Having Problems paying your loan? Loan Modifications & Loss Mitigations

What is loan modification?

Changes in your loan by the lender to help you avoid foreclosure
You basically refinance without paying high costs of refinancing…..
Banks do not want to own your home or prospering from your misfortune

I. Introduction to Loss Mitigation/Loan Modification
We all know that life is unpredictable, and that circumstances often arise that can prevent you from making your mortgage payments. Even hard-working people can encounter unforeseen situations which may affect their ability to pay their mortgage in a timely manner. Many issues can be contributing factors such as interest rate adjusting, illness, loss of job, reduced income, failed business, job relocation, death of spouse, divorce, marital separation, or even high medical bills. Just one of these situations can have a direct bearing on making home mortgage payments.
What is a Loan Modification? Loan Modification- This term has been getting a lot of attention lately and rightfully so. With millions of homeowners stuck in toxic adjustable rate mortgages and no ways to refinance out of them, loan modifications may be the only way to assist struggling borrowers. This term is used when your lender modifies your current mortgage (same loan you have, only changes are made to the note) in order to work with you and make your mortgage more affordable. A modification to your rate, balance of loan, delinquent fees owed, term of loan etc. can be made by the Lender. In the past this was only used when a borrower was delinquent but now we will see it being used before someone is delinquent. This will be the hottest term and the best way to help people avoid foreclosure.
Why, you might ask, would any bank be willing to change or even negotiate your loan terms? The reason is because banks already own over $50 billion in foreclosed properties and the last thing they want is more homes for their portfolio. It is in the banks best interest to negotiate the terms of your loan as an alternative to having to pay the high costs associated with the process of foreclosure. A loan modification is the banks best way to ensure they are paid back any money owed for the mortgage plus interest. This is a win/win scenario with the bank avoiding owning another property and potentially suffering huge losses, and more importantly ensuring your family can not only keep your home, but also maintain a mortgage payment you will have the financial capability to afford.
One of the best parts about this service is that you can potentially attain all of the benefits of refinancing without having to pay all the high costs of a refinance. Refinancing can often cost in excess of $10,000 when you take into consideration the appraisal, title, escrow, and loan origination fees. We realize that “value” in business is hard to come by, and the last thing we want to do is put our clients in a bind that could potentially lead to more financial difficulties down the road, which is why we only charge $2,000 for this service. Compare that with the costs of your last refi! Similar companies are charging anywhere from $4,000-$10,000 for this very same service!

Short Sales, Not that Fun

Short sales: A tough road

By Diane Wedner
Los Angeles Times Staff Writer

June 15, 2008

RESIDENTIAL short sales sound like a picnic: Owners need to sell their homes for less than they owe, lenders forgive the difference and buyers grab a good deal.

If only. This is one picnic that requires a long wait for dessert. The only “short” thing about short sales, buyers and sellers say, is one’s patience.

“The waiting is torture,” said Mark Shandrow, a Keller Williams Realty agent in Long Beach who specializes in such transactions. “The banks are overwhelmed with short-sale requests, and some make sellers wait five months for an answer.” That answer, in many cases, he added, is “no.”

Yet despite the obstacles to successful short sales — lenders holding the first and second mortgages don’t agree on the terms, buyers often ditch the deal midstream or banks nix the agreement just before escrow closes — they’re on the rise. Countrywide Financial Corp. of Calabasas, the largest U.S. home lender, reports a nearly 60% increase in those transactions nationwide in April, the latest month for which statistics are available, from the same period a year earlier.

In the Santa Clarita and San Fernando valleys, the number of short sales increased from at least 31 sales from May 2006 to May 2007 to at least 1,956 sales from May 2007 to May of this year, according to the Southland Regional Assn. of Realtors.

The reason for the rise, experts say, is that as more financially strapped homeowners fall behind on their mortgage payments — and see their homes’ values plummet to less than what they owe — they’re turning to short sales as an alternative to foreclosure. Banks, once loath to take on short sales because, among other reasons, they were understaffed for the application onslaught, are tackling them now mainly because they’re more cost-effective than foreclosures.

“Banks aren’t happy about short sales,” said Sherri Frost, a senior loan officer with Sherman Oaks-based Metrocities Mortgage, “but they have few options.”

Unlike a foreclosure, in which the lender takes ownership of a property after a borrower misses several payments, a short sale is a transaction in which the owners, not the bank, sell the home; they receive no proceeds from the sale. In a foreclosure, the defaulting owner may receive sales proceeds once the lender has been paid, if the amount exceeds that of the outstanding loan.

If a short-sale borrower owes $500,000 on a home, the bank may accept a payoff amount of $450,000, the amount a buyer has offered to pay. The sellers need not be in default — meaning they stopped making mortgage payments — in order for a lender to consider a short sale, but they must be able to show a real hardship to receive the debt forgiveness, which may have tax consequences.

Then there’s the wait

It sounds straightforward, but the short-sale road is a long one. Once sellers have an offer, they must assemble a package to present to the bank, including a “hardship letter” explaining why they had to put the house up for sale — loss of employment, a spousal death, a divorce, a disability or a mortgage resetting, for example — and asking the bank to accept a short sale, according to a Countrywide spokeswoman.

The sellers also must provide income verification, their most recent bank and income-tax statements, the listing history of the house and other documentation. Then comes the wait. And frequent follow-up calls to the bank to make sure the file isn’t buried.

“Banks won’t grant face-to-face interviews because of the volume of short sales and foreclosures,” said Mary Ebersole, a Re/Max Realty Specialists agent in Long Beach. Even if the seller gets approval, she added, “there’s only room for cautious optimism.”

That’s because impatient buyers sometimes head elsewhere while the bank’s loss-mitigation officer, or negotiator, sifts through the pile of short-sale packages. Or buyers put offers on five or six other properties to see which comes through first.

Sometimes, while awaiting a bank’s decision, interest rates go up and buyers no longer qualify for a previously approved loan because their lock-in rates expired. Worse yet, a seller may get an initial approval from the bank, but in the eleventh hour the bank adds a contingency that skewers the deal, or pulls the plug without explanation, agents say.

Second and third mortgages and even home equity loans can further complicate matters. Last fall, Pam Kennedy, a Coldwell Banker Ambassador agent in Whittier, was disheartened when her short-sale client’s lender demanded, after a long wait and with a buyer already on board, that the seller sign a promissory note for $15,000, which would be interest-free and amortized over 10 years. The seller had taken out a second mortgage awhile back to buy a recreational vehicle for $25,000 and pay off some debt. The lender wanted to recoup some of the loss it was absorbing.

The seller was going through a divorce, starting a new job and was afraid she couldn’t make the payments. Also, despite months of effort, she couldn’t sell the RV — an asset, in the bank’s opinion. The deal fell through and the bank foreclosed on the property. The experience left a bitter taste in Kennedy’s mouth.

“I avoid short sales and advise buyers to avoid them,” Kennedy said. “They are miserable.”

Sticking it out

True, most participants say, but some eventually have happy endings.

Mari and Joe Abrams found the house of their dreams in Porter Ranch in December. They got quick loan approval to buy the four-bedroom, three-bathroom home, and feeling optimistic about the new purchase, they put their Encino home on the market.

The couple offered $650,000 for the new house, which had been listed earlier in the $699,000 to $749,000 range. They paid a $10,000 good-faith deposit, agreed to pay all of the escrow fees (which usually are split between seller and buyer) and agreed to buy the property as is.

They expected the bank to quickly counter-offer. For one thing, the seller’s second-mortgage holder already had agreed to the sale, a major hurdle in short-sale transactions. But without the first bank’s approval, the deal stalled. (Both the first and second mortgage holders must settle to complete a short sale.)

The couple’s own house sold three months into the process, so they moved, with their toddler, Daniel, and 50-pound dog into Mari’s mother’s condo.

By April, Mari, 32, started peppering the first lender with daily phone calls, seeking a response to their offer. As the deal dragged, the Abramses extended the escrow. It closed, finally, on May 2. The family plans to move in later this month.

“Our hearts sank a hundred times,” Mari said. “It was a roller coaster.”

“If we didn’t like the house so much, we wouldn’t have hung on that long,” Joe, 37, added. In the end, however, they’re glad they stuck it out. It is, Mari says, just what they wanted. Even if they didn’t get the “deal of the century,” Joe said.

Bargain bins

Lenders will not accept short-sale offers that are far below market value. To the contrary, many banks “net about 90% of the current market value” on many of these sales, agent Shandrow said. Also, the homes usually are sold as is, which sometimes can mean a missing kitchen sink, ripped-out bathroom fixtures and stained carpets.

Marty Rodriguez, a Century 21 agent in Glendora, says she won’t take a short-sale offer to the bank unless it’s reasonable. “The negotiator doesn’t want to look at 12 offers,” Rodriguez said. “He wants the best, highest and the most qualified ones.”

Buyers looking for bargains should wait until short-sale and foreclosure prices are down about 35% from the peak market in their search area, said James Joseph, owner of Century 21 Ambassador in Brea and Whittier.

“Short sales and foreclosures are the nails in the floor of the market,” Joseph said. “That’s where the bargains are.”

diane.wedner@latimes.com

New Conforming Loan Limits

Interest rates are getting better on the

new conforming loan limits!!!

It is now starting to come to fruition 

that the new conforming loan amounts

between $417K-$729K are getting the lower

interest rates we had expected

when the stimulus package came out.

The rates are getting very competitive

to the $417K and under original

conforming loan amounts.

As an example the interest rate on a

30 year fixed Full Doc qualification,

purchase for the higher conforming

loan amounts are at 6%.

Rates are awesome so this is a

great opportunity to take advantage of this

money to purchase a home!!

.25% Cut to the Fed Funds Rate affects Bonds and Loans

Forecast for the Week

Last week’s full economic news calendar led to some wild days, especially on Friday, as you can see in the chart below. But this week’s economic calendar is significantly calmer, with only a few low to mid-impact reports in store, including the Institute of Supply Management (ISM) Report on Monday, Pending Home Sales on Wednesday, and Initial Jobless Claims on Thursday. If the news of the week tends toward being negative for the economy, Stock prices may suffer in response, and money could flow right into Bonds, which would cause home loan rates to improve. Additionally, Stocks have been in rally mode lately, and might be due to take a breather. While the coming week’s economic reports aren’t expected to be movers and shakers like the headlines from last week, count on me to be keeping a close watch on the market and staying in the know on your behalf in this very volatile environment. Chart: Fannie Mae 5.5% Mortgage Bond (Friday May 02, 2008)

The Mortgage Market View…

Specialized Mortgages get squeezed by Credit Crunch

Credit crunch expands to cash-out refinancing, investment properties and vacation homes

The latest to feel the pinch:

* Cash-out refinancings.

* Loans with less than full documentation of borrower income, credit and assets.

* Mortgages for certain second-home purchases.

* Investment loan applications in which the buyer already owns at least three other rental properties.

* Mortgages to borrowers with nontraditional credit.

* Short-term construction loans that convert to permanent mortgages.

* Adjustable-rate mortgages in which the first adjustment occurs within 60 months after closing.

In a move scheduled to take effect for all loans delivered after Aug. 8, Freddie Mac will restrict financing to second-home and investment purchasers who already have “individual or joint ownership” interests in multiple properties. In the case of second-home buyers, they will be ineligible for new mortgages through Freddie if they have ownership interests in more than four properties securing debt, including the one they propose to finance.

Similarly, loans for rental houses, rental condos and other investment properties will be ineligible if the borrower has ownership stakes in four units. Previously, Freddie allowed investors to own up to 10 rental properties carrying mortgages.

Freddie Mac also announced new cutbacks on refinancings in which the property had secured a “cash-out” within the previous six months. The company defines a cash-out as any refinancing in which the replacement loan balance exceeds the previous balance by 5% or more. Recently, according to the company’s quarterly surveys, more than 80% of refinancings involved equity-depleting cash-outs.

The rule changes, Freddie Mac said, are designed to “reflect the risk of these transactions” in the wake of post-boom property devaluations and higher rates of foreclosure.

Meanwhile, private mortgage insurers — who provide loss coverage for lenders and investors on loans with down payments of less than 20% — have begun rollbacks on a variety of products, especially in areas they define as distressed or declining.

Genworth Financial, one of the largest insurers, recently told lenders that after Monday, it no longer will consider applications for second-home purchases anywhere in Florida. The new policy is irrespective of borrowers’ credit scores, assets or other characteristics.

Also effective that date, in all “declining/distressed” markets, Genworth will not touch cash-out refinancings, investment properties of any type, nontraditional credit applications, construction/permanent loans or adjustable-rate mortgages with initial adjustments within the first five years.

In its advisory, Genworth said the restrictions are intended to promote “prudent underwriting standards” in light of higher risks prevailing “nationally and at localized levels.”

PMI Group, another high-volume insurer, banned cash-out refinancings, limited documentation loans and all mortgages secured by investment properties in “distressed” markets. In nondistressed areas, cash-out refinancings on second homes and rental houses no longer are eligible for coverage, nor are interest-only loans on investment real estate and all mortgages on properties containing three to four units.

PMI also boosted minimum credit score requirements for “jumbo” loans nationwide to a FICO of 700 and now will require at least 10% down payments. The company also ruled out “stated income/stated asset” mortgages on duplex purchases, in which one unit is occupied by the owners and the other is rented out.

MGIC, the largest private mortgage insurer, recently eliminated coverage of all “option ARM” loans that have either scheduled or potential negative amortization features that increase borrowers’ principal debt rather than reduce it monthly. MGIC’s new ban is nationwide.

The company also no longer will insure cash-out refinancings using limited documentation, temporary rate buy-downs on investment real estate and nontraditional credit applications to buy second homes.

Why the continuing rollbacks, and how long could they continue? Lenders and insurers are carefully studying the sources of their greatest losses from mortgage vintages between 2003 and 2007. In the areas where they see inordinate risk, they are reacting by eradicating that risk.

Some of those high-loss loan products — mass-marketed option ARMs with minimal down payments and “stated” incomes, for instance — probably never will be seen again. Others are likely to return only with tougher underwriting standards and higher fees tied to credit and geographic risks.

In the meantime, consumers have little choice: Get used to it. It’s not going away any time soon.

kenharney@earthlink.net.

Feds Meeting Last Week. Leave Fed Rates Unchanged?

Forecast for the Week

The economic calendar is a heavyweight this week, loaded with news of Housing, Retail Sales and Manufacturing…but one of the most important releases will be the Consumer Price Index (CPI), which measures inflation on the consumer level. Simply said - how much more are we as consumers paying for goods and services than we were last month, and last year? With the Fed’s elevated concerns over inflation, this report could pack an extra punch. The Personal Consumption Expenditure index recently measured year-over-year core inflation at 2.4%. And while the Consumer Price Index has a slightly different inflation-measuring formula, the read last month was at a beefy 2.7%. The Fed wants core inflation under 2% - thus why these numbers are concerning. Watch to see how the year-over-year CPI numbers come out - if they show a level under 2.7%, this should be good news for Bonds and home loan rates, as the market will want to feel inflation is at least trending in the right direction. But if the number sticks at that 2.7% range - or moves higher - hold onto your hats, as home loan rates could pop higher on the news. Chart: Fannie Mae 5.5% Mortgage Bond (Friday Apr 13, 2007)

The Mortgage Market View…

PLEASE MISTER POSTMAN, LOOK AND SEE…IF THERE’S A LETTER, A LETTER FOR ME… Perhaps the reason neither the Beatles nor the Marvelettes hadn’t received that important letter was simply incorrect postage. And with the postage increases that seem to come more and more frequently, it’s not a crazy assumption to make. So here it comes again - starting May 14th, new higher postal rates will go into effect. If you don’t want your loved ones - not to mention your creditors - waiting by the mailbox, now is the time to prepare. The cost of postage for a standard one ounce first class letter is increasing from 39 cents up to 41 cents. And you know the drill - each time the post office bumps up the rates by a penny or two, it requires an annoying trip to the post office to purchase a book of one or two cent stamps. But now - you can wave goodbye to those pesky one and two cent stamps that clutter up your desk or your wallet…the post office has finally created a stamp that will last “FOREVER”. The new stamp is called the “Forever” stamp and was created to do just what the title states….last forever. Once the stamp is purchased, the stamp can be used forever to mail one-ounce First-Class letters anytime in the future regardless of postage increases. The current price of each Forever stamp is 41 cents, and you can buy Forever stamps at that rate until the next postage increase. When the postal rates increase in the future, new Forever stamps sold at that time will go up in price too - but you can use up all your previously purchased Forever stamps without having to deal with buying and using the inconvenient make-up stamps for the difference. Forever stamps can now be purchased online at www.usps.com or at post offices nationwide.

The Week’s Economic Indicator Calendar

Information on Decline in Value Reassessments

Information on Decline in Value Reassessments

It has been widely reported that the property values of single-family homes and condominiums throughout most of the State have been declining. While the declines in Los Angeles County have not been as dramatic as those in other parts of the State, property values have dropped in some areas of Los Angeles County.

How does this impact your property taxes? In 1978, California voters passed Proposition 8, a constitutional amendment that allows a temporary reduction in assessed value when a property suffers a “decline-in-value.” A decline-in-value occurs when the current market value of your property is less than the assessed value as of January 1.

Typically, an application is required to initiate a review of your property’s value by the Assessor. However, in 2008 the Los Angeles County Assessor’s Office will be proactive in reviewing those single-family homes and condominiums that were purchased between July 1, 2005 and June 30, 2007. We will look at sales of comparable properties that sold near the lien date, January 1, 2008. If the market value is less than the assessed value indicated on your 2007-08 tax bill, the assessed value will be reduced accordingly. An application will not be necessary.

We will complete this review by June 1, 2008 and will notify in writing those property owners who qualify for a reduction in the assessed value of their property. Applications will be accepted prior to June 1, 2008, but if you purchased your home between July 1, 2005 and June 30, 2007, we urge you to wait for notification from our office before filing. Should it be necessary, you will have until December 31, 2008 to file an application for review.

If the sale date of your property is not within the dates noted or is other than a single family home or condominium, it will not be included in the review. However, if you believe the assessed value of the property shown on the 2007-08 tax bill is more than the fair market value as of January 1, 2008, you may file an application at any time through December 31, 2008.

Solicitations of this type may not be illegal, but property owners should be aware that the Assessor’s Office provides a simple filing process for a reduction in their property taxes at no charge.

Mortgage Giants get more funds to help home owners to refinance!

U.S. to ease capital limits on Fannie, Freddie

WASHINGTON - The government on Wednesday relaxed capital requirements at Fannie Mae and Freddie Mac as part of a plan to quickly inject an additional $200 billion of financing for home loans.

The initiative, which will require Fannie and Freddie to raise substantial funds, is part of a broader government strategy to ease a credit crisis that has made it difficult for consumers and businesses to borrow, and spread fear throughout global financial markets.

The Office of Federal Housing Enterprise Oversight, which oversees the government-sponsored companies, said the mandatory cash cushion for Fannie and Freddie — now nearly $20 billion for the two — will be reduced by a third under the new plan. The goal is to free-up money to help new home buyers take out loans and to help existing home owners refinance into more affordable mortgages.

The capital requirement for each company will be reduced from the current 30 percent to 20 percent, and further reductions will be considered by the regulator in the future. Fannie and Freddie will likely raise billions of dollars through special sales of stock.

“Fannie Mae and Freddie Mac have played a very important and beneficial role in the mortgage markets over the last year,” OFHEO Director James B. Lockhart said at a news conference. “We believe they can play an even more positive role in providing the stability and liquidity the markets need right now.”

The companies’ shares were buoyed by news of the agreement. Fannie stock jumped $2.64, or 9.4 percent, to $30.86 in late morning trading, while Freddie shares advanced $2.98, or 11.4 percent, to $29. The companies’ shares have plummeted to fresh 52-week lows in recent weeks amid concern over their ability to find buyers for their mortgage-linked securities amid plunging home prices and rising foreclosures.

The new agreement was the third step the government has taken in recent weeks to allow Washington-based Fannie and McLean, Va.-based Freddie to shoulder larger burdens in the mortgage market despite their multibillion-dollar fourth-quarter losses and expectations of further red ink this year.

The $168 billion economic stimulus package enacted last month included a temporary increase in the cap on mortgages that the companies can purchase or guarantee, from $417,000 to $729,750 in high-cost markets. And, as a reward for filing timely financial statements following multibillion-dollar accounting scandals, Fannie and Freddie were freed on March 1 of a combined $1.5 trillion cap on their mortgage-investment holdings.

OFHEO estimated that the combination of these efforts should allow Fannie and Freddie to purchase or guarantee roughly $2 trillion in mortgages this year.

The two companies together hold or guarantee around $4.9 trillion in home-loan debt. As the mortgage crisis and ensuing credit crunch have worsened in recent months, policy makers have increasingly looked to them to step up their participation in the hobbled market for securities backed by mortgages.

“This is what (Fannie and Freddie) were put in place for. … And we will deliver,” Freddie Mac Chairman and CEO Richard Syron said.

Influential Democratic lawmakers have been pushing for a reduction in the companies’ capital-holding requirements. Bush administration officials and numerous Republican lawmakers, on the other hand, have long opposed allowing Fannie and Freddie to take on more debt, contending that doing so could threaten the global financial system.

URL: http://www.msnbc.msn.com/id/23704630/

FHA Raises Mortgage Limits in HIgh-Cost California Counties (after article I have rates)

FHA Raises Mortgage Limits
In High-Cost California Counties

The Federal Housing Administration raised the mortgage limits to a maximum of $729,750 for 14 high-cost counties in California, as the government began providing aid to homeowners required by the recently enacted economic-stimulus package.

The upper mortgage limits also will apply to loans purchased or guaranteed by government-sponsored mortgage companies Fannie Mae and Freddie Mac, FHA officials said.

Details for the rest of the country are due to be announced this week. California counties such as Los Angeles and Orange will be eligible for the maximum limit, which was raised from $362,790. Lower- priced regions, such as Trinity and Lassen counties, will qualify for a loan cap of $271,050, up from $200,160.

FHA officials predicted the increases in California would aid about 33,000 individuals. The new loan limits will be in effect through the end of this year. The goal is to invigorate the market for larger mortgages, which should help push down interest rates.

The FHA said there would be an appeal process through which the new loan limits could be raised higher for counties that aren’t now eligible for the $729,750 maximum, but none of the limits will be lowered, said Bill Glavin, special assistant for public affairs in the FHA’s Commissioner’s Office. That appeals process could be announced, along with new loan limits for the rest of the country, as early as Thursday.

“From what we understand there are not going to be a lot of areas in the country except for California that are going to be at the maximum,” Mr. Glavin said.

Those who have applied for an FHA loan but haven’t yet closed on it will be able to take advantage of the new limits. The new ceilings also will apply to people seeking to refinance into an FHA loan.

By SARA MURRAY
March 5, 2008 6:38 p.m.

FHA Mortgage Limits in California by County