Foreclosures Are Often In Lenders' Best Interest

July 28, 2009, by Renae Merle, Washington Post Staff Writer

Government initiatives to stem the country's mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.

Policymakers often say it's a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable. Read more ...

U.S. Effort to Modify Mortgages Falters

July 28, 2009 - By Ruth Simon - The Wall Street Journal

An Obama administration effort to reduce home foreclosures by lowering the mortgage payments of struggling borrowers before they fall behind is failing to help as many people as expected.

Among the problems: Some homeowners are being told they must be behind on their payments to receive help, which runs counter to the aim of the program. In other cases, delays are so long that borrowers who are current on their payments when they ask for a loan modification are delinquent by the time they receive one. There is also confusion about who qualifies.

Administration officials have summoned executives of 25 mortgage-servicing companies to Washington on Tuesday to discuss efforts to help borrowers, both delinquent and at risk. Among the items on the table: what steps the companies should take to increase and speed up modifications. Read more ...

From Treasury to Banks, an Ultimatum on Mortgage Relief

A recent article by Joe Nocera of the New York Times attempts why so many loan servicers are having difficulty getting up to speed with the Obama administration's Making Home Affordable program:

“Servicers are just not equipped to do this,” said William Kelvie, the chief executive of Overture Technologies, a company that sells underwriting software. If you want to understand why loan modifications have been so slow in coming, that’s a pretty good place to start.

For most of its history, the mortgage servicing industry — which is dominated by big banks like Bank of America, Wells Fargo, and JPMorgan Chase — did relatively simple tasks: it collected mortgage payments, paid taxes on the properties and so on. Yes, it dealt with borrowers who were in arrears — which usually amounted to no more than 2 or 3 percent of their portfolio at any one time — but mainly it either prodded people to get current on their payments or initiated foreclosure proceedings.

Modifying loans — thousands upon thousands of loans, amounting to as much as 25 percent of a servicer’s portfolio — is a much more complex task. For some servicers, the sheer numbers can “overwhelm the system,” said Larry B. Litton Jr., the chief executive of Litton Loan Servicing, which is owned by Goldman Sachs and which has long specialized in loan modifications. That is at least part of the reason why borrowers are having so much trouble getting their servicers to take their calls: many servicers can’t cope with the volume.

More important, loan modification requires a lot of work. They can’t be done in a blanket, one-size-fits-all fashion. Rather, loan modification is a one-on-one process that requires servicers to do something that should have been done in the first place: actually underwrite the loan.

The full article is available here

White House Prods Banks

Letter Tells Chiefs To Start Backing Mortgage Relief

July 10, 2009, by Renae Merle, Washington Post Staff Writer

The Obama administration yesterday scolded the heads of the country's largest banks, urging them to move faster and do more to help millions of distressed homeowners under a federal foreclosure prevention program.

In a two-page letter, Treasury Secretary Timothy F. Geithner and Shaun Donovan, secretary of the Department of Housing and Urban Development, acknowledge that the government program, known as Making Home Affordable, has yet to gain traction since being launched in March.

"We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share," the letter said. more ...

CNNMoney.com interviews executive director of Hope Now

CNNMoney.com interviews Faith Schwartz, Executive Director of Hope Now, a coalition of servicers, community groups and mortgage investors working to stem foreclosures.

Freddie Mac turns to YouTube

New Video Shows Which Documents Can Help Reduce Repeat Calls To Servicers

McLean, VA – Freddie Mac today posted a new video on YouTube.com that shows late-paying borrowers how gathering a few financial documents before calling a mortgage servicer can cut the time needed to determine their eligibility and process their application for a loan modification under President Obama's Making Home Affordable program or Freddie Mac's other workout initiatives.

Available in English and Spanish versions, the new Freddie Mac video, “Stop Foreclosure: Documents Your Lender Needs to Help You,” can be seen at Freddie Mac’s channel on YouTube at http://www.youtube.com/FreddieMacWeb.



The two-minute video shows step-by-step which documents borrowers should have on hand when they call their servicer to discuss loan modifications. These documents can cut the time a servicer will need to understand the borrower's situation, determine his or her eligibility for a workout, and process the application.

"America's servicers are handling an extraordinary volume of calls from distressed borrowers seeking an Home Affordable Modification under the President's program," said Ingrid Beckles, senior vice president of default asset management at Freddie Mac. "By taking a few moments to gather these documents borrowers can help their servicer understand their financial situation and reduce the need for repeat calls."

Can I Qualify for a Loan Modificaiton Without A Job?

As a follow-up to NPR's story about homeowners struggling to navigate their way through the Making Home Affordable program, a listener wrote to NPR asking whether people whose only income is unemployment benefits are still eligible to be considered for a loan modification under the program. There seems to be some confusion among lenders and housing counselors on this point. Chana Joffe-Wolt, an NPR reporter, ran it by the Treasury Department's point person for the program, who said, yes. Here's the full answer:

As of now, unemployment must continue for nine months to be counted, but we are consistently reviewing requirements. People on unemployment are eligible, and people on unemployment have gotten loan modifications.

There are a number of different parameters for eligibility (can be found on MHA website), so I can't comment on why this couple in particular is having difficulty. The administration is committed to keeping families in their homes and we are exploring ways to reach as many in need of assistance as possible.

This is consistent with the program guidelines issued by Fannie Mae, the entity designated by Treasury as the Financial Agent for the program. Under the heading "Verifying Borrower Income and Occupancy Status," the guidelines provide:

If the borrower receives public assistance or collects unemployment:

Acceptable documentation includes letters, exhibits or a benefits statement from the provider that states the amount, frequency, and duration of the benefit. The servicer must determine that the income will continue for at least nine months.

Wisconsin-based information management company offers new loan servicing software designed around Making Home Affordable

BROOKFIELD, Wis. - (Business Wire) Fiserv, Inc. (NASDAQ:FISV), the leading global provider of financial services technology solutions, announced today its Loan Servicing Platform, with extensive loan modification and loss mitigation features, is fully compatible with new guidelines from the U.S. Treasury Department on home loan modifications. In fact, from its inception the Fiserv platform was the first loan servicing system that was fully capable of supporting the Making Home Affordable Modification program.

As part of the Obama administration’s initiative, the U.S. Department of the Treasury created the Home Affordable Modification Program (HMP) as part of the Making Home Affordable program. Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, were named as the administrators of the HMP. Designed to help as many as three to four million distressed homeowners avoid foreclosure by modifying loans and monthly mortgage payments to an affordable level, the program provides clear and consistent guidelines that the mortgage industry must follow.
The Loan Servicing Platform is an example of Fiserv’s processing services core competency and utilizes integrated default management tools that allow servicers to track and study the loans being modified. With this knowledge, servicers can formulate best-option workout scenarios based on operational business rules while meeting HMP guidelines.

Read full press release

So Many Foreclosures, So Little Logic

An article in today's New York Times reports that foreclosures are picking up speed. That's not a surprise. But what is surprising is that many lenders are apparently neglecting less expensive alternatives to foreclosure, alternatives such as loan modificaitons. When it seems to make greater economic sense to keep borrowers in their homes paying a reduced amount, than it does to toss them out and wind up loosing tens of thousands of dollars more, why aren't lenders selecting the less expensive alternative?

The article reports on a recent study of 3.5 million subprime loans in securitization pools overseen by Wells Fargo. The analysis showed that, among recent foreclosures from that pool, the average loss was 64.7 percent of the original loan balance; a staggering $144,000 loss on the average $223,000 mortgage.

This is much higher than the roughly $60,000 loss per foreclosure that others have estimated (see previous post). One explanation for the difference might be the recent study's focus solely on subprime loans. Another explanation could be the rapid decline in home values since the earlier estimates were calculated, a decline which means greater losses when homes are foreclosed.

Regardless of whether the loss per foreclosure is $60,000 or $144,000, the basic premise is that lenders have a lot of room to restructure loans and reduce borrowers' monthly mortgage payments -- and still end up in a better economic position than they would at the end of a long and costly foreclosure process. Why aren't more loans being modified?

The full artcile is available here.

Foreclosure Prevention: New Program Shows Big Jump

June 22, 2009 -- by Stephen Gandel -- Time

The government finally seems to be making progress in its efforts to stem the foreclosure crisis. Housing and Urban Development (HUD) officials say lenders extended loan-modification offers to 40,000 borrowers who were struggling to pay their mortgage in the second week of June. That is nearly triple the weekly average of about 15,000 workouts that loan servicers had extended in the prior 10 weeks since the government's latest foreclosure-prevention plan was announced.

"Foreclosures were becoming a self-reinforcing problem for the housing market," said HUD head Shawn Donovan, speaking to journalists last week at the National Association of Real Estate Editors' annual conference. "Already we are seeing signs that the housing market is better off than when President Obama took office."

more ...

Helping Homeowners Stay Put

At work: Patricia Hull, housing counselor
Jun 21, 2009 -- By Nancy Jones-Bonbrest -- The Baltimore Sun

BALTIMORE--Patricia Hull, a former real estate agent, has changed the focus of her counseling from guiding people into homeownership to showing them how to keep their homes.

... It typically takes 60 to 90 days to get an answer from lenders as to whether they are agreeable to refinancing or modifying a loan or lowering a mortgage payment. During this time, Hull recommends that clients call their lenders weekly or every other week to check in.

Hull said the housing atmosphere has changed from seeing primarily clients with unfavorable loans to those who need assistance because of economic hardship. The federal Making Home Affordable program has helped open up options to homeowners, Hull said. This includes greater access to lenders and a consistency in how lenders work with customers.

more ...

7 Lenders Get Immunity from State Foreclosure Prevention Act

June 20, 2009 -- By Jim Wasserman -- Sacramento Bee

SACRAMENTO--Bank of America Home Loans, CitiMortgage and Carrington Mortgage Services are among the first seven lenders and loan servicers granted immunity from the state's foreclosure prevention act launched this week in California. The new law makes lenders prove to the state that they have a comprehensive loan-modification program that helps borrowers stay in their homes. Those that can't prove it to the state's satisfaction must wait an extra 90 days before foreclosing on borrowers.

... Bank of America Home Loans spokesman Rick Simon said Friday the Charlotte bank's adherence to federal Making Home Affordable guidelines provided it the exemption from 90-day delays in foreclosing in California.

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Column: Government homeowner efforts almost too little, too late

June 20, 2009 -- By Wayne A. Capurro, Special to the RGJ -- Reno-Gazette Journal

RENO--As Notice of Default filings climb to unprecedented levels throughout our community, through the Western region, Florida and other parts of our country, the Federal Government is, once again, on it’s way to the rescue. Through the Obama Administration’s “Making Home Affordable Program”, they claim they will save as many as nine million homeowners from foreclosure. Considering the crime that brought about the need for such a plan has the government’s fingerprints all over it, it’s the least they can do.

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Homeowners report confusing, frustrating loan modification process

Homeowners report confusing, frustrating loan modification process

To battle foreclosures, the Obama administration launched programs with hopeful names such as Making Home Affordable, but as many homeowners seeking assistance are learning, such programs have added more confusion than help.

Many people look at the criteria for refinancing, loan modifications and assistance, then approach their lenders because it appears they qualify for help. But many find that, for one reason or another, they aren’t getting assistance.

more ...

Foreclosures grind on as lenders fail to modify loans

June 19, 2009 -- Stephanie Armour -- USA TODAY

The Obama administration's $75 billion program to reduce foreclosures has been beset by backlogs and delays, leading many overstretched homeowners to complain about unreturned phone calls and inaccurate information from lenders, while others say they were denied help for reasons that weren't clear.

Details of the plan were unveiled in early March. The goal is to prevent up to 4 million foreclosures by having banks modify loans into more affordable monthly payments.

Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.

more ...