Feldman Law Center

Feldman Law Center – News by Feldman Law Center — Part of Obama’s plan to overhaul regulation of the mortgage industry, unveiled last week, would create a Consumer Financial Protection Agency to monitor consumer financial products and change the entire process of getting a mortgage. With a stated goal of developing a mortgage process that is as simple as signing up for a retirement plan, the President’s proposal centers on an automatic offering of a “plain vanilla loan” to potential homebuyers. These loans would offer fixed interest rates and 30 year maturities, unless the borrower opts for a loan with riskier terms such as interest only or adjustable rates.


The plan has received vehement opposition from the mortgage and banking industries who say that government-approved mortgages would restrict borrowers’ options, make loans harder to get, and make them potentially more expensive. Powerful trade groups like the American Bankers Association, for example, oppose creating a consumer financial protection agency. Even lobbying groups open to the idea of a consumer-products regulator question whether the government should suggest which mortgages are best for consumers. “We don’t want to stifle innovation, and we don’t want to stifle competition,” said John Courson, president of the Mortgage Bankers Association.


One thing that would definitely be restricted, and one of the main factors behind these groups’ opposition to the plan, will be the potential commissions that mortgage brokers can charge when they sell a mortgage. For example, administration officials want to curb the fees that brokers and lenders receive tied to inflated mortgage rates. Brokers argue the incorporating those fees are a way for borrowers to amortize the costs of a loan without having to come up with thousands of dollars in closing costs. Another aspect of the plan would link compensation to whether the borrower ends up defaulting on the mortgage. “There’s no reason that we should have to assume that risk,” said Marc Savitt, president of the National Association of Mortgage Brokers. The group’s stance is that while a mortgage broker can facilitate a loan, the ultimate approval for the mortgage comes from the lender.


Mortgage brokers’ fees were typically highest on the most creative and dangerous of the mortgage varieties. With those mortgages a thing of the past, volume, commissions, and their share of new business has dwindled. Mortgage brokers’ share of new loans has dropped from a high of 60% to the current 20%, on much lower volume. Fixed rate mortgages have increased from a low of 50% of the total of new loans originated in 2004-05 to 95% today.
As the plan stands now, the newly created agency would approve a set of mortgages including fixed and adjustable rate mortgages. Approval for vanilla mortgages would be similar to the “prime mortgage” approval process. Potential home buyers could still get mortgages outside of the government approved versions but disclosure of risks and dire warnings will accompany them.
Supporters of the new regulatory agency say that it is needed as much to protect borrowers from themselves as from predatory lending practices. Many borrowers went through the process of getting their mortgage without ever taking the time to understand exactly how the loans they were applying for worked and where the risks were. Still, previous Congressional efforts to regulate the mortgage industry have consistently broken down over the years, even on simple issues such paperwork reduction, so the fight could be long, drawn out, and years in the making.

About Feldman Law Center
The Feldman Law Center is one of California’s top loan modification companies, providing excellent service to our clients and is completely focused on keeping everyone one of our clients in their homes.  Our loan modification experts work tirelessly to provide every homeowner we work with the information, guidance and support they need to modify their mortgages and keep the homes they’ve worked to buy.


About Loan Modifications
If you’re unfamiliar with what a loan modification is, a mortgage loan modification is quite possibly the most effective tool you can utilize if you are behind on your mortgage, and are in the midst of a financial  hardship, in order to save your home from interesting foreclosure.  A loan modification is literally is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower (i.e mortgagor and mortgagee). In general, any loan can be modified.  The Feldman Law Center knows every law in California (and the country) that may be able to keep you in your home.  Lenders would rather renegotiate the terms of your loan, and possibly even negotiate a principle reduction, than let the house go into foreclosure.


With years of experience negotiating with lenders, as well as years of experience keeping people in their homes, the Feldman Law Center is one of the most experienced loan modification firms in all of California. To learn more about loan modification programs and loan modification process visit Feldman Law Center at www.feldmanlawcenter.com or call 800-588-0425.

Feldman Law Center – News by Feldman Law Center

After months vehement opposition to most of what the Obama administration has tried to push forward to help struggling homeowners, mortgage investors have thrown their support behind one of the biggest failures of the Bush Administration. The Federal Housing Administration’s Hope for Homeowners (H4H) program, estimated at its outset to be able to help 400,000 homeowners, only originated one new loan.


As he Obama Administration tried to breathe life back into H4H, the mortgage investors saw some potential and started coming around. Part of what they liked was taxpayer money bailing them out of bad investments. The spin on H4H is that it aims to ease a struggling borrower’s debt burden by allowing for a principal reduction to bring a homeowner to approximately even between the size of the mortgage and the value of the home. The mortgage investors would forgive some of the borrower’s debt as part of the principle reduction and then get cashed out by receiving a check from Treasury for something less than the home’s current value.


Being able to roll up to the government sponsored trough and cash out with more taxpayer dollars is, by far, the best option presented to the investors since the bubble started popping in 2006. H4H will allow them to cash out of delinquent mortgages, convert a liability into cash, get a defaulting bond off the books, lick their wounds, and move on. Under the plan, taxpayers will become the new investors in residential real estate, at a time when professional investors are either fleeing or sitting on their hands waiting for the bottom to fall out of the market.


The Obama Administration’s Making Home Affordable home loan modification plan has frustrated mortgage investors as they have had to take a back seat in home loan modification process, with their loan servicers in the driver’s seat. The recent passage of a safe harbor bill by Congress in May added salt to the investor’s wounds by granting loan servicers even more autonomy in their loan modification negotiations. Those negotiations basically yield one of two outcomes for the investors: either a lowered interest rate on their bond with the possibility reduced principle, and a longer maturity or a home that’s going into foreclosure. With the small percentage of sales at auctions, foreclosures are building a huge backlog as bids often come in at 60% or less of the mortgage balance. The FHA plan gives them a third option of putting cash in their pockets without having to worry about selling the property.


The recently updated version of the H4H program is simplified, costs less, and has some incentives but, in its current construct, is still a dog that won’t hunt. A bunch of details need to be worked out, like profit splits with taxpayers and lenders, should a participating homeowner sell at a profit. That part is another aspect of the plan the investors love. Being able to participate in profits after cashing out is as good as it gets coming out of a situation as convoluted and costly as the current foreclosure debacle.


Another issue is that H4H breaks a single refi into three mortgages under the original design of the plan, which is probably one of the reasons that it yielded only one mortgage origination the first time around. Scott Simon, from Pimco, likes the FHA plan but knows it still needs work. “Unfortunately there are still too many devils in the current details for it to be widely used,” he said. Investors are hoping that the plan will be streamlined in continued meetings between HUD officials, the Treasury Department, the Federal Deposit Insurance Corp., and the White House.
Under the new design of H4H, homeowners get a mortgage with a smaller balance which is then sold to investors as a 100% taxpayer-backed bond. Ideally the mortgage balance will be reduced enough to give the homeowner an equity position in the home which, combined with lower mortgage payments, would greatly reduce the chance of foreclosure. That conclusion was backed by a recent Fitch rating report which estimated that 65 to 75% of subprime mortgages that were modified will end up going back into default, a huge jump from the current default rate of 50%. When those modifications include a principle reduction the default rate decreases by about 30%, according to the report.


Christopher Mayer, a vice dean and professor of real estate at Columbia University, in a recent interview said that “ …investors realize that H4H isn’t some grand solution and are championing it primarily because they see it as better alternative to the government’s modification program. They see the modifications as delay, delay, delay.”
Mayer supports the safe harbor bill that protects servicers and would like to see loan modifications increase. He doubts that the government’s efforts to subsidize this push for H4H will work out as planned. Seeing the plan for the investor bailout that it is he said, “This is just going to be a morass for taxpayers. Sometimes the best thing to do is foreclose and foreclose quickly. Speed is incredibly important in this business.”

About Feldman Law Center
The Feldman Law Center is one of California’s top loan modification companies, providing excellent service to our clients and is completely focused on keeping everyone one of our clients in their homes.  Our loan modification experts work tirelessly to provide every homeowner we work with the information, guidance and support they need to modify their mortgages and keep the homes they’ve worked to buy.


About Loan Modifications
If you’re unfamiliar with what a loan modification is, a mortgage loan modification is quite possibly the most effective tool you can utilize if you are behind on your mortgage, and are in the midst of a financial  hardship, in order to save your home from interesting foreclosure.  A loan modification is literally is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower (i.e mortgagor and mortgagee). In general, any loan can be modified.  The Feldman Law Center knows every law in California (and the country) that may be able to keep you in your home.  Lenders would rather renegotiate the terms of your loan, and possibly even negotiate a principle reduction, than let the house go into foreclosure.
With years of experience negotiating with lenders, as well as years of experience keeping people in their homes, the Feldman Law Center is one of the most experienced loan modification firms in all of California. Visit feldmanlawcenter.com for more information.

Feldman Law Center – News by Feldman Law Center — As the foreclosure backlog grows, a new class of American homeowners as described by a recent article in the Washington Post is growing by the month. These are homeowners that have fallen into a financial limbo where they are badly behind on payments, but their lenders have not yet foreclosed on the home. “I have even begged them for a foreclosure,” delinquent mortgage-holder Charlotte Jensen said. Behind on payments and not willing to wait for an eviction notice, she filed for bankruptcy, and left the home. Nearly a year later, still with no further payments, Bank of America has yet to take back the home.


The total of the backlog is estimated at one million borrowers, sits on top of the one million foreclosure actions that had been taken this year through May. It presents a major obstacle for any kind of rebound or stability in the country’s hard hit real estate markets. It’s also an obstacle than can drive the market lower and then keep it there indefinitely. Banks are currently doing the best they can not to flood the market with foreclosures but each sale, when one occurs, is counted as a “comp” for appraisal purposes. Everything similar gets indexed to the comp until the next sells at a lower price. For evidence of properties being kept off of the market one need only look at one of highest foreclosure states in the country. California had 111,000 foreclosed properties which could have gone to auction in May. Of that number, only 17,000 went to auction and only 2,000 sold. If those kinds of numbers repeat for just a few months, the state will have a backlog that will take years to unwind. Properties that aren’t sold on the way down would most likely be sold as prices stabilize or start to bounce back, which would mute any recovery.
“Lenders are having an immensely difficult time handling the capacity. They are torn between loan modification, short sales, foreclosures, and they are finding they can’t do all these things at once, and do them well, so we’re seeing a lot of things falling through the cracks,” said Howard Glaser, a housing industry consultant and a housing official during the Clinton administration.
Mortgage lenders and investors in that scenario would be looking at more losses as a result of the mortgage crisis. “It just means foreclosure rates are going to keep rising,” said Patrick Newport, an economist for IHS Global Insight. Without an end to the downward spiral in prices any kind of meaningful recovery in the economy will be impossible.


Another issue is the growing conflict of interest between mortgage investors and the companies that service the loans for them. In many cases, what is good for the servicers is bad for the investors and vice versa. For instance, in a home loan modification versus foreclosure situation, the servicer will favor the modification because it keeps payments and fees they can charge on them alive. The mortgage investors, seeing the potential for a decrease in cash flow as a result of the modification, will favor foreclosure as a means of getting their money out of the deal. The resulting stalemate can cause a house to sit in limbo while the servicers and lenders decide a course of action. For the homeowners in the situation, the stalemate can be beneficial as it allows them to stay in the house but the stress of knowing that an eviction can come at any time is tough to deal with.


While some of the backlog reflects the inability of lenders to keep up with the sheer volume of delinquent properties, another reason is an intentional slowdown in the pace of foreclosures as government and industry try to work with borrowers who want to stay in their homes. Fannie Mae and Freddie Mac, the government-run mortgage financing companies, put a temporary moratorium on foreclosures late last year, some states imposed moratoriums, and many of the country’s largest lenders voluntarily participated as well. The extra time gave lenders time to see how the guidelines of the Obama Administration’s “Making Home Affordable” would work and which borrowers could be helped by modifying their current mortgages under the plan. Many of those moratoriums started expiring at the end of the first quarter of this year, and foreclosures have been setting records on a monthly basis since then.


With potentially millions of foreclosed homes on the market and more coming every day, Prices have been hit across the country. The prices for existing homes fell another 16% in May versus the prices one year prior.  The growing backlog of homes in limbo indicates that foreclosure rates are likely to increase dramatically during the second half of this year and into 2010. Some estimates are calling for foreclosures to reach 2.4 million by year end. Bob Bellack, chairman of Zetabid, which auctions foreclosed properties, said “Prices will fall to the point where you have equilibrium, and it won’t reach that until there is no longer this foreclosure overhang.”
Financial firms that carry mortgages or mortgage-backed securities on their books are scrambling to stem past and anticipated losses with any means possible. Whether a sign of desperation or not, mortgage investors have thrown their support behind  the Hope for Homeowners plan, a leftover from the Bush Administration which was considered an absolute flop the first time around. Intended to help over 400,000 homeowners at its outset, the plan originated only one loan. If the economy doesn’t turn, and without some sort of government assistance, continued foreclosures will result in continuing rounds of losses for investors.
Being in limbo has allowed some homeowners the time to save money while not making mortgage payments and take action through the home loan modification process to save their homes from foreclosure. In general, however, statistics don’t bode well for homeowners once they start missing payments. According to a March report from NeighborWorks America, a large housing counseling group, 60 percent of homeowners go into foreclosure after missing more than four payments.


Normal protocol is for the foreclosure process to start after the third payment has been missed but now it’s common for a foreclosure process to take nine months or more to get started, said Guy Cecala, publisher of Inside Mortgage Finance. “No one is in a rush, lender-wise, to deal with the property,” he said. “If you have to sell at a loss, why rush?”


Another protocol has lenders writing down the value of the home six months after an owner stops making payments, but the total loss is not recorded until the property is sold in foreclosure, said Mark Zandi, chief economist of Moody’s Economy.com. “Some may feel that the property is worth more than the market can bear at this time, and they are willing to wait until the market improves”, he said. “They don’t want to sell it into a completely depressed market.”
The typical foreclosure process varies by state and has been slowed down by the constant incoming volume. The timeline of the process is also dependent on who actually owns the mortgage and whether a bankruptcy has been filed by the homeowner. One of the biggest issues in the process now is that the phase preceding eviction, sale at auction, isn’t happening. Lenders, considering their workload and the costs of each foreclosure, aren’t eager to start a process which isn’t likely to be seen through to completion so limbo is the next best option.
“During that period, where the property is in limbo, until there has been a sale of the property, the homeowner is still the owner, technically,” said John Rao of the National Consumer Law Center. Despite being seriously delinquent, homeowners can apply for a home loan modification to stay in their homes, even if they were turned down previously. Success after being turned down can be achieved if the homeowner has been hired into a new job, is generating more income, and/or by hiring legal representation to renegotiate the terms of the existing mortgage. The odds of approval are also increasing due to lenders’ reluctance toward taking more properties into foreclosure. Whatever they may have thought about home loan modifications before, at this point they’re a better option than either foreclosure or sitting in limbo.

About Feldman Law Center
The Feldman Law Center is one of California’s top loan modification companies, providing excellent service to our clients and is completely focused on keeping everyone one of our clients in their homes.  Our loan modification experts work tirelessly to provide every homeowner we work with the information, guidance and support they need to modify their mortgages and keep the homes they’ve worked to buy.


About Loan Modifications
If you’re unfamiliar with what a loan modification is, a mortgage loan modification is quite possibly the most effective tool you can utilize if you are behind on your mortgage, and are in the midst of a financial  hardship, in order to save your home from interesting foreclosure.  A loan modification is literally is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower (i.e mortgagor and mortgagee). In general, any loan can be modified.  The Feldman Law Center knows every law in California (and the country) that may be able to keep you in your home.  Lenders would rather renegotiate the terms of your loan, and possibly even negotiate a principle reduction, than let the house go into foreclosure.
With years of experience negotiating with lenders, as well as years of experience keeping people in their homes, the Feldman Law Center is one of the most experienced loan modification firms in all of California.

Visit www.feldmanlawcenter.com or call 800-527-8497 for more information about California loan modifications.

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