, whether they have trouble making their current payments or not. If loans are being modified to help borrowers, some borrowers who are not in financial distress will try to take advantage of the situation by pretending that they are. But potential free-riders may not be willing to become delinquent because that would hurt their credit. By only considering modifications for borrowers who are already delinquent, the servicer reduces the number of potential free-riders.

In addition, the practice of dealing only with borrowers who are delinquent keeps loans in good standing for longer periods. Consider the borrower who loses her job but has savings sufficient to cover the payments for some months. Investors would prefer that the borrower make the payment out of savings for as long as possible, since she might find another job during this period, avoiding the need for any modification of the mortgage.

Moving Up on the List

If I were a borrower with reduced income but with good prospects of recovery, I would make the payment out of savings, avoiding the hit to my credit. If I considered the prospects of recovery to be poor, however, I would stop paying and husband my savings. This would move me up on the servicer’s priority list for special treatment. While it also moves up the hit to my credit, that is something that would happen anyway as soon as my savings were exhausted.

If I did not have a problem making the current payment but would have a problem dealing with an anticipated payment increase, I would handle it differently.

First, I would determine exactly how large the payment increase would be. If the increase stemmed from an interest-only loan reaching the end of the interest-only period, the new payment could be found using any monthly payment calculator (including calculator 7a on my Web site) inputting a term equal to the remaining life of the loan. If the increase stemmed from an ARM (adjustable-rate mortgage) adjustment, the new payment wouldn’t be known exactly until a month or two before the adjustment, but an estimate based on the current value of the rate index would provide a good estimate.

A Detailed Budget

Step two is to develop a detailed budget which documents the point that the expected payment is not affordable. Use the form provided by Genworth to show your income, expenses, and assets.

Submit your document to the servicer well in advance of the anticipated payment increase. There is no guarantee that it will lead to a contract modification before the payment increase materializes. However, it gives you a good shot to move up in the servicer’s queue by providing the concrete detailed information that servicers require. It also keeps you out of the hands of the modification hustlers who want to be paid upfront for doing what you can do yourself.

CAROL PERDEW
Prudential California Realty
(209) 239-7979
wwwCentralValleyHomes.com

Bank Representatives Help Homeowners Save Their Homes

You could save your home Friday
Banks in Manteca in bid to see if they can modify loans on foreclosures

Dennis Wyatt
Manteca Bulletin
Managing Editor

There is a chance that a number of homeowners on the verge of losing their homes to foreclosure could walk away from the Manteca Senior Center on Friday cutting deals with lenders that makes it possible to stay put.

Five lenders – Countrywide, Indy Mac, Wells Fargo, Chase, and Washington Mutual – will have representatives on hand with many authorized to make loan modifications on the spot if they have all of the appropriate information from borrowers. For those who don’t have a loan through one of those five lenders, representatives of five different housing counseling firms that have HUD approval will serve as advocates.

“It means a lot to a lender when they get a call from someone that’s HUD approved,” said Ana Rocha, a Manteca Redevelopment Agency representative.

It’s all part of the grassroots non-profit No Homeowner Left Behind effort that has conducted nine similar efforts in the Northern San Joaquin Valley during the past year that have helped hundreds of families save their homes some times the same day of the workshop.

The Manteca gathering is this Friday from 2 to 8 p.m. at the Manteca Senior Center, 295 Cherry Lane. If you can’t make it Friday, there is also one Saturday from 9 a.m. to 3 p.m. at the Stanislaus Agricultural Center at 3800 Capricornia.

Edward Parcaut – a certified mortgage planner with SourceOne Financial in Modesto who is among the moving forces behind the effort to give homeowners in distress free help that arms them with knowledge and connections necessary to have a solid chance at saving their homes – noted that the chances of getting a resolution has improved significantly in recent months.

“A lot more banks are willing to take steps and modify loans upfront,” Parcaut said. “It saves them a lot more money.”

It’s based on the new reality of home loan math. For example, if a loan is outstanding for $477,000 a bank now realizes if it foreclosures on a home it can only get $277,000. It costs as much as $57,000 in additional costs to foreclosure. The bank looks at that, considers loan modification and is able to reduce their losses upfront.

There is no guarantee that a home can be saved on the spot, but the organizers say it happens every time – or within weeks of the workshop.

As for those that can’t save their homes as a bank may decide against loan modification based on financials and income, organizer Dori Beck noted, “we can work to make sure they leave their homes with the same dignity they had when they moved in.”

Those attending need to bring their loan information and documents, pay stubs for the past month, and current mortgage payment.

“There’s a huge chance it (a loan modification) can happen,” Parcaut said of those who attend the workshop.

The Federal Reserve is helping publicize the Manteca workshop by sending notices all the way back to June 1 who got foreclosure notices in San Joaquin County.

Rocha said the City of Manteca is participating in the effort under the direction of the City Council that wants to do everything it can to help people keep their homes in Manteca.

It is also open to those who have bought homes as an investment.

Parcaut said banks have worked with those people as well adding that many of those homes have renters in them who will lose a place to stay if the bank forecloses.

At such gatherings in the past, some homeowners have been successful with negotiating with bank representatives on the spot to secure 30-year fixed rate loans that have kept them in their homes,

Organizers have cautioned that not all banks are working to that degree. They also warned that some people might simply not be in a position to be helped based on the determination of the bank to get a streamlined loan at a reduced rate. The climate today has vastly improved compared to six months ago when banks were struggling to figure out what to do.

There are over 1,200 homes in Manteca property in various stages of foreclosure. Either the bank have repossessed them, they are in escrow to be transferred to another buyer, are in the final stages of having their home reposed or have just missed their first payment.

There is a serious concern about whether the market can continue to absorb foreclosures.

That is why some banks – but not all – are now working with those caught up in the foreclosure process.

For more information contact the Manteca Redevelopment Agency at 239-8427.

 

CAROL PERDEW
Prudential California Realty
(209) 239-7979
www.CentralValleyHome.com

TIPS FOR PREVENTING FORECLOSURE

 This informative article gives suggestions for those borrowers who are having payment    
 problems. This includes some great information and Web sites directed entirely to helping
 prevent needless foreclosures.  You can know your options to determine the best possible 

outcome.  This provides some useful resources that are available.

What Should Borrowers Do When They Need Help?

by

Jack M. Guttentag
Featured on Yahoo Finance

An uncomfortably large proportion of my mail these days is from borrowers with serious payment problems. In most cases, I can’t help them for the reasons discussed below. With a few common cases, I try.

In one typical case, the borrower has two mortgages which add to an amount well in excess of the value of the property, and can no longer afford both payments. If the same lender holds both mortgages, and if the borrower can afford a reduced payment, his objective should be to persuade the mortgage lender to modify the notes to lower the payments.

The burden of proof is on the borrower. He has to document that he will be forced to default on the existing mortgages but could afford the payment on a new mortgage that would cost the lender less than foreclosure.

A Greater Challenge

If the second mortgage is held by a different lender, the challenge is greater.
The first mortgage lender is unlikely to modify the note so long as the second mortgage lender remains in a position to foreclose.

I suggest that borrowers in this situation approach the second mortgage lender first, with the objective of inducing that lender to get out of the way. The borrower can offer the second mortgage lender an unsecured promissory note for a portion of what is owed on the second mortgage. Since the second mortgage loan has little or no value except as a nuisance, any reasonable offer is likely to be accepted.

The situation described above is only one of many in which troubled borrowers may find themselves. Rarely do they communicate all the information that I would need to find the best possible outcome. Not all have second mortgages, but some have large amounts of non-mortgage debt to complicate the process. While many have negative equity in their properties, some have positive equity. In some cases a loss of income appears temporary, in other cases permanent; in some cases borrowers plan to dispose of the property, in other cases they want to hang on if possible.

A Best Possible Outcome

In principle, there is a “best possible outcome” for every individual situation, but only rarely do borrowers give me all the information I would need to find it, even if I had the time. Few borrowers know what their options might be, and fewer still understand the information they must provide before a best option can be identified. But some useful resources are available.

I have an article on my Web site called “Mortgage Payment Problems: What If You Can’t Pay?” It covers a wide range of possible situations in which borrowers may find themselves, and suggests the remedies that appear most relevant to each situation.

Recently, PMI Mortgage Insurance Company and Genworth Mortgage Insurance Company have developed Web sites directed entirely to helping prevent needless foreclosures. They cover much of the same ground as I do, but they do it better by breaking the problems down into bite-size pieces. Further, they include a number of videos that many people will find easier to follow than written expositions.

Warning: These sites are not easy to find through the main sites of the two companies. For the PMI site, go here. For Genworth, go here. Click on the menu item “Education and Training”.  

These sites are for those who are prepared to invest the time needed to figure out what their options are; they will not hand-tailor a solution for them, but they will provide useful guidance nonetheless.

At a second site, Genworth takes a step toward providing hand-tailored solutions. They provide forms which, when filled out by borrowers, provide the raw materials from which hand-tailored solutions are derived. However, there is no automated assistant to generate solutions; instead the information is referred to a Genworth counselor who will do it manually. Unfortunately (but understandably), the counseling service is available only to borrowers whose lenders have mortgage insurance with Genworth.

That does not mean that this facility is useless for other borrowers in trouble. At some point, every borrower in trouble who expects help must pull together all the information about their financial situation that is relevant to a best possible outcome. If the intention is to go directly to the lender, providing this information at the outset will go a long way toward placing him at the top of the applicant pile rather than at the bottom.

I have been searching for a program that will automate the last step — that is, after the borrower enters all relevant information, it will produce a best possible outcome, for that borrower. While such programs exist, they have been developed for license to major players and I have not yet been able to shake one free for direct use by borrowers. But stay tuned.

 

 SEARCH FOR BANK OWNED HOMES AT www.CentralValleyHomes.com

Carol Perdew
Prudential California Realty
(209) 239-7979
www.CentralValleyHomes.com