Articles Posted in Modifications

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loan mod2
We are still doing loan mods for our clients – three alone this week – one in a Chapter 13 bankruptcy and two outside of bankruptcy.  One has the docs to sign, another was presented with options including a principal reduction, and the other should be finished with underwriting and accepted in less than 30 days.

The June 2015 MHA Handbook Ver.4.5, revised on January 6, 2015 to Ver. 5.0, covers some of the procedures to be followed for borrowers who have filed bankruptcy and are seeking a loan mod to keep their home:

8.5 Borrower in Bankruptcy Borrowers who are currently in a TPP and subsequently file for bankruptcy may not be denied a permanent modification on the basis of the bankruptcy filing. The servicer and its counsel must work with the borrower or borrower’s counsel to obtain any court and/or trustee approvals required in accordance with local court rules and procedures. Servicers should extend the TPP as necessary to accommodate delays in obtaining court approvals or receiving a full remittance of the borrower’s trial period payments when they are made to a trustee, but they are not required to extend the trial period beyond two months, resulting in a total five-month trial period. In the event of a trial period extension, the borrower shall make a trial period payment for each month of the trial period including any extension month.

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Green Tree to Pay $48 Million in Borrower Restitution and $15 Million Fine for Servicing Failures. See this announcement from the CFPB and the Federal Trade Commission.

Locally in Tampa Bay, Florida this is resulting in Greentree seeking continuances for all trials – including one this morning on behalf of one of our clients – to make sure that they are in compliance with this order. Perfect timing, because our client just submitted her loan modification paperwork in an effort to keep her home after her divorce.

I thought it would be useful to post what exactly are some of the mortgage servicing requirements by the new RESPA rules:

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FHFA-principal-reduction-hp-4_11_12.jpgFannie Mae and Freddie Mac’s position is that they will not agree to a principal reduction in a mortgage modification. So our Florida foreclosure defense and bankruptcy clients are out of luck when their home is worth a lot less than the balance owed. This is their position even after a homeowner has filed bankrutpcy and is no longer personally liable for the underlying debt.

However, a new Director may be appointed to head the FHA soon. And if that happens, principal reductions may soon follow. The nominee, Mel Watts, is presently a member of the House of Representatives. While it is not certain that he would permit principal writedowns, it is something that at least is under consideration. HUD Secretary, Shaun Donovan is asking that bankers support Mr. Watts as FHA Director and to begin the process of winding down Fannie and Freddie. Fannie and Freddie have been responsible for more the 90% of the home mortgage market since the mortgage meltdown.

The current FHA director, Edward DeMarco, is against permitting principal writedowns for GSEs for any loan modifications.

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bank owned.jpgAnother tool to help Florida homeowners keep their home and avoid foreclosure will be available this summer.

Only Fannie and Freddie owned mortgages are eligible, but starting July 1, 2013, a new streamlined program is being rolled out to help modification efforts. This program will eliminate the strenuous income documentation and hardship rules that apply now. Avoid your home becoming “bank owned” by taking advantage of this new program. It will likely be of the most benefit to those who are dealing with large disorganized servicers, strategic defaulters with difficult to prove hardships or business owners who have a hard time proving income.

If you are unsure if your mortgage is owned by Fannie or Freddie, please check Freddie’s lookup site or Fannie’s lookup site. These two resources are also listed on our website’s Resources page.

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house life preserver.jpgWe are still seeing significant principal reductions for some of our very lucky clients, mostly from Bank of America and Ocwen.

An article by Drew Harwell in the Tampa Bay Times and the Orlando Sentinel and the Tampa Bay Times indicates that since March, more than 1,000 Florida homeowners have learned their principal balances were dropping by an average of $114,000. This is due to the National Mortgage Settlement of $25 billion. Five of the nation’s largest banks – Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo.

I know to many this seems unfair. Those behind in their payments get huge windfalls, while those who have kept paying do not. Or someone with a different lender doesn’t qualify and no one has control over who buys their mortgages. Fannie and Freddie do not presently allow for any principal reductions.

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mortgage puzzle.jpgThere are several exciting things happening in mortgage modifications lately. The modification puzzle pieces seem to be falling into place, albeit four years after the foreclosure crisis began. We hope to take full advantage of this and get as many of our clients through a mediation this fall as possible.

First, the Attorney-General settlement is in full swing. We are seeing a number of substantial principal reductions. This money will eventually run out.

Second, Ocwen is buying lots of mortgages, or I should say the mortgage servicing rights. Homeowners who have previously been denied should try again if they learn that Ocwen has taken over their loan. We have written several blogs about Ocwen principal reductions.

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house money.jpgHere’s an example in Tampa, Florida this month for one of our foreclosure clients who wanted to keep her house and avoid the possibility of a deficiency judgment:

New monthly payment: $933.45 with escrow Old monthly payment: $1,491.35

New interest rate: 4% fixed Old interest rate: 7.75 % fixed

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Here in Florida, our foreclosure defense clients have seen two more excellent principal reduction offers in the past month – both from Ocwen. Both reductions were to the fair market value, maybe even below, and both were reduced over $100,000. Additionally, the interest rates were reduced to 4% for the remaining balance.

As I’ve reported in the past, Ocwen is buying the servicing rights for many mortgage loans, including Litton and Saxon, so when you open your mail and find your loan has been transferred once again, don’t fret if its Ocwen, as it may be a blessing in disguise.

Both of the above cases were involved in litigation with our law firm so that may also have been a relevant fact, but we really don’t know. All I can say on behalf of my clients is: Thank you Ocwen. Kudos.

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underwater house.jpgThe recent AG settlement among the states’ Attorneys General and the five largest mortgage servicers is expected to be filed any day now. Hopefully then more light will be shed on what exactly the terms are and how they will help Florida homeowners.

The Wall Street Journal reported today that Bank of America also made a side deal to avoid penalties and will be doing more principal reductions. Under the terms of the settlement, the five servicers are required to make more than $10 billion in principal reductions. There is a lot more info in the article at the link above.

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nacba.jpgThe Federal Housing Finance Agency (FHFA) that recently approved of HAMP principal reduction for Freddie and Fannie loans has rejected a proposal by the National Association of Consumer Bankruptcy Attorneys (NACBA). The Principal Paydown Plan is designed to amend the bankruptcy code to allow for payments during a Chapter 13 to go towards principal to substantially reduce the balance owed on an underwater home.

According to an email update by NACBA, many members of Congress have endorsed the Principal Payback Plan. However, despite FHFA Director DeMarco’s initial positive comments about the Principal Paydown Plan, which he said struck him as “being responsible,” and a “credible way to address the crisis while recognizing various interests mortgaged properties,” he recently wrote to Congress informing them that the agency would not be implementing the Principal Paydown Plan. FHFA concluded that few GSE borrowers have filed for chapter 13 bankruptcy and are underwater and therefore the proposal would not be all that helpful. They did, however, commit to doing what they can to help eligible borrowers in bankruptcy get the HAMP modifications they qualify for.

Personally, I see a lot of homeowners that would qualify for the Principal Paydown Plan. Moreover, until something is done about the conflict of interest of servicers, we are not going to see any widespread adoption of principal reduction for Fannie and Freddie loans.

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