Feldman Law Center – News by Feldman Law Center — If homeowners are holding on to one aspect of the Obama Administration’s Homeowner Affordability and Stability Plan, it’s “2%”. Of the multitude of calls that come in to The Feldman Law Center, a majority of them sound something like “How do I qualify for a 2% mortgage?”
The promise of the program, in general, has been muted by its slow uptake by lenders and mortgage servicers and the incredibly slow response time for those that have applied with them for home loan modifications. Some homeowners are waiting months just to hear whether they qualify, while their foreclosure creeps ever closer.
The one issue being proved out is that attorney driven home loan modifications are moving faster and have a much better chance of getting approved. Steve Feldman, Senior Partner at The Feldman Law Center agreed saying, “We took the time to understand the guidelines and we’re familiar with the different protocols at the various lenders, so we’re very comfortable with navigating the process.”
The new program has carried with it the problems of learning the guidelines, integrating systems, and training staff, all of which have slowed the process to a crawl at many of the lenders. Fifteen lenders, in addition to FNMA and FHLMC, are participating in the program. That group lists the biggest lenders in the country including BankAmerica, JP Morgan Chase, CitiMortgage, and Wells Fargo but the banks are still very limited in how many applications they can process at any given time.
Homeowners unfamiliar with guidelines and the lender’s interpretations of them are getting different answers from different people at the banks and requests for multiple submissions for paperwork as files are passed from one overworked processor to the next. Another impediment is that the bulk of original loans were packaged and sold to domestic and international institutional investors. The mortgages are handled by servicers that process payments, do billing, and keep records but don’t actually own the mortgage paper. This brings a third party into the negotiations that may or may not agree with the new terms of a modified loan. Congress recently passed a “safe harbor law” that gives servicers more autonomy in their loan modification approval process but whether that increases the number of completed modifications remains to be seen.
Jobs cutbacks and unemployment are now the largest single factor causing homeowners to struggle with their payments. “Employment issues started with people that worked directly in the real estate and mortgage areas, and then spread to the people that relied on business from those sectors like furniture, flooring, etc”, Mr. Feldman said, “Now, with the economy as soft as it is, unemployment is spread across the entire job market. We’re seeing home loan modification applications from all walks of life.”
Borrowers who have received foreclosure documents from lenders/servicers and those who may soon miss a mortgage payment are eligible for the Homeowner Affordability and Stability Plan. To be eligible, a borrower must live in the home, have a monthly mortgage payment larger than 31 percent of their gross income, bought their homes before January 1st 2009, and owe less than $729,750 on the mortgage. The cap of the size of the mortgage excludes many homeowners on both coasts and other affluent areas.
Under the most basic guidelines of the plan, the monthly payments of those who are approved for a modification are lowered to the 31 percent limit. Lenders can do this by reducing interest rates to as low as 2 percent, by extending the term of the loan to 40 years or by deferring principal. The plan has provisions to cover some of the homeowner’s mortgage balance in order to reach the 31% of gross income level. The plan also rewards borrowers and lenders for modifications where payments are made for twelve consecutive months.
About 100,000 homeowners across the country so far have been extended loan modification offers, according to Meg Reilly, a spokeswoman for the Treasury Department. “We are absolutely working to make things move faster and provide relief to more homeowners as soon as possible,” Ms. Reilly said. “We are encouraging servicers to staff up, establishing a hotline for homeowners, looking for new tools to expedite this process, working with communities to get the word out about resources available to homeowners.”
JP Morgan chase has 15,000 homeowners in trial modifications and Wells Fargo has enrolled approximately 3,000. A trial typically lasts 3 months and reduces a homeowner’s mortgage payments while the home loan modification is being processed. If the homeowner is late or misses a payment the loan modification process is stopped and the homeowner is immediately disqualified. There are no statistics at this point covering how many homeowners have been disqualified from the trial aspect of the modification process.
With a million foreclosure already filed through May, industry watchers agree that more needs to be done but there are additional challenges that may prevent homeowners from receiving home loan modifications. One of those challenges is an aspect of the program that allows servicers to run what is known as a net present value test, which determines whether a loan modification would be a better value for the mortgage investors than foreclosure. In places where property values have been hard hit and many people owe more than their properties are worth, servicers are more likely to opt for mortgage loan modifications because the homes would not bring in enough money in a foreclosure sale, if the homes could be sold at all.
On the other hand, the net present value test would favor foreclosure in places like New York City, where values are still high and loan amounts are much higher than other areas of the country. There, servicers might have to give more concessions in a modification to bring them in line with homeowners’ current financial picture. If homes haven’t lost as much value, on a relative basis, and there are indications that they could be sold at auction then foreclosure would provide a better return for the investors.
At issue, is that servicers are using their own criteria for the net present value tests and are not required to tell borrowers the details of how they run them and how they determine a home’s value. The calculations derived from the test put homeowners at the mercy of the investors in terms of a foreclosure decision but they have no idea on how the decision is made. The incentives provided by the program to servicers are intended, in part, to mitigate the results of the net present value tests but at the higher price ranges they don’t pay enough money to alter the outcome of the test.
According to Steve Feldman, “This is one of the areas where we add the most value for our clients”, referring to the net present value tests, “A lot of homeowners trying to do this on their own are getting bogged down and disqualified at this point in their modification. Our process gets the homeowner through the net present value test as quickly as possible.” Homeowners on the brink of foreclosure may want to consider those words before walking through the labyrinth of home loan modifications on their own.
For more information visit Feldman Law Center at www.feldmanlawcenter.com.
Resources:
Feldman Law Center: Profile – Business Exchange
Press Release – The Feldman Law Center’s Code of Ethics and Practices
Loan Modification – Feldman Law Center
Feldman Law Center, Mission Viejo CA 92691
Feldman Law Center – The Cream Rises in Loan Modifications
Feldman Law Center – Ten Tips for a Successful Home Loan Modification
Feldman Law Center – Saving Thousands with a Loan Modification – Debt Settlement Combination
Feldman Law Center – Mission Viejo, CA, 92891 – Citysearch
Feldman Law Center – The New York Times gets it About Half Right
Feldmanlawcenter.com – Feldman Law Center Company News
Feldman Law Center
Feldman Law Center Trulia Profile
The promise of the program, in general, has been muted by its slow uptake by lenders and mortgage servicers and the incredibly slow response time for those that have applied with them for home loan modifications. Some homeowners are waiting months just to hear whether they qualify, while their foreclosure creeps ever closer.
The one issue being proved out is that attorney driven home loan modifications are moving faster and have a much better chance of getting approved. Steve Feldman, Senior Partner at The Feldman Law Center agreed saying, “We took the time to understand the guidelines and we’re familiar with the different protocols at the various lenders, so we’re very comfortable with navigating the process.”
The new program has carried with it the problems of learning the guidelines, integrating systems, and training staff, all of which have slowed the process to a crawl at many of the lenders. Fifteen lenders, in addition to FNMA and FHLMC, are participating in the program. That group lists the biggest lenders in the country including BankAmerica, JP Morgan Chase, CitiMortgage, and Wells Fargo but the banks are still very limited in how many applications they can process at any given time.
Homeowners unfamiliar with guidelines and the lender’s interpretations of them are getting different answers from different people at the banks and requests for multiple submissions for paperwork as files are passed from one overworked processor to the next. Another impediment is that the bulk of original loans were packaged and sold to domestic and international institutional investors. The mortgages are handled by servicers that process payments, do billing, and keep records but don’t actually own the mortgage paper. This brings a third party into the negotiations that may or may not agree with the new terms of a modified loan. Congress recently passed a “safe harbor law” that gives servicers more autonomy in their loan modification approval process but whether that increases the number of completed modifications remains to be seen.
Jobs cutbacks and unemployment are now the largest single factor causing homeowners to struggle with their payments. “Employment issues started with people that worked directly in the real estate and mortgage areas, and then spread to the people that relied on business from those sectors like furniture, flooring, etc”, Mr. Feldman said, “Now, with the economy as soft as it is, unemployment is spread across the entire job market. We’re seeing home loan modification applications from all walks of life.”
Borrowers who have received foreclosure documents from lenders/servicers and those who may soon miss a mortgage payment are eligible for the Homeowner Affordability and Stability Plan. To be eligible, a borrower must live in the home, have a monthly mortgage payment larger than 31 percent of their gross income, bought their homes before January 1st 2009, and owe less than $729,750 on the mortgage. The cap of the size of the mortgage excludes many homeowners on both coasts and other affluent areas.
Under the most basic guidelines of the plan, the monthly payments of those who are approved for a modification are lowered to the 31 percent limit. Lenders can do this by reducing interest rates to as low as 2 percent, by extending the term of the loan to 40 years or by deferring principal. The plan has provisions to cover some of the homeowner’s mortgage balance in order to reach the 31% of gross income level. The plan also rewards borrowers and lenders for modifications where payments are made for twelve consecutive months.
About 100,000 homeowners across the country so far have been extended loan modification offers, according to Meg Reilly, a spokeswoman for the Treasury Department. “We are absolutely working to make things move faster and provide relief to more homeowners as soon as possible,” Ms. Reilly said. “We are encouraging servicers to staff up, establishing a hotline for homeowners, looking for new tools to expedite this process, working with communities to get the word out about resources available to homeowners.”
JP Morgan chase has 15,000 homeowners in trial modifications and Wells Fargo has enrolled approximately 3,000. A trial typically lasts 3 months and reduces a homeowner’s mortgage payments while the home loan modification is being processed. If the homeowner is late or misses a payment the loan modification process is stopped and the homeowner is immediately disqualified. There are no statistics at this point covering how many homeowners have been disqualified from the trial aspect of the modification process.
With a million foreclosure already filed through May, industry watchers agree that more needs to be done but there are additional challenges that may prevent homeowners from receiving home loan modifications. One of those challenges is an aspect of the program that allows servicers to run what is known as a net present value test, which determines whether a loan modification would be a better value for the mortgage investors than foreclosure. In places where property values have been hard hit and many people owe more than their properties are worth, servicers are more likely to opt for mortgage loan modifications because the homes would not bring in enough money in a foreclosure sale, if the homes could be sold at all.
On the other hand, the net present value test would favor foreclosure in places like New York City, where values are still high and loan amounts are much higher than other areas of the country. There, servicers might have to give more concessions in a modification to bring them in line with homeowners’ current financial picture. If homes haven’t lost as much value, on a relative basis, and there are indications that they could be sold at auction then foreclosure would provide a better return for the investors.
At issue, is that servicers are using their own criteria for the net present value tests and are not required to tell borrowers the details of how they run them and how they determine a home’s value. The calculations derived from the test put homeowners at the mercy of the investors in terms of a foreclosure decision but they have no idea on how the decision is made. The incentives provided by the program to servicers are intended, in part, to mitigate the results of the net present value tests but at the higher price ranges they don’t pay enough money to alter the outcome of the test.
According to Steve Feldman, “This is one of the areas where we add the most value for our clients”, referring to the net present value tests, “A lot of homeowners trying to do this on their own are getting bogged down and disqualified at this point in their modification. Our process gets the homeowner through the net present value test as quickly as possible.” Homeowners on the brink of foreclosure may want to consider those words before walking through the labyrinth of home loan modifications on their own.
For more information visit Feldman Law Center at www.feldmanlawcenter.com.
Resources:
Feldman Law Center: Profile – Business Exchange
Press Release – The Feldman Law Center’s Code of Ethics and Practices
Loan Modification – Feldman Law Center
Feldman Law Center, Mission Viejo CA 92691
Feldman Law Center – The Cream Rises in Loan Modifications
Feldman Law Center – Ten Tips for a Successful Home Loan Modification
Feldman Law Center – Saving Thousands with a Loan Modification – Debt Settlement Combination
Feldman Law Center – Mission Viejo, CA, 92891 – Citysearch
Feldman Law Center – The New York Times gets it About Half Right
Feldmanlawcenter.com – Feldman Law Center Company News
Feldman Law Center
Feldman Law Center Trulia Profile
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