Because so many million homeowners across the United States are struggling to make their mortgage payments and facing foreclosure, the US Treasury Department under Making Home Affordable implemented the Home Affordable Foreclosure Alternatives Program (HAFA). Effective April 5, 2010, HAFA offers incentives to homeowners, investors, and loan servicers to complete a short sale or deed in lieu of foreclosure. The incentives for homeowners include receiving $3,000 in relocation costs and avoiding foreclosure.
Not all homeowners qualify. The HAFA program applies to homeowners who:
1. do not qualify for a trial mortgage modification under the Making Home Affordable Program;
2. do not successfully complete the trial period for their modification;
3. miss at least two consecutive payments during their modification period; or
4. request a short sale or deed-in-lieu of foreclosure.
In addition, the property must be the homeowners primary residence, the first mortgage must have been obtained prior to January, 2009, loans balances cannot exceed $729,750, and the homeowners’ monthly principal, interest, taxes and insurance must exceed 31% of their gross monthly income.
Mortgage servicers participating in the Making Home Affordable Program (HAMP) must evaluate homeowners for a Home Affordable Modification before evaluating them for other options as well as implement the Home Affordable Foreclosure Alternatives Program (HAFA).
Some limitations under HAFA include the bank pre-approving short sale terms (the servicer can dictate price before the home can list it), the deficiency will be reported to the IRS, the servicer may still deny the short sale, VA and FHA loans are excluded, and investor properties are excluded.
For more information, contact Ryan & Schwarz/LLP.
Chase said on May 5, 2010, that its counselors will work with struggling homeowners “as long as 12 hours a day” at special events intended to prevent borrowers from falling into foreclosure.
Chase and other top mortgage lenders, including Bank of America, Wells Fargo and Citigroup, have initiated several assistance programs in the face of an unabated foreclosure crisis, with a growing number of homeowners owing more than the value of their property.
In Congressional testimony last week, U.S. Treasury Secretary Timothy Geithner lashed out at all mortgage servicers who signed up for the government’s incentive-based effort, Home Affordable Modification Program, HAMP. Geithner said he was troubled by increasing complaints from borrowers that servicers have not done enough to stop foreclosure. But Geithner himself has been under fire from lenders, lawmakers and borrower advocates who say that HAMP is poorly run and widely ineffective. Chase and the others, though, say they are pressing on with their own, non-governmental programs.
Over the next five months, Chase said it will hold the “foreclosure prevention events” in eight major markets, following what the lender called a successful series of such programs in Florida, where counselors met with 3,200 customers.
Chase plans to host multi-day events in the following markets: Chicago (May 13 – 17); Atlanta (June); Washington, D.C. (June); New York; Northern California; Orlando; Phoenix; and Southern California. Chase will provide updates on its website.
At the events, homeowners with Chase mortgages will be assisted in initiating mortgage modifications to lower payments or will be provided details on short-sale assistance if they cannot afford their home or don’t want to stay in it. They will also counsel those who are current on their mortgages but are struggling.
Since Jan.1, 2009, Chase said it has offered more than 750,000 modifications to struggling homeowners under HAMP; its own foreclosure mitigation programs; and those offered by Fannie Mae, Freddie Mac, the Veterans Administration and the Federal Housing Authority.
Due to current economic conditions, the number of short sale properties on the market is rising. The increasing number of short sales on the market presents serious challenges and inexperienced realtors may undermine the benefit to the selling homeowner. Below you’ll find more information on: short sales and their challenges, the government’s efforts to address these challenges, and tools to help you navigate the short sale process.
To help homeowners who are unable to keep their homes under the Home Affordable Modification Program, the HAFA program may make a short sale or a deed-in-lieu of foreclosure a viable option to help them avoid foreclosure. The HAFA Program, which will take effect on April 5, 2010, provides servicer, seller and junior lien holder incentives for these transactions and is designed to simplify and streamline use of short sales and deeds-in-lieu of foreclosure.
What is a short sale?
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Why is the number of short sales rising?
Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.
A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.
What challenges have short sales presented for REALTORS®?
The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for realtors. Major challenges include:
As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.
Bank of America will offer principal forgiveness to approx. 45,000 customers who got pay-option and subprime ARMs from Countrywide. If your loan officer sported a Bank of America ID badge, you won’t be offered principal forgiveness, because you didn’t get your mortgage from Countrywide.
(March 25) — The Obama administration plans to expand a program aimed at helping troubled mortgage borrowers by providing new loans to people whose homes are worth less than they owe and giving banks and other lenders incentives to give breaks to people who are behind on their mortgages.
Some details of the plan were emerging today as the government said more than half of borrowers whose loans were modified in the first quarter of 2009 had already defaulted again by the end of the year.
The current administration will dedicate an additional $14 billion from the $75 billion of the Trouble Asset Relief Program (TARP) already allocated to prevent foreclosures.
That money will bolster efforts by the Federal Housing Administration to give new loans to people who owe more on their homes than the homes are now worth. It will be available to the 100 mortgage companies participating in HAMP so they can reduce the the principal owed on homes and allow tardy borrowers to catch up on their payments.
The supply of foreclosed homes that banks need to sell is rising again, signaling further downward pressure on home prices in some parts of the U.S.
Mortgage analysts at Barclays Capital in New York estimated that banks and mortgage investors held a total of 645,800 foreclosed homes in January, up 4.6% from 617,286 a month earlier.
According to Barclays, the supply peaked at around 845,000 in November 2008 and then declined through 2009.
Even though the number of people behind on mortgage payments kept rising last year, the flow of homes into bank ownership slowed markedly because of time-consuming efforts to figure out which distressed borrowers could qualify for programs that attempt to avert foreclosures by reducing monthly payments. Meanwhile, brisk demand from investors and first-time home buyers helped banks unload many of the homes they held.
Now the supply is rising again because banks are determining that many homeowners don’t qualify for loan modifications and are completing more foreclosures. Home sales also have slowed in recent months.
Barclays projects that the supply of foreclosed homes will rise to about 733,000 in April, then begin to decline again gradually. Foreclosed properties now account for roughly a fifth of all homes listed for sale nationally.
The outlook for sales of foreclosed homes depends heavily on whether the economy continues to heal and manages to create enough jobs to boost demand for housing. It also depends on how many distressed borrowers can be rescued from foreclosure through loan modifications. Nearly eight million households, or 15% of those with mortgages, are behind on mortgage payments or in the foreclosure process. Foreclosures are heavily concentrated in a few states, notably Florida, Arizona, Nevada, California and Michigan.
Estimating the number of homes owned by banks and mortgage investors isn’t an exact science. Barclays uses foreclosure-related data from mortgage securities packaged by Wall Street and extrapolates from that to estimate the entire market.
John Burns, a real estate consultant in Irvine, Calif., projected that home prices as measured by the S&P/Case-Shiller national index will fall an additional 6% before leveling off later this year.
While he expected many lower-end homes to show price increases this year, he said that would be offset by steep declines on some luxury homes. He assumed mortgage rates would rise to about 6% by year end and job growth would resume in the second half.
Write to James R. Hagerty at bob.hagerty@wsj.com
Read the original article at: http://online.wsj.com/article SB10001424052748703523204575129861685086570.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
Some homeowners who sign up for the government’s mortgage assistance program are getting a nasty surprise: Lower credit scores.
For borrowers who are making their payments on time but are on the verge of default, the Obama administration’s loan modification program can reduce their credit score as much as 100 points. That makes it harder to get a loan and can present a problem when applying for a new job.
Housing counselors say it’s unfair, especially because the news often comes as a surprise to homeowners.
“Why should people’s credit be hurt even worse when they’re trying to do the right thing?” said Eileen Anderson, senior vice president at Community Development Corp. of Long Island, a housing counseling group in New York.
And many homeowners are angry that a program designed to help carries such a penalty, said Kathy Conley, a housing counselor with GreenPath Inc., a nonprofit group in Farmington Hills, Mich.
“It’s a feeling of being duped,” she said.
Still, the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That’s due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner’s’ credit by 150 points or more on a scale of 300 to 850.
To enroll in the Obama administration’s $75 billion “Making Home Affordable” program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus — Experian, Equifax and TransUnion.
For delinquent borrowers, the damage was done when they fell behind on their loans.
But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower’s credit score.
Read the original article at: http://abcnews.go.com/Business/wireStory?id=10147330
HOT SULPHUR SPRINGS, Colo.—Like many Americans, Jon and Laura Hagar are searching for a lender to refinance their home loan. But banks are leery of the Hagars. Their rural Colorado house is made of 17,000 old tires.
A niche mortgage mess is brewing in homes made of earth, tires, concrete and trash. Environmentally minded people built them, hoping to conserve energy and to re-use what might otherwise wind up in a landfill.
Such sentiments in some cases have been no match for the new resolve of the banking industry in the wake of the housing bust. Banks have become much pickier about examining sales of comparable homes, in deciding whether and how much to lend. Owners of odd homes can be out of luck.
The Hagars built their 2,700-square-foot house by stacking tire bales—five-foot-wide blocks of compressed tires—to form the exterior walls. They plugged gaps between the bales with cans, bottles, plastic plates, and other junk and moved in toward the end of 2008.
“We lovingly call it the trash house,” Ms. Hagar says. The Hagars covered up all that trash with concrete, clay and stucco and installed south-facing windows to capture light, heat and views of the snowy slopes.
To pay for it, the Hagars in 2007 took out a $240,000 line of credit from Red Rocks Credit Union in suburban Denver. In the old days of easier credit, appraiser Lori Slota couldn’t find another tire-bale home that had recently sold but said the house would be valued at $500,000 when complete, citing the listing of a straw-bale home as well as other houses in the area.
Last year, with the home finally finished and interest rates at record lows, the Hagars started trying to refinance into a long-term, fixed-rate mortgage. But in February 2009, they got the bad news from loan officer Bill Schimel, who wrote in an email, “I think we have really hit a brick wall here.”
So far as anyone can tell, no home made from tire bales has sold recently in the state of Colorado. Lenders have been telling the Hagars they can’t value the property and won’t give them a regular mortgage.
Getting financing for unusual homes has never been easy. Near Granby, Colo., Richard Messer opted not to look for a conventional mortgage because there was nothing conventional about what’s inside his walls: 50 tons of paper Coors beer packaging used as insulation. Mr. Messer got a $60,000 loan from friends to help pay for it. “The problem for anyone trying to do a unique house is financing,” he says.
Wayne Bryant, a 56-year-old steamfitter, spent much of last year looking for a way to refinance a $417,000 construction loan on his underground house high in the San Juan Mountains in southwest Colorado. The first appraiser to examine his property didn’t even come down from Denver to look at it, saying he had made a few phone calls and determined that there were no comparable transactions in the area, Mr. Bryant says.
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http://online.wsj.com/article/SB10001424052748704398804575071381513802938.html
CitiMortgage rolled out a new program for delinquent homeowners and homeowners who are in foreclosure in New York. CitiMortgage says:
“Give us the keys and we will let you stay for six months for free.”
Before you jump on this so called deal here are some facts about New York Foreclosures followed by a local Real estate agent’s take on this.
Is there really an advantage to you, the homeowner in this offer from CitiMortgage? Nnot really.
Once you are served a summons and complaint which would be in this instance CitiMortgage filing a law suit complaint against you as the homeowner- you have 20 days in which to respond to the complaint. If you hire an attorney or go to the legal aid society if you can not afford an attorney- they will file a defense or a counter complaint in court.
At that point, there will have to be a settlement conference scheduled. Most of the time here in the state of New York- you will be able to have your foreclosure postponed for much longer than 6 months.
We have recently represented people who have not made a mortgage payment in over 24 months and are still living in their homes.
Take that in consideration before jumping on CitiMortgage’s offer. They make it sound very good but they are not in business to protect you or to help you. They are in the business to cut their losses and what is in the best interest of their company and their shareholders, although the latter is questionable at best.
Turning in your keys is called a “Deed In Lieu of Foreclosure”.
Remember too, there are rules that must be adhered to even in Deed In Lieu and unless CitiMortgage is also going to change the rules you may not even qualify for the Turn in the Keys program.
If you have a second loan on your property or a HELOC on your property, your second lender has to be taken care of before a Deed in Lieu can be processed. If you don’t have the money to pay your mortgage payment you most likely don’t have money to pay your second note off either.
Also, if you do a Deed in Lieu- the mark on your credit report is the same as a foreclosure.
A Deed in Lieu is nothing more than giving up your rights to a judicial foreclosure. It is a foreclosure without going to court.
When and if, the loan modification fails, the best way to deal with the foreclosure filing short of bankruptcy is to do a SHORT SALE.
The mystery lies in why Citimortgage apparently wants your property.
This gets us to thinking, why is it that you want to own all these properties? Is there something you are not telling us?
There are qualified attorneys in New York that work closely with local realtors who are ready to help you solve your foreclosure problems.
CitiMortgage’s CEO of CitiMortgage- Sanjiv Das says: “We’re committed to finding every solution possible to help families facing foreclosure. Not every homeowner has the financial stability to remain in their home.” though with right attorney and realtor most homeowners can rebuild a nest egg and avoid fleeing in the night with their tail between their legs. Broke and beaten presents an impediment to a fresh start.
In New York CitiMortgage has over 4 % of their loans in a 90 days or more delinquent status. Nationwide that number is 6%. 22% of all the loan modifications that CitiMortgage approved in New York are now 60 days one year after their loan modification was approved.
We will go into further detail about the follies and idiocies of the loan modification programs and how those are set up for failure from the onset.
This post does NOT constitute legal advice. You should seek the legal advice of a qualified attorney who works in the foreclosure field. Call Ryan & Schwarz/LLP for Short Sale Information Today- 845/357-7700. We are qualified attorneys.
Under the Home Affordable Modification program, the target maximum amount for your mortgage payment (or mortgage debt-to-income) should be 31% of your gross (pre-tax) monthly income. This figure does not include any payments on your second mortgage. Make sure in calculating the total, that you do not add again the real estate taxes that are already included in your first mortgage payment, if your bank escrows for real estate taxes. So be careful to count taxes and escrow only once.