Has your short sale or loan modification been turned down and you have no idea why? Let's examine some of the reasons. These reasons may not make you feel any better or maybe they are just excuses by your lender, however there are a few things you may not even know about your loan. loan modifications short sales
Let's say that you make your mortgage payment to Wells Fargo. You can no longer handle your payments so you ask Wells Fargo to modify your loan- to do a loan modification for you. You are behind in your payments. You are in fact, in foreclosure but you are still living in your home and the judge in your case has not ordered the sale of your home at auction yet. You are scared. You see your neighbors losing their homes all around you. You are hopeful because you see on the news and in the newspapers that the Federal Making Homes Affordable Program has been helping some folks keep their home and get a loan modification.
You are no longer making your mortgage payment because your adjustable rate has been applied and your mortgage payment has gone from $1600 a month to $2300 per month. You just can not make these payments. You have been trying for almost 2 years now to get Wells Fargo to approve your loan modification. You even hired an attorney to help you with your foreclosure defense.
Wells Fargo turns down your loan modification request. You wonder, how could this be? After all, Wells Fargo is one of the large lenders and is participating in the government's Federal Making Homes Affordable program.
But Wells Fargo tells you that the investor is the one that will not allow you to get a loan modification. What in the world is an investor doing making decisions on your loan you wonder. Well, you are not alone in your confusion. Every day we are explaining the whole mortgage note owner thing to buyers agents, real estate agents and homeowners.
Just because you make your house payments to Wells Fargo does not mean they own that note that you are paying on. They are the servicer. Other words you will hear them called are asset management companies.
The very first thing you need to do before you ask for a loan modification is to find out who actually owns your note. You can do this by calling who you make your mortgage payments to and asking them.
If it is Freddie Mac or Fannie Mae that own your note- you have a much better chance at getting your loan modification approved if you qualify. If it is a private group of investors, your chances go way down. Why would this happen?
One in eight homeowners' loans were sold to investors on Wall Street. What happens is that a bunch of loans are packaged together. These are called mortgage-backed securities. They are then sold off to investors. Homeowners who have mortgage-backed securitized loan are five times more likely to be late on their house payments. Many of these borrowers were given loans they were not qualified for from the beginning. Many of the homeowners getting these loans did not read the fine print and did not realize how high their mortgage payments might go when adjusted.
The rules to allow modifications, short sales and terms of foreclosures and deficiencies are ambiguous at best. Homeowners who are told no by the investor have little recourse.
The federal Making Homes Affordable program lenders who participate in the program must modify all homeowners that qualify. The exception is when the investor has a rule that they do not allow modifications.
The Federal Housing Finance Agency reported to Congress on June 3rd that these securitized mortgages are a "hurdle" to the success of the Making Homes Affordable program. The treasury department has not disclosed why the modifications are denied so there are little to no facts to go on.
Why would the investors say no to your loan modification? Well, Wells Fargo's response is that the investors need their money. Wells Fargo has one situation where the borrowers ( the homeowners) are trying to get their loan modified but Goldman Sachs is the issuer and Deutsche Bank is the trustee. But when you go and talk to these investors and we have on several occasions when doing short sale negotiations for our sellers; the investor passes the buck back to the servicer. For instance, Deutsche Bank says that Wells Fargo is solely responsible for the decision to modify a loan or not.
Some people say that the investors are the scapegoats. Everything can easily be blamed on them. Since you rarely get to speak to anyone at the investors' group it is hard to tell who is telling the truth. In this particular situation Wells Fargo is saying that the investor is not forgiving the past due debt and that makes the payment go up on a loan modification because then Wells Fargo would have to put that past due balance along with all the penalties and fees into the loan modification which then may cause the homeowner to not qualify financially for the loan modification.
Servicers have agreements, contracts that they sign with investors. These agreements contain the rules for modifications. These agreements are called Pooling and Servicing Agreements which is known as PSA's. The PSA is most often what the servicer says is the reason for them not being able to do the loan modification or release the deficiency on a short sale.
But when you talk to other people in the management areas or to the investors they claim that there is nothing in the PSA's that would prevent the servicer from approving loan modifications, short sales and releases. There is a new study coming out from a law school wherein they state that only 8% of these mortgage-backed securities agreements contain any language that says the servicer is not allowed to do a loan modification for these notes. That means that about 92% of all the NO's; could actually be YES's. So why would that even happen?
loan modifications short sales Fear of law suits! The language in the PSA in question here, Wells Fargo and Deutsche Bank- it says that Wells Fargo can "waive, modify or vary any term" as long as Wells Fargo as the servicer makes a "reasonable and prudent determination" that the modification is in the investor's best interest. Attorneys examining these agreements say there is quite a bit of room for servicers to make these decisions. But the language itself in this agreement is enough for the servicers legal counsel to be concerned with the investor suing them for not acting in the best interest of the investor. They can not, no matter how inhumane this sounds, put the homeowner ahead of the investor. This is about business and if they want business from investors they need to make sure they are looking out for the interests of the investors.
The treasury department has stated that the fear of law suits is the biggest deterrent to getting the servicers to approve loan modifications and short sales. So doing little or simply turning down the loan modifications are the answer many servicers choose. This is not personal and this is not against you, the homeowner. The position of the servicers is to watch their own backs and to protect the assets to which they have been entrusted with, your mortgage-backed security. The Treasury Department says they can relieve some of the pressure of the fear of lawsuits by standardizing requirements for loan modifications and also provide some type of calculation to figure out if the investor will make more money by the loan modification or by the foreclosure.
We need to keep in mind one big thing in all of this and that is that these investors end up being regular people because most of these mortgage-backed securities were bought by pension funds and retirement plans of folks like your parents or even yourselves. You may well be one of the shareholders of the very loan you can not pay.
source: http://activerain.com/blogsview/1239128/is-your-short-sale-or-loan-modification-being-turned-down-
Loans, loan agreement, free loan, mortgage, mortgage loan, mortgage rates
Indianapolis - The fund designed to help Indiana's unemployed is bankrupt, and it's a problem that must be fixed. That effort is underway right now.
Earlier this year, the Indiana House of Representatives passed bill number 1379 to help pay for the fund that issues checks to unemployed Hoosiers. But now a summer study committee is reporting that there is a problem. The federal government says part of the bill which requires compliance centers is non-conforming. That means Indiana must adjust its plan before the law goes into effect next year.
The state has already borrowed $1.1 billion to meet payments. By the end of 2010 it will be up to $2.7 billion.
"Federal law provides that we would continue to pay benefits as we go into bankruptcy. We would borrow a loan from the federal government and Indiana right now is at $1.12 billion. That's the current drawdown that we've got on the fund. That number has pretty much been steadily increasing the borrowing with the exception of a short time where I think it ticked up barely when we saw the first quarter tax receipts. It's the largest tax receipt of the year so we wouldn't expect that to happen again," said Josh Richardson, Indiana Workforce Development.
The Indiana Department of Workforce Development said Wednesday that the state had been expected to stop borrowing from the federal government by 2012. But newer, less optimistic unemployment projections predict it will now be 2015 before the state can stop borrowing, and then it will take several more years to pay back the federal loans. The state wouldn't start paying interest on the loans until 2011.
"The picture is much worse," Richardson said.
Indiana has been paying out hundreds of millions of dollars more in jobless benefits than it has been taking in through taxes. The tax increase on employers is expected to raise about $300 million in additional money each year to help turn the fund around.
But the federal government plans to begin charging interest on the state's loans in 2011, and can begin raising federal taxes on employers that year that would compound annually until the loans are repaid.
State Rep. Russ Stilwell, D-Boonville, said the unemployment bill passed this year was not designed to fix the problem immediately.
"It's a fix that stops the bleeding and hemorrhaging, and it's still going to bleed," he said. "We were very clear about that. It's a long-term black hole."
Indiana is not alone. Currently 21 states and territories including Indiana are borrowing from the federal government. The current debt is $14.3 billion. By the end of the recession it is anticipated that 33 states will borrow at total of $50 billion.
source: http://www.wthr.com/Global/story.asp?S=11099200
The lowest mortgage rates in 3 months had US consumers clamouring for home loans last week even as the government said on Wednesday it expected millions more foreclosures.
The Treasury Department followed up with a report saying only 12 per cent of US homeowners eligible For loan modifications under the Obama administration's housing rescue plan have had their mortgages modified.
Survey shows US recession may be over
US job openings fall to lowest level in 9 years
But aside from the mixed picture on housing, the Federal Reserve said the overall economic situation was improving in spite of weakness in the housing and labor markets, while Treasury Secretary Timothy Geithner added that the economy was starting to grow again.
The housing market has been showing signs of stabilization in recent months, with sales on the increase and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
Mounting foreclosures could mean another leg down for home prices and perhaps send the sector into a vicious cycle, analysts say.
The Treasury said 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Michael Barr, assistant Treasury secretary for financial institutions, told a House of Representatives Financial Services subcommittee.
But the housing crisis is showing signs of easing. The Federal Reserve's Beige Book survey said most regions reported some improvement in hard-hit residential real estate markets.
And US mortgage applications surged last week to their highest since late May as consumers sought to take advantage of the lowest interest rates in months, data from the Mortgage Bankers Association showed.
The MBA said rates on 30-year fixed-rate mortgages tumbled to a 3-month low, spurring a surge in demand for home refinancing loans. Applications to buy a home, a tentative early indicator of sales, also climbed, hitting their highest since early January.
Low mortgage rates, high affordability and the government's $US8000 tax credit -- part of the economic stimulus bill -- for first-time home buyers have helped pave the way for stabilization.
"CAUTIOUSLY POSITIVE"
The Fed report said half of Federal Reserve districts saw evidence the US economy had improved by the end of August, although labor markets remained weak and retail sales were flat overall.
"Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive," the Fed said.
But it also said there was still downward pressure on housing prices, and that business people in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's "cash for clunkers" incentive program lapses.
Geithner, however, said the government's efforts to help the financial sector were paying off and helping the overall economy.
"The economy is now growing again. We've seen the cost of credit start to come down. Banks are repaying the investments the government had to make in them with a significant... return," he said during a speech at Syracuse University in New York.
"We are going to keep at this until we fix it --- until we get it back on track," he added.
source: http://www.businessday.com.au/business/world-business/us-home-loan-demand-rises-despite-foreclosures-warning-20090910-fhux.html
CNN Money reports today that 12% of eligible borrowers have been placed into trial loan modifications, up from just 9% a month ago. This comes from the second progress report issued by the government, which also says that 360,165 homeowners — who were at least two months behind in payments — received assistance through August. The goal of Obama’s Making Home Affordable Loan Modification program is to have 500,000 loan modifications under way by November 1.
The loan modification initiative was announced in February, began accepting applications in April, and is projected to help up to 4 million homeowners. The plan calls for servicers to reduce monthly payments to no more than 31% of a mortgage holder’s pre-tax income.
There are now 47 servicers participating in the program, and, though the performance of the providers has been all over the map, Bloomberg News reports banks are stepping up loan modifications. The administration is releasing monthly servicer performance reports in an effort to hold the institutions responsible for their performance and so the public will be able to see which institutions are lagging. Many borrowers have complained that servicers are not responding to their calls and applications, and that they are denied without explanation.
Even with all the efforts to refinance, the number of people falling behind on their payments continues to mount as unemploument rises.
source: http://www.zillow.com/blog/obama-loan-modification-plan-gets-closer-to-the-goal/2009/09/09/
Taxpayers could foot bill for inflated valuations of assets in government’s protection scheme amid talk of potential ‘fraud’
Banks are significantly overvaluing assets to be included in the government’s insurance scheme, which could leave the taxpayer footing the bill for any shortfall, experts have warned.
Property loans – which will be part of the £575bn government’s asset protection scheme (APS) to ring-fence the most toxic assets of Lloyds Banking Group and Royal Bank of Scotland – will be dated as of the end of December 2008 although commercial real estate values have fallen by just over 10% since then, according to data from the consultancy Investment Property Databank.
Matthew Oakeshott, the Liberal Democrat Treasury spokesman, said: “The APS is a ticking time-bomb for the British taxpayer. These poisonous property loans must have an independent, up-to-date valuation in accordance with the Rics [Royal Institution of Chartered Surveyors] valuation ‘red book’ when taxpayers actually go on the hook.
“If not, the APS will be a fraud on the British taxpayer – just like someone insuring a car after it has crashed.”
Oakeshott is writing a letter to the chancellor, Alistair Darling, raising his concerns about what he called “taxpayers being stung in an APS cover-up”. According to him, Britain should follow the Irish government, which is contracting independent valuers to put a price on banks’ property loans before they go into a so-called “bad bank”.
Governments around the world have designed programmes to insure, protect or ring-fence toxic assets to help re-establish confidence in the financial system and encourage banks to start lending again. RBS is putting about £60bn of commercial property loans into the APS, out of a total £315bn of assets, while Lloyds’ property loans in the scheme mount to £90bn, out of an overall £260bn, according to Credit Suisse estimates.
Industry specialists say any insured asset should be priced as realistically as possible. David Lovett, managing director of the restructuring firm Alix Partners, said: “The assets to be transferred should be valued at the date of transfer; it has to be at that date to ensure there is an accurate assessment and the issue has been resolved.
“To have a valuation of any other date has the potential for distorting the claim and creating an over- or an underpayment for the claim,” he said.
The government and the banks, however, claim the valuation date goes back to the end of last year because that is when coverage of the losses started. The taxpayer will pay 90% of any losses suffered by the two partially nationalised banks after a first loss to be taken by the banks.
Ann Cairns, managing director at the restructuring firm Alvarez & Marsal, said: “If the government insured portfolios at today’s prices, the insurance would be less expensive for the banks, but the value of that insurance would be limited.”
The banks are paying a fee to the government for insuring their toxic assets and analysts differ over whether they will be forced to shoulder losses above that level. The government made a £25bn provision for APS-related losses in the budget.
Jonathan Pierce, of Credit Suisse, estimates that the two banks’ losses will not surpass the £32bn that the banks are paying the government in fees. However, he added: “This is highly sensitive to small changes in the proportionate loss rate because the amount of assets is so big and the length of time that the assets are covered.”
Future losses depend on whether the economy recovers quickly enough, with predictions also varying widely. According to CB Richard Ellis, a real estate consultancy, property prices may only increase by 5% to 10% over five years, short of the near-30% decline in value since the peak of the market. BNP Paribas forecasts a rise of about 30%.
Analysts complain that the scheme has so many uncertainties that it is difficult to predict any outcome. Final details are not yet ready, after months of negotiations following the initial announcement in February. A deal may be struck later this month, a source said. Lloyds is also having second thoughts about it and has been sounding out investors about an alternative rights issue.
Analysts agree that the announcement of the scheme helped calm the markets at a time when bank shares were in freefall. But since then, the design of the APS has been slow to take shape and has failed to re-ignite inter-bank lending, critics say. People and firms are still finding it difficult, or expensive, to access finance and encourage economic growth.
Simon Adamson, credit analyst at CreditSights, said: “Clearly, it has taken a long time to put together and there are still a lot of doubts about how and when. It helped to restore confidence to banks but in terms of stimulating lending, it doesn’t really seem to have achieved much.”
Oakeshott believes it would be better to be more realistic and take the pain right away. “Japan’s long agony in the 80s and 90s after a property price crash should teach us one single lesson – it’s far better to take the pain up front and move on than trying to hide overvalued property off balance sheet for years on end,” he said. “Our government must not sweep this £500bn problem under the carpet until after the election.”
source: http://www.world-biggest-news.com/banks-are-overvaluing-toxic-property-loans-experts-warn/