Most Americans thumbs down on 'strategic defaults'

New postal rates could boost your income tax bill

Even if you are "underwater" -- owing more on your mortgage than your home is worth -- there's rarely a good reason to stop paying your mortgage, according to a majority of Americans.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - The fallout you can expect from walking away from home ownership could include the ire of your neighbors.

Even if you are 'underwater' -- owing more on your mortgage than your home is worth -- there's rarely a good reason to stop paying your mortgage, according to a majority of Americans.

A new FindLaw.com survey says 60 percent of Americans believe that it is "never OK" for homeowners to simply stop making payments on their mortgages.

Another 34 percent said walking away, called a "strategic default," is OK for homeowners, but only if they aren't able to make the monthly payments.

Only 3 percent said home owners should be able to walk away from mortgages anytime they want.

Tossing the door keys in the circular file and stopping mortgage payments will eventually lead to foreclosure, but that's not all. Unanticipated consequences could include tax problems, contractual issues, damage to your credit and credit scores, damage to your ability to borrow in the future, even a lawsuit.

"Many homeowners are currently facing very difficult and complicated situations involving their home mortgage, in some cases even including the threat of foreclosure," said Stephanie Rahlfs, an attorney and editor for FindLaw.com.

"But before making any major decisions, homeowners should consult with financial and legal professionals, including accountants, real estate attorneys and financial advisers," Rahlfs added.

She also said, "Various government programs and tax changes involving mortgages have been enacted since the beginning of the housing crisis. Combined with private programs and variations in state laws, it creates a complicated web of potential actions available to homeowners."

FindLaw.com advises consumers not to play Ostrich, but, at the first signs of financial trouble, to seek help from counselors, community and social organizations and your lender or servicer. Examine all the alternatives before bailing on homeownership.

They include:

• Refinance. If you qualify, turn your existing mortgage for a new one. If you have a mortgage that is underwater, this could be the toughest option to accomplish. However, federal programs, including the Federal Housing Administration's refinance effort, can be a good bet for those who haven't yet faced hardship and can qualify for a new loan.

• Mortgage modification. A mortgage modification reworks the terms of your existing loan to get the payment down to a more affordable level. To add greater affordability, lenders lower the interest rate, lengthen the term of the loan or reduce the principal -- or do some combination of all three.

• Short sale. A short sale occurs when the bank allows the sale of your home for less than the existing mortgage balance, typically, provided there's a qualified buyer in the wings.

• Deed-in-lieu-of-foreclosure. With this option, you hand over the property to the bank for resale. Some short sales and deed-in-lieu of deals qualify for the government sponsored Home Affordable Foreclosure Alternatives (HAFA) deal -- the lender or servicers can't request any cash from the home owner, require a promissory note or pursue any deficiency judgments.

• Bankruptcy. Bankruptcy is a court-based process that can give you a financial "fresh start" by getting you out from under burdensome debts. Once the bankruptcy process is complete, you typically are released from personal liability for most debts.

• Reinstatement, repayment plans and forbearance plans. These plans help you get current on their mortgage when you have temporary financial problems. Talk with your lender or loan servicer for details.

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Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

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Mortgage modification makers get poor grades

Mortgage servicers get sloppier during the loan modification process than they do during the loan origination process, according to the recently released J.D. Power and Associates study.

by Broderick Perkins
© 2010 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - If you thought it was tough getting up to snuff on the mortgage application process, wait until you get a load of the mortgage modification mine field.

Mortgage servicers get sloppier during the loan modification process than they do during the loan origination process, according to the recently released J.D. Power and Associates' "2010 U.S. Primary Mortgage Servicer Satisfaction Study".

That means you'll need to take the initiative and learn the ins and outs of the mortgage modification process before diving in.

"This will not come as a great surprise to many homeowners who have had to endure the tribulations of loan modification," said Bruce Hahn, president of the American Homeowners Foundation.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable, according to a helpful and inexpensive resource, Silver Spring, MD-based mortgage expert Peter Miller's "The Quick & Dirty Guide To Successful Mortgage Modifications" (Silver Spring Press, $2.99).

To get the payment down, mortgage modification lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches. Modification are often use as an alternative to foreclosure.

"With more than a million borrowers signed up for mortgage modification programs the overall result is that most are wildly unhappy with their loan servicers," says Miller, whose publication uses an easy-to-understand linear approach that takes the mystery out of the mortgage modification process, a process which apparently stymies even lenders.

According to J.D. Power, compared with the loan origination process, mortgage servicers do worse in mortgage modifications in a host of areas.

• In terms of providing and meeting a time frame for approval.

• In terms of asking for information more than once (in order to be sure to obtain information crucial to the modification).

• When explaining the entire process during application.

• In terms of providing proactive status updates during the process.

The study measured customer satisfaction with five areas of the mortgage servicing experience: fees; the billing and payment process; escrow account administration; website; and phone contact. The study is based on responses from 4,516 homeowners queried May through June 2010.

"While the loan origination process is already a milestone event for most homeowners, the stakes are even higher for those going through the modification process," said David Lo, director of financial services at J.D. Power.

J. D. Power says there are several key service practices that can have a particularly strong positive impact on customer satisfaction:

• Fee transparency. Communicating all fees in a concise way to ensure complete understanding and no surprises.

• Informative account statements. Providing account statements to ensure that the most important information customers need is easily found.

• Billing and payment by preferred method. Ensuring that customers are able to receive account statements and make payments through their preferred method.

• Problem resolution. Ensuring that once a problem is identified, it is resolved quickly and efficiently.

Says Miller, "You can easily understand that clarity is required with the first three items, it’s the fourth which is a problem. "Resolution" may not possible and in cases where a borrower has lost a job there’s nothing the servicer can do to help the homeowner short of offering them employment."


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Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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Most mortgage modifications doomed to failure

Quick! Click my head!

Global rating agency Fitch Ratings recently reported that mortgage modifications are likely to fail 65 percent to 75 percent of the time within 12 months, because other debts owed by the homeowner remain in place and untouched.

by Broderick Perkins
© 2010 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - A mortgage modification doesn't come with a guarantee that it will save your home.

Chances are, the same conditions that make it tough for you to afford your mortgage payment, also force you to stretch to pay other bills.

If that's the case, a mortgage modification alone won't be enough to bail you out of your financial hardship.

That doesn't mean you should forego a modification. It means you should have a full grasp of what you may need to do beyond a mortgage modification to keep your home and your house in order.

Global rating agency Fitch Ratings recently reported that mortgage modifications are likely to fail 65 percent to 75 percent of the time within 12 months, because other debts owed by the homeowner remain in place and untouched.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable. To get the payment down, lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches.

Since the onset of the Obama Administration's Home Affordable Modification Program (HAMP) approximately 300,000 of a potential 2 million eligible homeowners have received permanent mortgage modifications of the federal program.

A similar amount of modifications have been completed under other programs.

While the HAMP program and others come with a round of mandated counseling that includes budgeting, planning and wise credit use, it does nothing to directly address other debts homeowners may be suffering.

The modifications cut homeowners' monthly mortgage debt by an estimated $550 or more and it reduces housing expenses to 31 percent of net income.

However, because of other debts, including auto loans, credit cards and other household expenses, homeowners spend an estimated 64 percent of their net income before they go food shopping, according to Fitch.

Small emergencies, say, an auto repair bill, medical bill, even a temporary loss of some or all income can sink mortgage modification homeowners who don't have cash reserves.

The Mortgage Bankers Association revealed similar findings over the course of several years -- mortgage modification default rates from 40 percent to 60 percent.

Fitch also reported moratoriums and mandated mediations can help some homeowners prolong the inevitable or get through hard times with homeownership intact.

Federal and local government moratoriums will delay final resolution on many properties until 2012, Fitch said. That means distressed sales will maintain a toehold in the housing market for at least another two years -- more by some estimates.

Homeowners can consider the ever more popular short sale alternative to foreclosures. Foreclosures often follow failed modifications.

Fitch reported half of prime borrowers who lose their homes now do so through short sales -- selling a home for less than the amount owed. Among the short sales are also deed-in-lieu sales, a transaction where the bank repossesses the property and forgives any balance.

Both modifications and short sales can negatively impact a consumers credit standing, but often not as badly as a foreclosures.

The Fitch findings underscore the importance of paying off debt, carrying as little credit as possible and living within one's means.

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Short sale myths debunked in short order

World's first "green" Hummer

More competent short sale professionals working a greater number of short sal deals are helping bust some of the myths that have surrounded the lesser-used foreclosure alternative.

by Broderick Perkins
© 2010 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - Short sales can be a tall order, but as their numbers increase, better trained professionals working the deal are getting wise to what's needed to make them a success -- in short order.

More competent short sale professionals are also helping bust some of the myths that have surrounded the lesser-used foreclosure alternative, according to Woodland Hills, CA-based Panorex Realty affiliate I Short Sale, Inc.. As it's name implies, I Short Sale, Inc. is a real estate brokerage specializing in short sale transactions.

"If done right, the short sale is a winning proposition for all, including the lender because the costs involved are certainly lower than that of foreclosing," said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.

A short sale occurs when the bank allows the sale of a home for less than the existing mortgage balance, typically provided there's a qualified buyer in the wings. Such homes are often held by home owners struggling with "underwater" mortgages -- mortgages with balances larger than the value of the home.

First American Core Logic says more than 11.3 million home owners are underwater on their mortgages.

Mortgage modifications and federally sponsored refinancing programs, to date, have been the go-to tools to help struggling home owners.

All are strategies to avoid foreclosure, but banks have been more likely to refi, modify or foreclose, rather than taking the short sell route.

That's because short sale bids can come in well below the last appraisal and banks don't want to take a loss. After sellers seal the deal, they can be left with a bill that's the difference between the selling price and the mortgage balance. Real estate agents and buyers fear a six month or longer transaction period that could end in a no-sale scenario that comes with the cost of lost time.

"A major reason why a short sale fails is the length of time it takes to get the lender’s approval. Long delays frequently cause the buyer to drop out of escrow and buy another home," said Zdenka Mahan, a short-sale experienced Intero Real Estate agent from Saratoga, CA.

However, as their numbers have grown, more attention is making the deals easier to close.

First American Core Logic's first monthly Distressed Sales Report released in April, reveals January's
short sales nationwide were 8 percent of all resale home sales, up from 7 percent in December and 5 percent a year ago.

Their numbers are much higher in areas hit hardest by the housing bust and account for 20 percent of resale home sales in San Diego (the nation's highest), 19 percent in Sacramento, and 15 percent or more in Oakland, CA Washington D.C. and Tampa, FL, according to First American.

Effective April 5, the Obama Administration rolled out Making Home Affordable's Home Affordable Foreclosure Alternatives (HAFA) streamlined short sale effort to give qualifying home owners up to $3,000 to defray the cost of moving. Servicers can also get $1,500 each for short sale deals that pencil.

With short sales getting more federal support and greater know-how from professionals who work them, myths about short sales are flying out the window, according to I Short Sale, which is "setting the record straight on common short sale myths."

Myths debunked

• You must be default on your mortgage to negotiate a short sale. Short sales are not a function of default status on a mortgage. They are the result of the bank mitigating a potential default situation that, in the long run, will cost more money to the investors. Defaulting is not a short sale requirement under the HAFA plan.

• Short sales are embarrassing. Home owners who "avoid" short sale "embarrassment" could face a foreclosure disaster and much greater heartache. Emoting through tough financial situations won't make the problem go away, says I Short Sale.

• Buyers aren't interested in short sale properties. Perhaps not as many as are interested in foreclosures, but the number of short sales is up, according to First American Core Logic. That's because short sale properties are often available at bargain prices compared to similar homes on the market and given the owner remains until the sale is closed, short sale properties may also be in better shape than abandoned foreclosures.

"Search for a buyer, especially those who have expressed an interest in buying short sale properties. The buyer must be willing to deal with extended deadlines and additional demands made by your lender," said Julie Larsen Wyss, a RealtyU graduate and holder of its new Certified Short-Sale Professional (CSP) designation.

• There's not enough time to negotiate a short sale before foreclosure. Federal mandates that come with paid incentives for lenders demand that lenders consider a short sale before moving to foreclosures, especially if a refinance or mortgage modification hasn't worked out. A good negotiator takes into account the timeline affiliated with a foreclosure. There is always a chance that a short sale can be negotiated. However, the only way to know for sure is to try.

"A real estate agent needs to put together the most comprehensive short sale proposal possible to minimize the back-and-forth delays," said Mahan.

• The bank would rather foreclose than complete a short sale. The bank would rather have the full mortgage paid on time. If a lender can strike a better deal with a short sale than a foreclosure, they'll go for the short sale when possible. It costs the bank money and liability risk to carry foreclosed homes. The sooner a home is off the books for the most amount of money, the better. Wherever possible, banks are seeking other loss mitigation options before foreclosure.

• Short sales are impossible and never get approved. Short sales can be complicated, but again, according to First American, short sales are increasing.

"We negotiate short sale approvals every day," reports I Short Sale.

(More short sale news that really hits home!)

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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BofA announces enhanced mortgage modification plan

Even critics of the mortgage-lending industry's efforts to help struggling homeowners keep their homes are lauding Bank of America's reduced-principal approach to mortgage modifications for some 45,000 of its customers.

by Broderick Perkins
© 2010 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - Beginning in May, BofA will forgive up to 30 percent of the loan principal of homeowners who are severely "underwater," those who owe approximately 20 percent more than their homes are worth and have missed at least two payments.

The plan harkens back to the so-called "Mod in a Box" reduced-principal modification plan the Federal Deposit Insurance Corp., under Chairwoman Sheila Bair, used on many mortgages in the 2008 federal takeover of IndyMac.

Bair has continued to encourage reduced-principal modifications because the federal Home Affordable Modification Program has come up short without them, managing fewer than 200,000 permanent modifications out of a potential 3 million to 4 million eligible homeowners.

Even critics of the mortgage-lending industry's efforts to help struggling homeowners keep their homes are lauding Bank of America's reduced-principal approach to mortgage modifications for some 45,000 of its customers.

The much-encouraged but little-used reduced-principal approach to mortgage modifications has long been championed by federal officials and consumer advocates as the most effective type of modification.

You've got news...news that really hits home!The full story is here: "Praise for BofA's Mortgage Modification Plan"

Also: Struggling home owners awarded another $14 billion

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Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
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Struggling home owners awarded another $14 billion

New Making Home Affordable enhancements include refinancing for underwater loans, reduced mortgage payments for unemployed homeowners, and pressure to get more lenders to consider reducing the principal of certain mortgages, among others.

by Broderick Perkins
© 2010 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - With the federal government's year-old housing relief efforts under fire, the Obama Administration recently announced a new $14 billion round of enhancements to reach a larger share of millions of struggling home owners.

The enhancements under the administration's Making Home Affordable initiative, include refinancing for underwater loans, reduced mortgage payments for unemployed homeowners, and pressure to get more lenders to consider reducing the principal of certain mortgages, among other provisions.

Some critics, however, say the enhancements don't go far enough and actually reward lenders for making bad loans that helped bring down the housing market and the economy.

Since its inception early in 2009, Making Home Affordable's mortgage modification segment, the Home Affordable Modification Program (HAMP) has managed mortgage modifications (including trials and permanent modifications) for only 262,000 home owners out of a potential 3 to 4 million eligible home owners.

A mortgage modification, used to make mortgage payments more affordable for struggling homeowners, typically occurs when the lender reworks the terms of an existing home loan by lowering the interest rate and exchanging an adjustable rate for a fixed rate, or extending the term of the loan, or both. Rarely do lenders also reduce the principal to get the payment down, but, thanks to the enhancements, that could be changing.

The refinance segment, the Home Affordable Refinance Program, has reached fewer than 200,000 of the up to 5 million borrowers federal regulators hoped it would help. A refinance, unlike a modification, pays off the old loan with a brand new loan.

Given the small share of needy homeowners actually helped, the Center For Responsible Lending, a critic of results thus far, welcomed the news of the governments enhanced efforts to help home owners.

"We welcome the Administration’s stronger actions to stabilize the housing market, particularly doing more to lower loan balances on homes worth less than the mortgage. Foreclosures dragged us into the recession, and until we stop them, the economy will not recover and most homeowners will watch their hard-earned home equity drain away," the Center announced.

Under the $14 billion enhancement, using funds already available from the Troubled Asset Relief Program (TARP) , provisions include:

• More pressure and financial incentives for lenders doing HAMP modifications to offer reduced-principal mortgage modifications and workouts, for homeowners who owe more than their home is worth.

The Bank of America announced a similar plan just days before the Obama Administration announced enhanced relief efforts.

"The core reason principal reductions have suddenly gained traction is the growing recognition that many of the loans in such programs would have represented even larger losses had the properties gone to foreclosure," said Peter Miller, Silver Spring, MD mortgage expert and author of the new eBook "The Quick & Dirty Guide To Mortgage Modifications" (Silver Spring Press, $2.99).

First American Core Logic says more than 11.3 million homeowners are underwater on their mortgages.

Reducing the principal is crucial to both making a home more affordable and giving home owners incentive to stay in a home that's no longer worth less than the mortgage.

Miller said, "These new programs should be applauded because they save homes and homeowners. First, they're keeping homes out of foreclosure and that's hugely important for families. Second, they're holding down foreclosure inventories. Home prices will not rise until the supply of distressed properties is reduced by 80 or 90 percent in the hard-hit foreclosure areas such as California, Nevada, Florida and Michigan."

• Likewise financial support to lenders who reduce the principal on first and second mortgages, when first mortgages are refinanced through the Federal Housing Administration (FHA). The support includes the additional incentive of insurance coverage to cover lenders' losses on such principal reductions.

• For unemployed home owners, mortgage payments reduced to 31 percent of their previous household income for up to six months while they look for another job. Once employed, homeowners facing a regular payment that's greater than 31 percent will be consider for a permanent HAMP loan modification.

• Up to $3,000 in moving expense paid to home owners entering short sale -- transaction where the lender accepts less than the loan amount to move the loan off the books. That doubles a previous amount offered. Many homeowners who agree to short sales are stuck with bill for the difference between the selling price and the old loan.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC. says the cash incentives approach benefits lenders more than home owners because the incentives are more than the first mortgage holder would collect if the loan went through a foreclosure process.

"By substantially reducing the required payment on the first mortgage, the program will be creating a situation in which the second mortgage-- which would be worth little or nothing in foreclosure-- will suddenly again hold considerable value. This will be a huge windfall for second mortgage holders. It is worth noting that the major banks have vast portfolios of second mortgages," Baker said.


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Latest mortgage modification speed-up plan finalized

Consumer Reports suspends
Toyota recommendations

Effective June 1, 2010, new mortgage modification provisions are designed to speed up the process of getting struggling home owners into modifications they can afford. It doesn't really change the documents required, just the process.

by Broderick Perkins
© 2010 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - The latest spin on government-sponsored mortgage modifications, demands that home owners provide an initial package of documents before the first phase of a modification can begin.

The newest plan for the ever-evolving Obama Administration's Home Affordable Modification Program (HAMP) also requires lenders (or servicers) to review the documentation and respond with an approval or rejection within 30 days.

The new guidance also details how lenders must convert a trial modification to a permanent one.

Effective June 1, 2010, the new provisions are designed to speed up the process of getting struggling home owners into mortgage modifications they can afford. It doesn't really change the documents required, just the process.

As of December, only about 100,000 of a potential 4 million eligible home owners were enjoying permanent mortgage modifications with average mortgage payment reductions of $500 a month, according to the U.S. Treasury. Another 750,000 home owners have trial modifications with the same average mortgage payment reduction.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable. To get the payment down, lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches. Reducing the principal is rare, but there is a push afoot to encourage more principal reductions.

While a modification might stain your credit, it's considered a better deal than losing your home and your credit standing to a foreclosure or short sale.

Home owners who sign up for HAMP mortgage modifications begin with a trial modification period of at least three months. Previously, some home owners entered the trial modification with less documentation than is now required.

Now, before obtaining a trial modification, home owners who believe they are qualified must supply three types of documentation:

• A completed "Request for Modification and Affidavit" (RMA) form, which provides information about the property and the home owner's financial situation.

• IRS Form 4506T-EZ, "Short Form Request for Individual Tax Return Transcript" allows the lender to look at a home owner's tax return and not rely upon "stated incomes" -- the bane of many failed mortgages.

• Proof of income. A checklist is available to tell home owners what documents they need for proof if they are a wage earner, self-employed, or receive retirement or receiving other income.

Within 10 days of receiving a home owner's information, the lender must, in writing, acknowledge receipt of the paperwork and describe, with a timeline, the next phase -- the evaluation process.

Within 30 days of receipt of the application, the lender must evaluate the application and request additional information if the application is incomplete. Also within 30 days, if the home owner's information is complete and otherwise meets modification eligibility requirements, and the lender grants a modification, the lender must send the home owner a trial modification plan notice.

If the requirements aren't met, the lender must notify the home owner that he or she is not eligible for a HAMP modification.

For home owners who are not eligible for a HAMP deal, the lender is required to consider the home owner for other loss mitigation options, including refinance, forbearance, non-HAMP modifications, and ultimately short sales or deeds in lieu of foreclosure.

During the 30 days, in order to review the application, the lender has a right to get a copy of a home owner's credit report and to verify the property is the home owner's principal residence.

The lender can also determine the property's value using an onsite appraisal, automated valuation model (AVM) or a real estate broker's price opinion (BPO).

Home owners who achieve a trial modification must make all payments on time to move to a permanent modification. A "permanent" modification isn't necessarily so. Years down the road, the lender can determine to continue or end the modification and revert to the original terms of the mortgage or take other steps.

Throughout the ordeal, lenders must track and maintain records of the process including phoned, written and emailed contacts with the home owner.


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Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
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Mortgage modifications with cash payments to homeowners?

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New Treasury provisions aren't carved in stone, but they could include direct cash assistance to home owners or a grace period allowing home owners to postpone payments.

by Broderick Perkins
© 2010 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - The Treasury Department may be planning to give home owners direct cash assistance or postponed mortgage payments as a way to address lenders' reluctance to reduce the principal during a mortgage modification.

As of December, only about 100,000 of a potential 4 million eligible home owners are enjoying permanent mortgage modifications that have reduced their mortgage payment by an average $500 a month, according to the Treasury. Another 750,000 home owners have trial modifications with the same average mortgage payment reduction.

New Treasury provisions aren't carved in stone, but the New York Times recently reported that they could include direct cash assistance to home owners or a grace period allowing home owners to postpone payments, along with reduced paperwork and faster processing by banks.

"Loan modifications with principal reductions should be the norm. The banks could easily solve the problems and keep stability in family neighborhoods," said Mark K. Hicks, broker/owner of Seabrooke Group in Campbell, CA.

Get the full story here: Mortgage modifications with cash payments to homeowners?



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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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Turning 'upside down' mortgages right side Up

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This is the kind of scenario government leaders would like to see played out more often for struggling homeowners, especially when a loan modification without a principal reduction could force them to simply walk away from their homes.

by Broderick Perkins
© 2010 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - You've got an "upside down mortgage," owing more than your home is worth. With a 6 percent interest rate on your $400,000 mortgage, the $2,400 monthly payment is brutal. You can barely make ends meet.

The bank agrees to defer $75,000 of the debt, which you'll pay back when you sell your home. The lender also slashes your interest rate to 3.75 percent. The new $1,500 monthly payment on the $325,000 balance puts a $1,000 wad in your pocket every month. You see your mortgage begin to surface, and the headaches disappear.

This is the kind of scenario government leaders would like to see played out more often for struggling homeowners, especially when a loan modification without a principal reduction could force them to simply walk away from their homes.

Get the full story here: Turning 'Upside Down Mortgages' Right Side Up

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Get "News that really hits home!" for your Web site or blog from the DeadlineNewsGroup.Com.

You are reading a sample of "News that really hits home!", now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
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Manipulate your mortgage, mangle your credit score

Uke Puke: 'Going viral' gets lame

If you are struggling financially as a homeowner, you may be considering some of the new ways to make your mortgage more affordable, but look beyond the monthly savings you can net on a mortgage modification, workout or short sale.

by Broderick Perkins
© 2009 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - How you manage your mortgage can help or hurt your credit score.

Your credit score, a numerical rendition of your creditworthiness - or lack thereof - should be at 760 or above if you want the best interest rate, according to FICO, the leading credit scoring system provider.

Mortgage lenders as well as other creditors take a hard look at your credit score when you want to borrow against your home, refinance or buy anew.

If you are struggling financially as a homeowner you may be considering some of the new ways to make your mortgage more affordable, but beware.

Look beyond the monthly savings you can net on a mortgage modification, workout or short sale and also carefully consider how those savings will affect your credit score.

"The number borrowers who have reported being misled by their lender/servicer about the impact the loan modification process would have on their credit is alarming," says Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.

According to FICO:

• If you get a mortgage modification or short sale, expect some negative impact.
There are many variables here: how the lender reports the deal; what's already on your credit report (negatives compound), etc. A loan modification or short sale are certainly less damaging than a foreclosure or bankruptcy.

Consumer Reports' Money Advisor suggests that before you enter a mortgage modification or short sale, ask how the lender will report it so you can weigh your priorities. If you need the break, take the deal sooner rather than later, even if it will hurt your credit score. Negatives on your credit file are removed after seven years. The sooner you get the clock ticking, the better.

"Many borrowers claimed to have been told expressly by their lender/servicer that their credit rating would not be damaged in the course of modifying their loan, only to discover that this was not the case," Osborne said.

• If you are rejected for a loan several times, expect a small negative. It's the inquiries the credit scoring model sees, not the rejections. Too many inquiries may indicate you are trying to pile up a lot of credit in a short time and that's deemed risky behavior.

Consumer Reports advises loan shopping within a 14 to 30 day period. FICO counts all mortgage inquiries within that period as one inquiry. Also consider applying for credit in person so you can ask about the lender's requirements and your chances for approval. If one lender's underwriting standards are too tight, seek a more lenient lender, Consumer Reports also advises, to reduce the number of inquiries.

• If you have a subprime or adjustable rate mortgage (ARM) on your credit report, expect zero impact. The FICO scoring system isn't privy to the underwriting terms of your loan. Keep making payments on time and or refinance to a lower fixed rate if you can and you'll keep your score intact or boost it over time.

• If you get debt relief from a credit counselor, expect a ding. That's because you aren't living up to the original terms of the credit agreement. Get the help if you need it, again, the sooner you begin to correct credit problems, the sooner they leave your credit file.

Consumer Reports advises working with certified counselors from the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. For housing issues, see counselors certified by the U.S. Department of Housing and Urban Affairs

• If you get a "goodwill correction" from your lender, expect a positive effect on your credit score. If, say, you were late once on your mortgage and never again in several years, it can't hurt to ask your lender to remove the one ding.

• If you pay the mortgage but fall behind on other bills, expect black marks that negatively effect your credit score. FICO doesn't weigh your payment history on one type of loan more than another.

Consumer Reports says there are no "less important" creditors when it comes to your credit score. Call creditors before you get into trouble and try to work something out.

"In some instances borrowers who had never been late on a single payment, were encouraged to seek help to modify their loan and then discovered down the line that they had been reported to the credit bureaus as not having "paid as agreed" or as having only made "partial payments," Osborne said.

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You are reading a sample of "News that really hits home!", now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
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Mortgage modifying moratorium gives homeowners more time

Separate car loans, negotiations

The U.S. Treasury late last year banned mortgage lenders from canceling trial modifications that are due to expire before Jan. 31, 2010, giving homeowners more time to convert.

by Broderick Perkins
© 2009 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - If your trial mortgage modification was set to expire this month, sending you back to the limbo of a less affordable mortgage, you just got a reprieve.

The U.S. Treasury late last year banned mortgage lenders from canceling trial modifications that are due to expire before Jan. 31, 2010, giving homeowners more time to convert.

As part of the ban, federal regulators will keep tabs on lenders' efforts to make trial modifications permanent during an open-ended review period that could last until the Obama Administration's Home Affordable Modification Program (HAMP) expires later this year.

The ban on axing trial modifications is part of the "Mortgage Modification Conversion Drive," which offers other provisions designed to take some of the sludge out of the slow-moving HAMP program and give homeowners a better shot at a permanent mortgage modification.

A mortgage modification occurs when the lender reworks the terms of your existing home loan, typically to lower payments and make the home more affordable. Lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches to get the payment down.

While it might stain your credit, a modification is a better deal than a foreclosure or short sale.

Under HAMP, you may qualify for a mortgage modification if your home is your primary residence; your first mortgage's balance is no more than $729,750; you can prove you face financial hardship that is affecting or will affect your ability to make mortgage payments; you signed for your current mortgage on or before January 1, 2009 and your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) is more than 31 percent of your current gross income.

HAMP borrowers who sign up for mortgage modifications begin with a trial modification period of up to five months. During the trial, borrowers must provide required documentation to make their case for a permanent modification and determine if the trial modified monthly mortgage payment is affordable.

Borrowers who meet the documentation requirements during the trial period, including making all the modified payments on time, get a permanent modification. Borrowers who fail are rejected for a permanent modification and must resume paying the original mortgage.

Before federal intervention, many borrowers were coming up short on the required documentation. Approximately 60 percent of the 375,000 borrowers with trial modifications that were scheduled to go permanent by the end of 2009 had not completed the paperwork in November, according a federal audit.

HAMP's conversion drive first streamlined the application process and ordered lenders to reach out to borrowers who may be late and give them more time to catch up and file paperwork.

Feds also beefed up the MakingHomeAffordable.gov web site with updated, detailed information about the mortgage modification application process and added user-friendly videos, checklists and FAQs about all of the required documents, the initial trial period and homeowner responsibilities to convert to a permanent modification.

Later, along with banning lenders from ending trial modifications, the Feds initiated a review period, during which time lenders must confirm the payment status of trial modification borrowers and confirm which, if any, documents borrowers are missing.

The review period also calls for servicers to correspond with borrowers as necessary and inform them that they are at risk of losing eligibility for a permanent HAMP modification if the borrower has

• Failed to make all required trial period payments.

• Failed to submit all required documentation.

• Failed or both to make all required trial period payments and to submit all required documentation.

The notice has to give the borrower 30-days to correct errors and submit any missing documents or payments.

If the borrower complies or provides evidence of lender error, the lender must consider the new information and determine if the borrower is can continue onto a permanent modification.

More resources for borrowers seeking mortgage modifications:

• Making Home Affordable's HAMP videos on YouTube

• PMI Mortgage Insurance Co.'s "Navigating the Home Affordable Modification Part I & Part II"

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You are reading a sample of "News that really hits home!", now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
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Loan modifications cut mortgage bills by $550 a month

Brace for blustery winter storms

Mortgage Modification Update: Home owners with modified mortgages save an average $550 a month, but there has been some difficulty converting trial modifications into permanent modifications.

by Broderick Perkins
© 2009 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - The Obama Administration is saving home owners an average $550 a month with loan modifications, but only 31,382 of a potential 4 million qualified homeowners are actually enjoying the savings.

In its November Making Home Affordable Servicer Performance Report, the U.S. Treasury reported the Home Affordable Modification Program (HAMP) also has more than 697,000 trial modifications underway.

However, there has been some difficulty converting trial modifications into permanent modifications.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable. Lower payments can result from a lower interest rate, extended loan term, reduced principal or any combination of those approaches.

"Modifications are the ideal and most economically viable method by which homeowner's can retain their homes. Previously, homeowner's were left to fend for themselves in terms of innocently contacting somewhat shady sources who often collected an upfront fee of between $4,000 to $5,000 and promised to contact the lender directly on their behalf in order to modify their loans and reduce their monthly payment," said Michael D. Rodriguez, broker/owner of Platinum Capital Mortgage & Real Estate in Salinas, CA

Under the HAMP plan, borrowers who sign up for mortgage modifications begin with a trial modification of up to five months.

That gives them time to submit a stack of paperwork, including proof of income, assets, debts, hardship affidavit and other documents, to make the modification stick. The trial period also gives them time to determine if the modified monthly payment is sustainable, according to the Treasury.

The majority of approximately 375,000 borrowers who have begun trial modifications nationwide and are scheduled to convert to permanent modifications by the end of the year, have not completed the paperwork, according to the Feds.

Some delays have also been caused by servicers switching gears with each new federal update or adjustment to the program.

The Feds recently added pressure to help both homeowners and lenders speed up the process.

"I am very pleased that the government has taken a more aggressive hands on approach towards implementing programs such as HAMP to provide an alternative to homeowner's who would otherwise lose their homes to foreclosures," Rodriguez said.

GMAC Mortgage Inc. completed 7,111 permanent modifications, more than any other servicer, followed by JPMorgan Chase & Co., with 4,302 modifications; Ocwen Financial Corp., with 4,252; Aurora Loan Services, 3,622 and Wells Fargo, 3,537.

The trial modification leader was Bank of America with 156,864, followed by JPMorgan, 136,686; CitiMortgage, Inc., 100,126; Wells Fargo, 96,137 and Saxon Mortgage Services, Inc., with 35,565.

"As this report illustrates, struggling homeowners across the country continue to receive immediate relief in the form of reduced monthly payments and a second chance to stay in their homes," said Phyllis Caldwell, Chief of Treasury's Homeownership Preservation Office (HPO).

"Our focus now is on working with servicers, borrowers and organizations to get as many of those eligible homeowners as possible into permanent modifications," she added.

• Mortgage Modification Updates


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Get "News that really hits home!" for your Web site or blog from the DeadlineNewsGroup.Com.

You are reading a sample of "News that really hits home!", now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
• National Offbeat News Examiner
• National Consumer News Examiner
• National Real Estate Examiner

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