mortgage modification
Top Consumer Debt Radio Podcasts
Below are some of our favorite podcasts we have recorded over the past year.
Saturday July 17, 2010 – Alternatives to loan modifications
Saturday July 3, 2010 – Liability from 4th of July Parites
Saturday June 12, 2010 – Identify Theft
Saturday May 29, 2010 – Why Loan Modifications are failing
Saturday May 22, 2010 – How to handle Medical Bills
Saturday May 1, 2010 – Truth about the Obama Refi Program
Saturday April 24, 2010 – Fraudulent and deceptive lending practices
Saturday March 27, 2010 – How to fix your credit report
Saturday March 20, 2010 – Non discharable debts
Saturday March 13, 2010 – Income tax issues
Saturday Janaury 2, 2010 – Bankruptcy Myths and facts
Saturday January 16, 2010 – Social Security Protection
Saturday January 23, 2010 – issues small business owners face
Saturday February 6, 2010 – Issues facing the unemployed
Saturday February 13, 2010 – Protecting your job and employment status
Saturday February 20, 2010 – The History of Fico Score
Saturday February 27, 2010 – Debt settlement vs. Bankrutpcy
How to Find the Owner of Your Mortgage
Concerns continue about parties filing foreclosures when they do not own the note. Florida recently enacted a rules requiring plaintiffs in foreclosure to verify ownership of the note. (Here’s a brief article on the rules, with the original subheading “Bankers Don’t Like It”). While these concerns may be interesting for those of us who understand civil procedure, standing, and the importance of the rule of law, the practical problem looms for homeowners who want to know who owns their note. Particularly, in non-judicial foreclosure states or for those families who are not in foreclosure, they do not have the option to ask the judge to order the plaintiff (foreclosing lender) to prove ownership.
John Rao, an attorney at the National Consumer Law Center and Credit Slips guest blogger, wrote a great short piece in the National Association of Bankruptcy Trustees publication this winter called “Six Ways to Find Out Who Owns and Services the Mortgage.” I can’t seem to find an online version, so I’ll give the short story here. For ownership (rather than servicing), the best options that John identifies are:
1) Send a request to the servicer asking it to tell you (the borrower) who the actual holder of the mortgage is, and to provide the address and telephone number of the owner of the obligation. These requests are authorized by Truth in Lending section 1641(f)(2). Importantly, the Helping Families Save Their Homes act of 2009 amended the Truth in Lending Act to provide a remedy for non-compliance. Borrowers can recover actual damages, statutory damages, costs and fees.
2) Review the transfer of ownership notices that are required to be sent as of May 20, 2009 and thereafter under the Helping Families Save Their Homes Act. This one won’t help for loans bought and sold long ago, but at least Congress heard the message that tracking down ownership is a problem.
3) Send a “qualified written request” under the Real Estate Servicing Procedures Act (RESPA). While this statute primarily is aimed at servicers, John Rao points out that because the servicer acts as an agent for the owner of the mortgage, the request is related to the servicing. The servicer has 60 business days to comply, which may be too long for families facing foreclosure. Actual damages, costs and attorneys fees are available for violation. HUD provides a little information on how to make a qualified written request on its website.
It’s important to note what is NOT on this list: the old-fashioned method of searching the land records. John includes that method in his list of six ways, but cautions not to rely solely on the registry of deeds because many assignments are not recorded. I think in a world of MERS, and missing paper, the land record system needs a hard look. The point of that system is to provide a public record of security interests in land, but it’s clearly no longer serving that function in the way it historically has. In what ways is the land record system failing? How should we fix it? Do we need penalties for not recording assignments? Or federal regulation of MERS? Or something else entirely?
Home Affordability Modification Program: The Troubling Reality
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President Obama’s Home Affordability Modification Program (HAMP) was intended with the purpose of keeping homeowners in their houses. Unfortunately, the idea was wonderful and the basic core concepts of the HAMP appear to be generated with good faith in mind but it lacks one key component—success in purpose. In other words, HAMP is failing and the troubling reality of the program is becoming very clear.
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Image Credit: blog.Foreclosure.com |
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The HAMP was designed to get consumers to work directly with their mortgage company to get into a modification of their current mortgage payment. The program was intended to make the modification so the consumer could actually make a payment that they could afford. The amount of the payment is based upon the general economic principle that a mortgage payment should be about a third of the homeowner’s income. The problem with this philosophy is that the principle owed to the mortgage company is too large to minimize to a third of the homeowner’s income or the homeowner’s income and other expenses cannot meet even the third payment. However, there are more problems on the surface of the HAMP. Once a homeowner is initially accepted into the trial period, the homeowner is given the false hope that this is a final agreement. The “trial” period is exactly that—“a trial.” It is not a final agreement. A homeowner can make all the required payments asked of them in this trial period and still not receive a final agreement from the mortgage company. The real issue is that a mortgage company is only required to “consider” the homeowner for the program. (See Home Affordability Modification Act 2009). A mortgage company is not required to do anything at all for the homeowner under the HAMP. The troubling reality of the program is that a homeowner could make three months of payments and still not have a final agreement and still be facing a foreclosure sale. Unfortunately, the most common pattern that we are seeing with this program is that homeowners are making three months of the trial payments and then being denied without cause or for some superficial reason. If this should happen to you, you should immediately seek a bankruptcy attorney to ensure protection of your home from a foreclosure sale. So what was once thought to be the hope of a nation is really a troubling facade. If you have experienced the troubling reality of the HAMP, we want to hear from you. Please email us at http://www.consumerdebtradio.com/contact.asp. |
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Home Affordability Modification Program: How does it work?
Everyone knows about President Obama’s program known as the Home Affordability Modification Program (“HAMP”). Many have wondered if the program can help them save their home, but how does it work? In brief, the HAMP was designed to save your home if you are struggling to pay your mortgage. It was also designed for consumers to be able to work through the process on their own without the need of an attorney or a consultant.
The HAMP process is not really that difficult. A consumer should review the mortgage company’s web site for all required documentation which is needed in order to be considered for the HAMP. Once all the required documents are submitted the company will put the consumer’s request for review under the HAMP into a pool of thousands of other like consumers.
It sounds simple right? Well, there are many problems hidden within this simply process. A consumer should keep in mind that the mortgage company in the HAMP is trying everything not to get the consumer into the review of the program. What I mean by this is that the mortgage company is likely to reject a consumer’s request for not having all documents requested even though you’ve submitted them. Also, the mortgage company is not going to stop foreclosure proceeding while the consumer’s request sits in the pool of thousands of request. The biggest issue with this process is time. The HAMP process is likely to take 3 to 12 months.
How to ensure that this process works for you? You really will need to either make a commitment to setting aside at least two hours a week to follow up with the mortgage company for updates and to ensure that the mortgage company continues to review your request. Alternatively, you could hire a professional like an attorney to ensure that the mortgage company continues to review your request and to ensure that the process is documented.
Overall HAMP is a simple process, but be prepared to dedicate the required time to prepare the documents and also for the long review process.
Home Affordable Mortgage Program Calculation
Many Consumer’s have heard of the Home Affordable Modification Program (“HAMP”). This is the Federal loan modification program. However, what most consumers do not realize is that the calculation of a new mortgage payment is very guideline specific. The following is a detailed explanation of how the program calculates the new or modified payment under HAMP.
The goal for borrowers, as they seek a HAMP Modification, is a Front-End Debt-to-Income of 31%. In plain English this ratio measures the percentage of monthly gross income that is consumed by debt and housing payments. This rate considers the value of consumer expenses compared to the borrower’s gross monthly income. This calculation begins with the reduction of mortgage payments by the investor to no more than 38%. The subsequent reductions by the lender, to get to the target of 31%, rest on the reduction of the borrower’s interest. If, however, the reduction reaches the floor of 2% without reaching 31%, the borrower may need to account for the difference with annual increases of the interest rate.
Once the lender reduces mortgage payments to no more than 38% Front-End Debt-to-Income ratio, the Federal Government will match further reductions in monthly payments down to 31% Front-End Debt-to-Income ratio for the borrower. At this point, lenders may capitalize arrearage.
The target Front-End Debt-to-Income (DTI) is 31%. The Standard Waterfall step that results in a Front-End DTI closest to 31% without going below 31% will satisfy the Front-End DTI Target. Front-End DTI is the ratio of PITIA to Monthly Gross Income.
- Gross Monthly Income—the amount before any payroll deductions.
- The total first mortgage debt and monthly payments (PITIA). This includes principal, interest, taxes, insurance, and homeowners association and/or condominium fees.
The calculation to reduce the interest rate to reach the Front-End DTI Target is subject to a floor of 2%. The interest rate reduction shall be made in increments of 0.125%, with the goal of bringing the monthly payment as close as possible to the Front-End DTI, without going below 31%.
If the modified interest rate is at or above the highest interest rate allowed by the original mortgage note, the modified interest rate will be the new note rate for the remaining loan term. If, however, the modified interest rate is below the maximum allowed rate in the note, the modified interest rate will be in effect for the first five years, followed by annual increases, until the interest rate reaches the interest rate cap, of up to 1% per year. The interest rate will be fixed once the interest rate reaches the interest rate cap. If the Front-End Debt to Income target has not been reached, the term of the loan shall be extended up to 40 years
It should be noted that there is no requirement to use principal reduction under HAMP, but servicers may forgive principal to achieve the Front-End Debt-to-Income target. Consumers should recall that the goal is to reduce Front-End DTI to 31%. By forgiving principal, monthly payments (as part of the PITIA calculation) are drastically reduced, thus reducing to overall ratio.
Loan Modifications vs. Traditional Mortgage Refinancing
There are many differences between loan modifications and refinancing. However the main difference stems from the financial opportunity provided; Refinancing relates to obtaining a whole new mortgage, whereas a loan modification is simply changing the essential terms of the homeowner’s present mortgage. When you refinance your mortgage you are paying off your existing mortgage with a new mortgage thereby change your payments for the life of the new loan. The two largest facts that come into play in determining if a homeowner will be approved to refinance is their credit rating and whether any equity exists in the home.
A loan modification generally is considered a temporary solution to a homeowner’s inability to comfortably pay the full mortgage, or to wait out an uncertain real estate market. According to Michael Hall in the Practicing Law Institute Corporate Law and Practice Course Handbook Series, March 2008, homeowners will be moved into a lower fixed interest rate, for five or more years. The most significant benefit of a loan modification is that credit scores do not come into play. Under many state laws, (for example M.G.L. c. 93A) if you want to get help negotiating a loan workout or modification, an attorney must negotiate with the bank on the homeowner’s behalf based upon your hardship. There are no closings needed in a loan modification. As such, there are no closing costs, no points being paid, no new title insurance fees, no application fees, or any other fees typically incurred in traditional mortgage transaction.
There are Federal loan modification programs such as the Home Affordable Modification Program (“HAMP”), however, traditional loan modifications are conducted by the bank under no specific program. Each lender has its own set of rules to determine whether a consumer can qualify for a modification. Some lenders will look at the homeowner’s other outstanding bills; if the homeowner is in financial distress and whether there is equity in the home. Some lenders will look to the amount of time the homeowner has gone without making a mortgage payment. Sometimes the modification will be as simple as moving from an ARM loan to a fixed mortgage rate, or if there is a FHA loan involved, the homeowner could qualify for a partial claim. A partial claim, according to Brian Heaton, in the Indiana Law Review of 2005, is when the loan is brought current and a lien is placed on the property for the outstanding balance until the property is sold or refinanced.
The benefit to a homeowner of conducting a loan modification is rather obvious, in many cases a very large reduction in monthly mortgage payments. Additionally, under the HAMP program, should the monthly payment be reduced by 6% or more, homeowners are eligible to receive $1,000 per year for up to five (5) years against their principal.
Should you wish to learn more about traditional loan modifications or those pursuant to the Federal Govenment, you should contact a local bankrutpcy or consumer debt lawyer in your area.
