Property Qwest Blog - Real Estate News, Economics, and Housing Data

Loan Modifications Failing to Reduce Foreclosures?

As reported by CNNMoney.com - "FDIC chief: Intervene on foreclosures":

The nation's top banking regulator warned Tuesday that help for troubled homeowners is failing to keep pace with the foreclosure crisis.

"We're definitely behind the curve, and we fall further behind the curve every day," FDIC Chairwoman Sheila Bair told an audience at the Fortune 500 Forum in Washington, D.C.

According to Bair, the nation's financial system would be in much better condition today if earlier warnings she made about mortgage modification had been heeded.

Bair began sounding the alarm more than two years ago, warning that lenders had to shore up capital reserves to offset non-performing loans. In October 2007, she told lenders that they should start modifying more at-risk mortgages so borrowers could afford to stay in their homes.

Meanwhile the mortgage mess has ballooned, expanding beyond the housing market into the entire financial sector and the overall economy.

Foreclosures still growing in large numbers:

... Nearly 280,000 struggling homeowners received some kind of foreclosure notice during October, according to RealtyTrac, a 25% increase over October 2007. And nearly 85,000 families actually lost their homes, up 59% year-over-year.

Those increases illustrate the difficulties in getting foreclosures under control, including resistance from the investor community - the individuals and organizations that purchased many of these at-risk loans as mortgage-backed securities.

"The legal authority is there to modify loans, but there are conflicting economic interests on the part of investors [in mortgage-backed securities]," Bair said at the Fortune 500 Forum.

These mortgages have been broken up into classes or tranches, as they are called in the industry. The senior tranches have first claim on assets should the loan fail. Other tranches have a secondary claim on assets.

In a modification that reduces the value of an investment, "The senior claim may be okay but the lower tranches could get wiped out," said Bair.

In concluding:

She (Bair) told the Fortune 500 Forum that it's not too late to step up foreclosure prevention initiatives.

"The sooner we do it the better," she replied. "I see higher delinquencies growing through 2010."

Acting now would help many families who would otherwise lose their homes. And that would benefit everyone.

"Attacking the financial problem at its roots is the fiscally responsible and smart thing to do," she said.

We don't know about you, but we're not holding our breath. Our government has been disgustingly inept in handling these housing and economic problems and there is absolutely no reason to believe that anything is going to change now. We're at the point where it's every wo(man) for themselves. This is what we get when no-one is paying attention - the majority of the American people included!

Just think, give all this a few years and we'll be breaking out the champagne cheering the beginning of doing this all over again.

Real Estate and cycles. They can't exist without each other, without us either!

Labels: loan modification programs, loan modifications

Citigroup`s Loan Modification Program

As reported by MarketWatch - "Citi unveils housing relief plan - Banking giant steps up efforts to avoid foreclosures":

Citigroup said that under the Citi Homeowner Assistance program, it would preemptively contact 500,000 mortgage holders -- involving $20 billion of mortgage balances -- to try to ensure that they can pay their loans. It said it is focusing on borrowers who live in areas that are likely to face "extreme economic distress." Read MarketWatch First Take commentary.

Citi also extended its moratorium on foreclosures, saying it won't begin or complete a foreclosure sale on a home on which it owns the mortgage if the borrower wants to stay in the home, which is his or her principal residence. Citi said it will also need to be sure the borrower is working in good faith with the bank and has enough income for affordable mortgage payments.

"Under our new program we will preemptively reach out to help homeowners before they become delinquent, which is critical to avoiding the loss of a home and protecting their credit score and future borrowing potential," said Sanjiv Das, chief executive officer of CitiMortgage.

The broken record continues to skip along. Same script, just another bank. We're beginning to sound like a broken record too ... until the next loan modification announcement!

Need an additional fix of loan modification news? Find our growing list of links below regarding, you guessed it, more loan modification posts:

Labels: citi loan modification program, citigroup loan modification program, loan modification programs, loan modifications

Fannie Mae and Freddie Mac - New Loan Modification Program

As reported by Bloomberg - "Fannie, Freddie Boost Effort to Minimize Foreclosures":

Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, will accelerate anti- foreclosure efforts with a new loan modification program designed to cut monthly payments for struggling homeowners.

Fannie and Freddie, operating under a government conservatorship, will target loans in which borrowers are at least 90 days delinquent and have high loan-to-income ratios, officials from the Treasury and the Federal Housing Finance Agency said today at a press conference in Washington. The companies may offer reduced interest rates and longer terms of as much as 40 years to trim monthly payments.

The loan modification plan:

Under the proposal, mortgage servicers will work with borrowers to reduce monthly payments to 38 percent of their gross income, a level considered a threshold for affordability, using a combination of lower principals, interest-rate reductions and extensions, the people said. The plan doesn't include money from the Treasury's $700 billion bank rescue.

Homeowners will have to apply for the program, and their loan modifications won't become final until they have made three consecutive payments. Their new monthly payment will include all of their monthly housing costs, such as taxes and even condominium payments, one person said.

With increasing regularity, these loan modification programs are becoming commonplace in the industry. In fact, Citigroup is joining the party as well. We've allowed our blog to be hijacked by the relentless news of late regarding the loan modification mania. If you find yourself similarly obsessed, you can find links to our previous loan modification articles below with most certainly more loan modification articles to follow. The housing market bust has created the loan modification boom.

Labels: fannie and freddie loan modification program, fannie mae, fannie mae loan modification program, freddie mac, freddie mac loan modification program, loan modification programs, loan modifications

Loan Modification Specialist - Don`t Miss Your Calling!

What are you waiting for, you can get your piece of the pie too. Everyone's doing it, why not you? Did you really think the lending industry was dead? It always takes a few minutes to get back on track. There's money to be made. Stop reading this blog and get out there. Short memories - history does repeat itself!

Loan modifications, loan modifications, loan modifications ... the next boom. (Click on image to enlarge in a new window)

Loan modification mania! Find additional links to our loan modification articles below:

Labels: loan modification programs, loan modifications

Loan Modification Programs - Officially in Vogue?

As reported by Bloomberg - "Schwarzenegger Seeks to Save Homeowners With Foreclosure Delay":

California Governor Arnold Schwarzenegger proposed a 90-day stay on home foreclosures in California, one of the hardest hit U.S. states by the national housing-market collapse.

Schwarzenegger attempts to add California to the VIP list for the loan modification party:

California, which leads the nation in foreclosures, is one of more than two dozen states that that have taken steps to help distressed homeowners and to stem escalating defaults. Congress has been urging financial-services companies to work with borrowers and avoid foreclosures, which rose to the highest on record in the third quarter.

'The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes - and I am presenting a plan to do just that,' Schwarzenegger, a 61-year- old Republican, said in a statement. 'Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy.'

Schwarzenegger's loan modification wish list:

Schwarzenegger said he wants lenders to adopt a loan modification plan based on a 38 percent housing debt-to-income ratio so that the modified loan is sustainable for the homeowner.

He said lenders could achieve that 38 percent by reducing the loan's interest rate to as low as 3 percent for five years, increasing the mortgage's term to 40 years and deferring the payment of some principle to the end of the loan term, when it could be paid by refinancing or selling the home.

Are these loan modification programs helping or hurting the housing market? As we've discussed before, modifying ones loan will definitely provide immediate financially relief to struggling homeowners who get to participate.

How many loans will the banks be able to modify in 90 days? Will they be able to modify such a significant amount of these troubled loans that homes that would have entered foreclosure today, won't be doing so in 90 days?

Our opinion, doubtful. The 90 day moratorium will most likely do nothing more than stave off the inevitable for another 90 days for most homeowners ... Foreclosure.

Again, for a select few, this breather will prove to be saving grace. For the remaining overwhelming majority, your holiday season will prove to be just that. After the festivities are over, the fact will remain that the economy is still in bad shape, jobs will remain few and far between, your adjusted interest rate will still be sky high, and, unfortunately, you will still most likely be unable to pay your monthly mortgage obligation to own your home. In fact, your debt load will probably have increased in lockstep with those extra pounds that we always seem to embrace during this time of year.

On the bright side, perhaps in 90 days there will be another loan modification tweak or housing market proposal that will roll the debt forward. After all, we do this with the national debt and almost everything else financially speaking, why not with the housing market too?

It's a perfect time don't you think? Hmmm.

Additional loan modification articles:

Labels: loan modification programs

JPMorgan Chase Loan Modification - Moratorium on Foreclosures

Update to previous post: "JPMorgan Chase Loan Modification - Mortgage Program Expanded"

As reported by CNNMoney.com - "JPMorgan Chase expands housing rescue plan":

The bank will step up its efforts to offer mortgage modifications for borrowers at risk, institute an independent review process to eliminate all unnecessary foreclosures and hire and train more staff to handle the added caseload that the plan will generate.

Most important, it will not put any delinquent loans into the foreclosure process during the 90 days it takes to implement its new plan.

Good news for homeowners currently at the brink of foreclosure. In regards to the overall housing market, this aspect of the program could delay the inevitable because undoubtedly a 100% of the foreclosures put on hold will not be able to be modified by JPMorgan Chase. As a result, the homes that should've foreclosed during this 90 day period will still be ripe for the pickin'. The harvest will be delayed and perhaps so will the stabilization of the housing market.

The fruit will still be bad, but the seeds in the right hands will produce a healthy future crop. Misfortune for some, no doubt opportunity for others.

Labels: JPMorgan Chase loan modification, loan modification programs

JPMorgan Chase Loan Modification - Mortgage Program Expanded

As reported by CNNMoney.com - "JPMorgan will modify mortgages":

JPMorgan Chase & Co. said Friday it is expanding its program to modify mortgages in an effort to avoid foreclosures on up to $70 billion in loans.

The enhanced program will include the opening of 24 regional counseling centers, the hiring of 300 additional loan counselors, new financing alternatives, reaching out to borrowers with pre-qualified modification terms and a new process to independently review each loan before it is moved into foreclosure.

Chase said the changes are expected to be implemented in the next 90 days, and until those changes can be made, it will not put any loans into foreclosure.

Other loans ARE included in the loan modification program:

The loan-modification program will also be offered to customers with loans held by Washington Mutual Inc. and EMC. JPMorgan (JPM, Fortune 500) acquired Washington Mutual last month after the bank became the largest in the nation's history to fail. EMC was a mortgage unit of Bear Stearns Cos., which JPMorgan acquired in February.

Who's eligible? Who's not?:

The modification program applies only to owner-occupied properties with mortgages owned by JPMorgan, Washington Mutual or EMC, with investor approval.

It's quite clear that the big push in regards to the banking institutions are the implementation of their loan modification programs. Other banks of note implementing loan modification programs are B of A and IndyMac Bank.

Without a doubt, in the short-term, these loan modification programs will help homeowners to the extent that their monthly mortgage payments will become cheaper, lightening the financial load weighing heavily on most Americans in consideration of today's grim economic conditions.

One of the main arguments against these types of programs is the belief that the inevitable is merely being pushed to a future date. In paraphrasing, "if you can't afford your home now, you most likely won't be able to afford it in a few months or a year (give or take) down the road."

We disagree with this argument (to an extent) in consideration that drastic measures have been taken (to this point, mostly in outlining the laws that will implement these programs) to pump huge amounts of liquidity into the market, the Feds have dropped the Federal Funds Rate to historically low levels, and housing prices have fallen significantly (so significantly that some of these overheated markets are returning to levels seen before the boom).

Again, these government funded measures, coupled with the banks' loan modification programs, WILL equate into more money for the pockets of homeowners who are the recipients of these programs. This money is immediate and couldn't be at a better time for most.

As with many large institutions, we don't believe the banks will be able to move quickly so the effects of these loan modification programs will be slow and gradual resulting in less foreclosures being dumped into the market over a protracted period of time. Not all of these adjustments are merely 1, 2, or 3-year extensions of cheaper rates. Some of these programs include cheaper rates, principle reductions, and a transition into 10-year to 30-year fixed type products. Hence, a wave of future delinquencies are less likely than that of the sub-prime tsunami. Less available housing units now, regardless of which type, means less inventory. The sooner these inventory levels stabilize, the quicker housing prices will begin to stabilize. Systemic positive effects will begin to infiltrate the market just as the negative effects are currently plaguing our economic markets.

Cheap government funded money and lots of it, a battered housing market, a volatile stock market, equates into more investors turning to real estate for their investment vehicle of choice. In the field, many Realtors will tell you that they've already seen a substantial increase in the number of CASH buyers looking to enter many of these overheated markets that have fallen hard and fallen fast. If investors are entering the market now, with CASH, odds are they've done this before thus unscientifically indicating that there's some level of comfort with current housing prices.

In short, we believe many critics of these programs are critics in terms of their ideological views that a thorough cleansing of the housing market needs to happen. They would suggest no more stints and tourniquets as this is what got us to this point. Do you agree?

We suggest that whether you do or not, these programs will have a positive affect in the near term. When it comes to money, future relevancy seems to be of little importance when tomorrows bills are what you fear. Furthermore, how many people are concerned with the future implications of their actions when they're mired in their day to day tasks? Good, bad, or indifferent, nearly everything is put off into the future except for the endless yearning of immediate gratification. Is anyone noticing a trend with this sort of human nature? Does this ever seem to go away? Will we learn our lesson from this current housing and economic mess?

As usual, most definitely will not!

Loan modification mania. Find additional links to our loan modification articles below:

Labels: bank of america to adjust mortgage loans, IndyMac loan modification, JPMorgan Chase loan modification, loan modification programs, mortgage modifications

Loan Modification Programs - IndyMac and B of A Lead the Way

As reported by CNNMoney.com - "One failed bank gets the housing fix right":

... Chairwoman Sheila Bair told the Senate Banking Committee about the success her agency has had in helping struggling borrowers at IndyMac, which the FDIC took over this summer.
Bair, the nation's leading bank regulator, thinks this foreclosure prevention program can work for other banks.
"Our hope is that the program we announced at IndyMac Federal will serve as a catalyst to promote more loan modifications for troubled borrowers across the country," she told the committee.
She's not alone. While individual lenders, loan servicers and non-profit foreclosure prevention outfits have been chipping away at the staggering housing crisis on a case by case basis, IndyMac, under the FDIC's leadership, became the first bank to establish a set protocol to modify home loans.

IndyMac has made some reasonable progress in the implementation of their loan modification program. Borrowers who have had their loans modified are receiving significant payment relief:

IndyMac services more than 60,000 loans that are either more than 60 days past due, in bankruptcy, in foreclosure or are otherwise not currently being paid. About two-thirds of those customers are eligible for the program, according to Bair, and more than 3,500 IndyMac borrowers have had their loans modified to affordable levels so far. Borrower payments have been cut on average by $380, she said.
Currently most lenders assess each loan on a case-by-case basis, which takes a tremendous amount of time and resources, and can hold up the process for months. Establishing set rules that a lender can apply to thousands of borrowers will speed the process, and help right the housing market more quickly
Under IndyMac's program, the lender modifies a loan so that the borrower's new mortgage payment, including insurance and taxes, eats up no more than 38% of their pre-tax income. This percentage, known as a debt to income ratio, topped 50% for some loans during the boom.
To achieve this lower payment, IndyMac can lower the interest rate, extend the life of the loan to, say, 30 or 40 years, defer some principal to the final years of the loan, or a use a combination of these strategies.
IndyMac is also trying to simplify the process for borrowers. It is overnighting loan forms to eligible customers with a signature required upon receipt. "It doesn't show up with your regular mail, coupons and junk mail, because the key is getting the consumer to open it," said FDIC spokesman David Barr.

Other banks following suite? Bank of America will begin working to modify loans as well:

Bank of America (BAC, Fortune 500) launched a similarly systematic program earlier in October. That program, scheduled to start in December, came as part of a settlement with state attorney general offices that sued Countrywide, which B of A recently acquired, for predatory lending practices. It's expected to help 400,000 troubled borrowers and is actually slightly more aggressive than IndyMac's plan.
B of A will use a 34% debt-to-income ratio to calculate the affordable monthly payment for its customers, and may also write down the principal balance of some negative amortizing loans. IndyMac will not forgive debt, but instead will add principal to the final years of a loan if necessary.

The loan modification program to be expanded:

IndyMac's program is now being applied to many delinquent loans owned by Freddie Mac (FRE, Fortune 500), Fannie Mae (FNM, Fortune 500) and other investors, Bair said in her testimony ...

The implementation of these "loan modification" programs are definitely a step in the right direction in terms of helping to stabilize the battered housing market. Only time will tell if these programs can catch on with a multitude of banks. If the banks do overwhelmingly adopt similar types of "loan modification" programs the question then turns to how efficient will they be in their implementation. To date, most banks have shown little discipline and grave incompetence in dealing with the housing crisis. At this point, to expect anything more would be naive, but we do hold out hope that they can get their act together.

Labels: b of a, bank of america, IndyMac, loan modification programs, mortgage adjustments, sub prime