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The Battle in Loan Modification October 13, 2009

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Since the beginning of the year, the Making Home Affordable Program and programs alike have been met with both progressive support and glaring criticism. Supporters believe that the loan-mod programs are ebbing the tide of mounting foreclosures, while critics question the success rate and amount of effort pur forth by banks in these programs. What is certain is that Mortgage Assistance Programs are vital to a recovery in the economy and the housing market. Real estate is Cylclical, Seasonal and Emotional.

 An example of promise is the recent news of the HAMP program achieving 500,000 loan-mods ahead of schedule. Increased pressure has forced banks to speedily follow through with loan-mods with the Administration issuing progress reports periodically. Also, news of banks getting better at processing foreclosures is the silver lining in an otherwise dark cloud.

However, criticism about these programs is mounting; some banks are far behind on the amount of mortgage relief being provided while some borrowers face default even after mortgage assistance. Slow turnaround of paperwork by banks is one of the criticisms about these programs.

With foreclosures mounting and unemployment on the rise, the final outcome on these programs is yet to be seen.

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Mortgage Industry Faces Looming Concerns October 9, 2009

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Heading into the 4th Quarter of this tumultuous economic year, the mortgage industry faces growing problems ahead. While news of Obama’s HAMP program reaching its 500,000 goal of helping homeowners faster than expected is promising, concerns on possible bailouts and underperforming programs continues to threaten the vision of recovery in the housing market. Mortgage Assistance Programs are needed to curtail these concerns before problems become “too big to fail.” We must always remember that Real estate is Cyclical Seasonal and Emotional.

Will the FHA Need a Taxpayer Bailout?

The question about a possible Federal Housing Administration bailout in the near future is the story circulating news desks today. F.H.A. commissioner David H. Stevens sought to dispel concerns about the mortgage giant’s looming problems.

“Absent any catastrophic home price decline, F.H.A. will not need to ask Congress and the American taxpayer for extraordinary assistance – we will not need a bailout,” Mr. Stevens said in a prepared testimony on Capitol Hill Thursday.

Providing lenders with protection against losses as the result of homeowners defaulting on their mortgage loans, the FHA now insures more than 25% of mortgages in the country, up from 3% in 2006. Critics argue that a future FHA bailout is almost inevitable, as the agency’s capital is dangerously close to dipping below the mandated level of 2%. Independent financial consultant Edward Pinto concurs,

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” Edward said. He estimates that the agency faces losses of $70 billion on loans it has already made, short of its current reserves by $40 billion.

Fed Preparing for Commercial Real Estate Mortgage Crisis?

An unpublished Federal Reserve Report leaked in a recent Wall Street Journal article reporting rising defaults in the commercial real estate sector. The unpublished report concludes that U.S. banks are slow to take losses on their commercial real estate loans. Specific servicers reported having only 11 cents in reserves for every $1 in bad loans in the second quarter. 

The NuWire Investor had this to say; “I don’t know what’s worse, the banks skimping on reserves and holding off on reporting losses in hope of revival or the Fed for knowing about the problem and trying to keep it a secret. Someone at the Fed must feel the same way because the report somehow found its way to the media.”

TARP Oversight Group Says Treasury Mortgage Plan Not Effective

The TARP group indicates that the government needs to increase its efforts to help struggling homeowners in this article. There is doubt that the $50 billion loan-modification program will provide the necessary relief to all homeowners it intended at the start of the program. With rising factors of unemployment, and decreasing property values the task becomes more daunting.

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Housing News: 10/6/09 October 6, 2009

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For statistical reports on property data from public records and property valuation click here.

Fannie Prepays Could Grow By 10%, Says BofA Merill Lynch

Housing in Crisis

Program to But Bad Assets  Nearly in Place, U.S. Says

Square Footage and Median Price Differentials

All Eyes on the Resedential Real Estate Radar

Real Estate is Cyclical, Seasonal and Emotional

Mortgage Assistance Program to Benefit Homeowners

A Plan for Forbearance

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Firms Getting Federal Funds Have Spotty Records October 5, 2009

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It is well documented that many borrowers now seeking loan-modifications are facing continuous roadblocks dealing with the mortgage firms they were borrowing from. Much of the inefficiencies in President Obama’s Home Affordable Modification Program deal with lenders’ unresponsiveness to customers. Improvements to the program have increased transparency in lenders’ efforts to borrowers. But stricter guidelines will not ultimately force lenders to play it straight, which is why alternative Mortgage Assistance Programs should be viewed and taken into consideration.

A recent Yahoo article sheds light on the guilty practices of some mortgage firms now involved in the Treasury’s program to modify troubled mortgages. The article mentions guilty of inexcusable practices dating ar far back as 2007, many with a no comment response. Instances of missed calls, shuffled or lost paperwork, unattainable payments and unfair late fees to customers mirror the problems facing Obama’s HAMP program today.

So what have we learned?

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Mortgage Delinquencies Rising September 30, 2009

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The housing market needs mortgage assistance. As we push towards recovery, the rising delinquency rates from borrowers remains the elephant in the room. Today’s news of Fannie and Freddie Delinquencies Moving into Uncharted Territory highlights this point. According to the article, the delinquency rate in single-family home loans backed or held by Fannie Mae crossed over 4% in July for the first time. Freddie Mac reported a rise to 3.13% in August. As loans approach recasting for many borrowers – especially borrowers with “Alt-A” loans – potential recovery in the market will dampen.

This Mortgage Assistance Program looks to curtail rising foreclosure rates by keeping homeowners in their homes. If structured correctly, homeowners can sustain a monthly mortgage payment. Here is an example of how it can work:

• Mr. and Mrs. Z have a mortgage payment of $1,170 ($200,000 loan with 30 year payout at 5.75% interest).

• The Z’s lose their job and can only pay $470, so the government pays the difference of $700

• The Z’s remain homeowners and work through their problem. It takes the Z’s 10 months to get back on their feet, the government paid out $7,000 and now the Z’s owe the government.

• But the government says okay, you can start paying us back in seven years and the payment will be over 10 years at an interest rate of 3%.

See the rest of the Program here. While there are some obstacles to overcome with this program, it can be done.

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Mortgage Assistance? FDIC Encourages Forbearance for Unemployed September 16, 2009

Posted by John Watch in AccuriZ News, News Feed.
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The Federal Department Insurance Corp. has recently encouraged acquirers of failed banks to offer forbearance to

Image Courtesy: Eurosilex.com

Image Courtesy: Eurosilex.com

unemployed or underemployed borrowers through a new program. We will take a look at this FDIC program and compare it to the AccuriZ Mortgage Assistance Program (MAP) created months prior.

This FDIC initiative –available to institutions that have acquired failed banks through loss-share agreements with the FDIC – is requiring only a portion of monthly mortgage payments from borrowers for up to 6 months. As a result, unemployed borrowers can find jobs, and banks aren’t forced to foreclose with a portion of payment still being received.

The AccuriZ Mortgage Assistance Program, if initiated, would allow homeowners owning no more than one property who are unable to afford a full mortgage payment to pay a reduction, with the government covering the difference to be reimbursed in 7 years. The repayment would be over 10 years at an interest rate of 3%.  Up to $25,000 could be provided in a year, with a $50,000 cap for 36 months. Click HERE to see additional benefits.

Although the FDIC program is a positive effort with good intentions, a 6 month cap for unemployed borrowers is highly optimistic given the current state of the economy. Also, given the requirements and eligibility, the FDIC program would not have the significant impact in overall homeowner assistance as HAMP is trying to execute. More foreseeable problems and concerns over impact can be seen HERE.

Some drawbacks to the Mortgage Assistance Program would be the Application Filings and Processing. Possible solutions for these problems can be seen HERE.

Whether the FDIC program will follow through with its good intentions if initiated remains to be seen, but it’s good to see institutions attempting to weather this foreclosure storm any way possible. The AccuriZ Mortgage Assistance Program has its obstacles, but with a focused effort could very well be implemented.

Gives us your thoughts and opinions on the two. We only fail if we do not try.

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Mortgage Modification Plan Too Complex? August 10, 2009

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Complex? Public records on property data show that homeowners are not getting the help fast enough. Maybe the Mortgage Assistance Program would be more beneficial for homeowners.

Via theRealDeal.com

“Only 15 percent of eligible homeowners have been offered loan modifications since the federal government’s mortgage modification plan went into effect in March. Ken Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics, and John Geanakoplos, a professor of economics at Yale Univeristy, talked to MSNBC about how the program has worked so far. Rosen said he does not think the mortgage industry has the capacity to handle a program as complicated as the government’s mortgage modification plan. Geanakoplos said it is important to reduce the principal amounts on mortgages that are at risk of going into foreclosure. “

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Obama’s Loan Modification Plan Resurged? July 29, 2009

Posted by John Watch in AccuriZ Reports, News Feed.
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With 5 months in, the public record from homeowners on President Obama’s Loan Modifcation Plan has been that it’s not operating up to par. With foreclosures mounting and unemployment rising, the plan simply hasn’t been working fast enough to meet the dire needs of the American people. Claims that the modification process throwing many homeowners in a loop due to unresponsive servicers was an important topic at yesterday’s White House meeting with the top executives at the nation’s largest banks.

While the program is in the process of helping 200,000 homeowners, the White House would like to see 500,000 trail modifications underway by November 1. A CNNMONEY.com report states additional adjustments to the program  that came out of yesterday’s meeting;

“To help servicers speed up the modification process, the administration said it will work with the institutions to set more exacting performance measures, such as average borrower wait time, document handling and response time for completed applications. Officials will release their first progress report on each servicer — detailing the number of trail modification offers were extended and are underway — by Aug. 4.”

The banks have not stopped lending, but until the market is showing signs of recovery with homeowners able to make consistent payments on their loans, the guidelines to loan will not be able to soften up.

With our Mortgage Assistance Program, direct help to the homeowner can be achieved without relying on lenders or servicing institutions. We can return confidence to the housing market without relying on the lending institutions to provide the assistance.

Instead of a rental payment, let the homeowner make the payment toward the mortgage and the government can cover the difference in a mortgage assistance program which will be repaid over time.  

Here is an example of how it could work.:

• Mr. and Mrs. Z have a mortgage payment of $1,170 ($200,000 loan with 30 year payout at 5.75% interest).

• The Z’s lose their job and can only pay $470, so the government pays the difference of $700

• The Z’s remain homeowners and work through their problem. It takes the Z’s 10 months to get back on their feet, the government paid out $7,000 and now the Z’s owe the government.

• But the government says okay, you can start paying us back in seven years and the payment will be over 10 years at an interest rate of 3%.

What the government provides is assistance to the property owner (just like the bailout plans for the Financial Industry and Automotive Industry) and requires them to pay back the obligation starting in seven years. This is not a freebie, but short term assistance. Franklin Roosevelt called it Lend Lease.

Benefits of the Program, to name a few are:

–          A significant benefit of this program is that payments to financial institutions will resume and cash flow will get back to normal levels, thus credit availability should improve.

–          Property values will stop declining and have a short recovery to adjust for the liquidation values of the past nine months, this will restore equity to many property owners and fewer homes will be under water.

–          This program is not perfect, but it can assist a lot of people who want to own homes. Most importantly, it is channeled directly to the property owner, not a large corporation that has other motives besides keeping the property owner solvent.

Implementation

There needs to be conditions of eligibility, such as confirming gross income via income tax statements; confirming employment and confirming current payroll. The only group of individuals who would be excluded are those who own more than one property and cases where mortgage fraud exists in the form of straw buyers and invalid sales.  Some conditions and limitations would be as follows:

  • This total assistance would be capped at $50,000 and could run for 36 months
  •  In a given year up to $25,000 could be provided in assistance
  • The government would be releasing the funds over 12 months, thus the federal outlay would be limited
  • The total cost of 10 million loans receiving assistance would be $250 billion per year or $500 billion in total  (current TARP has over $300 billion available)
  • This is more cost effective than the TARP bailout because banks who needed TARP Funds will become more stable with improved cash flows and a reduction in non-performing loans.  Thus TARP funds can be paid back and used to fund MAP (Mortgage Assistance Program)
  • Funds will need to be paid back starting in seven years, sooner if possible with no impact on an individuals’ credit score

Obstacles
There are two major issues to overcome: Application Filings and Processing.

Application Filings:  To get the assistance quickly and to have the greatest impact, applications can be submitted on-line or through an IRS related system whereby an Accountant submits Income Tax Statements, and current Payroll Documentation as a third party validator. The financial institution would be required to take a partial payment and submit a balance due to the Treasury for payment.  This is a simplified version of the process, but it can work with refinement.  The goal is to stop loans from defaulting and individuals from losing their homes.

Processing: One of the greatest difficulties in implementing this program is processing and accounting. Loan Servicing companies would need to add staff (if one servicer can process 50 applications a week, 4,000 servicers would need to be hired, plus additional support staff)  Ramping up and training personnel will take time, but, as many as 10,000 new jobs could be created. Add to this job creation, the fact that several million homes do not go into foreclosure and more jobs are not lost due to desperate situations.

Can it Work?

Yes it is possible and yes it can work.  The reason it can work is because real estate goes through cycles. If people are forced to sell at liquidation prices, everyone loses. Give property owners a chance to get back on their feet, get back to work and the whole economy starts to turn around.

This is not perfect and many will complain about the injustice. But think about the injustice of the corporate bailouts, the injustice that first time home buyers get a break, the injustice that shareholders come before the individuals who created value in the companies by buying products. One can go on and on, or we can try.

We only fail if we do not try.

For more information regarding the Mortgage Assistance Program, including additional real estate reports CLICK HERE

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