Loan Modification

Posts Tagged ‘Loan Modification’

HEFI, Home Equity Fractional Interest-A Win/Win

Monday, March 29th, 2010

Ask anyone that knows anything about our housing market and they will most likely agree that we need to keep more people in their homes to begin a housing recovery. The problem is that loan modification as we know it is non-existent and short sale or foreclosure obviously don’t do anything but make the situation worse. You would think that loan modification would be the best route. You would of thought that until the FDIC announced that over half of the borrowers who received a loan modification that did not include a principal reduction re-defaulted after multiple payments. What if the Servicer could reduce the principal on a mortgage in exchange for an option to share in the equity and potential appreciation of the property? Wouldn’t it be great to have a program that addresses the real problem….keeping people in their homes?

What if there was a way to reduce or eliminate the Lenders loss mitigation costs normally associated with a Short-sale or Foreclosure?

What if the Lender had a financial incentive to reduce the principal balance on a mortgage in a loan modification

What if there was a real incentive to the Homeowner to stay in their home and not go to Foreclosure or Short sale?

What if the Homeowner was able to stay in their home without the damage to their credit associated with a Short sale or Foreclosure?

What if the Lender could participate directly in a borrower’s successful retention of their home vs. a second lien position?

All the above is possible with HEFI Home Equity Fractional Interest. HUD first proposed a program called “Hope For Homeowners” (H4H) last August that was based upon some of the themes above and it has failed miserably. Hope For Homeowners penalized the lender who was taking the biggest loss by passing the benefit of the Shared Equity to HUD and Ginnie Mae when the home appreciated with no return of the forgiven debt back to the original Lender that would reduce the principal balance.

Why not a Win / Win?
Why not have the Lender that is reducing the principal balance retain the equity?
Why should the existing Lender be forced to sell off the now performing senior mortgage?
Why not retain the newly performing loan and sell that loan at a future date at Fair Market Value instead of at a discount?

HEFI provides the Homeowner with a partner in their successful retention of their home instead of having their equity shared for life, as it is in Hope For Homeowners. In a Home Equity Fractional Interest (HEFI) the homeowner retains the right to redeem the HEFI and regain 100% of the home’s equity and allows the Lender that exchanged the reduced principal balance for a HEFI to maximize his recovery.

Some Benefits of HEFI

Homeowners get to stay in their homes by granting a fraction of equity
Homeowners retain their ownership rights
Foreclosure costs to the surrounding community are avoided
Homeowners preserve their equity and maintain their properties
Likelihood of a re-default is mitigated
In the event of default, the HEFI converts into a Tenants-In-Common allowing the HEFI owner to sell the home as a resale

There are several servicers testing HEFI throughout the country, several of the experts I have spoken to believe HEFI is a reality that will soon be a viable option for banks and struggling homeowners.

For more information about HEFI, contact EquiDebt Solutions

Thanks to Don Doerr and Doug Farnham or Thomson Conant’s Mortgage Mediation Group

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Tags: HEFI, Home Equity Fractional Interest, Loan Modification, Loss Prevention
Posted in Sellers | 2 Comments »

Loan Modification: Why YOU Probably Won’t Get One. IndyMac

Saturday, March 27th, 2010

Short sale, foreclosure, loan modification. These seem to be the buzz words when talking about real estate these days.

If you can’t get a loan modification, maybe you can get a short sale BEFORE you become a victim of a FORECLOSURE.

Loan modification is like a Sasquatch or Big Foot. I have heard of them but I have never actually seen one, although I am told that they exist. I mean, I know plenty of people that have had a short sale, and I surely know plenty of people that have had a foreclosure BUT, I can honestly say that I have never met anyone that has had a loan modification.

Under normal circumstances this would be a little weird, but these are not normal circumstances. You see, I am in the title insurance industry. I work with REALTORs, lenders and investors all day and yet I don’t personally know anyone, nor have I heard of someone who, knows someone, who knows someone that has had a loan modification.

Weird.

When thinking in terms of “loss” I (being a sensible American) would think that a loan modification would be the best way to go for all parties. What I mean is, we have a serious problem right now with our housing market. Foreclosures and short sales continue to force good people from their homes and adds to the slippery slope that is the housing market. Wouldn’t it make sense to offer more modifications to people that want to stay in their homes? Wouldnt this begin to shore up our subdivisions>city’s>states and the country as a whole and start us on a faster recovery?

I would think so. Wouldnt you?

A client of mine (thanks Brent) forwarded the video below to me yesterday and asked me to take a look. Now, there are not many things that I see that jump off the page (or screen in this case) that make me want to scream. But this is certainly one of them.

Do me a favor, After you view this short video, and after you are done shaking your head in disgust like I did. Forward it to everyone that you can.

This is absolutely ridiculous.

These are good, hard working people in my subdivision>city>state>country that are being forced out of their homes. As you can see, our system is broken, there is a real problem when there is a financial incentive for a bank to deny your modification in favor of short sale or foreclosure . FAIL.

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Tags: Loan Modification
Posted in Rant | No Comments »

HAMP-Housing Affordable Mortgage Program-January 2010 Results

Thursday, February 18th, 2010

The Home Affordable Modification Program or HAMP allows for loan modifications for those that can no longer afford to make their monthly mortgage payments. You may qualify for a loan modification under HAMP to make your payments more affordable. Millions of borrowers who are current, but are having difficulty making their payments and borrowers who have already missed one or more payments may be eligible. Under HAMP the borrower must answer these 5 questions:

HAMP

“The Home Affordable Modification Program site then helps to determine if you are eligible, but only the servicer of the loan can tell you if you qualify. To qualify, you will generally need to show that you have adequate income to make the reduced payments on an ongoing basis and that modification is an appropriate option given the characteristics of your mortgage and the value of your home.”

Servicer Performance Report Through January 2010

Mortgage servicers have recently increased efforts to change trial modifications to permanent status under the Obama administration’s Home Affordable Modification Program (HAMP), nearly doubling the number in just over one month.

The U.S. Treasury released it’s January report on Wednesday that showed 116,297 homeowners were in permanent modifications as of the end of January 2010.

76,482 more have received offers for a permanent restructuring. The Treasury said the data “marked record progress.” January marked the first time that the pace of permanent conversions exceeded that of new trials – most likely proof of intense pressure placed on the servicers by the Obama administration over the last few months to increase permanent modifications.

From December to January, Permanent modifications jumped 75 percent. During the same period new trials rose by about 9 percent. To date there has been nearly 1.3 million trial modification offers extended to struggling homeowners since the program began almost a year ago, Treasury officials say HAMP is on pace to meet its goal of helping three to four million borrowers hang on to their homes by the end of 2012.

The Treasury department estimates there are 5.6 million homeowners who are currently 60 days behind on their payments. 1.7 million of them are eligible for assistance through HAMP, according to the Treasury’s figures. The number of HAMP-eligible homeowners is expected to grow over the next three years, officials said, as delinquencies increase.

The January Treasury report shows that 60,476 trial modifications have been canceled, and 1,005 permanent modifications have been terminated, an indication the borrower may have failed to stay current on the new payment

Modification Results

According to the January report, the monthly payment reduction for borrowers enrolled in the program is $522. According to the administration, 100 percent of the permanent modifications have reduced the interest rate, 42 percent have extended the loan term, and 27 percent have included principal reduction.

As of the end of January, CitiMortgage and GMAC Mortgage have provided modifications to 50 percent of their eligible borrowers. Citi has converted 10,929 modifications to permanent status. GMAC has converted 11,494 of its home loans to permanent status as well. Saxon Mortgage Servicing has 48 percent of its eligible borrowers in a trial or permanent modification, completing 5,312 permanent modifications.

JPMorgan has made 11,581 modifications permanent, and has 17,959 pending. Wells Fargo has completed the most permanent conversions, with 17,652. Bank of America has put 22 percent of its eligible borrowers into modifications and made 12,761 permanent.

What do you think….Does HAMP go far enough to save struggling homeowners?