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Charlotte Short Sale Advisors
Helping Homeowners Avoid Foreclosure is our #1 Goal!- A Division of Showcase Realty in Charlotte, NCBrowsing Posts tagged balance
The House Committee on Oversight and Government Reform has launched an official investigation into the federal government’s foreclosure prevention program.
According to a statement from the head of the committee, the probe was triggered by complaints that servicers have been slow and inconsistent in modifying loans under the Making Home Affordable (MHA) program, and are not communicating clearly with eligible homeowners.
Chairman Ed Towns (D-New York) says he’s a strong proponent of efforts to ease the burden on struggling homeowners but has received “concerning information” that the administration is not fully living up to its pledge to help borrowers mitigate foreclosure.
“While I applaud Treasury’s efforts, numerous concerns have been brought to my attention regarding the effectiveness and efficiency of the MHA program and the extent to which it has assisted struggling homeowners,” he said.
In a letter to Treasury Secretary Timothy Geithner, Towns wrote, “… it is my understanding that Treasury has thus far refused to reveal in detail how it defines ‘net present value’, one of the key criteria for homeowner participation in the mortgage modification program.”
Towns added, “Moreover, if a homeowner is denied a permanent mortgage modification, the specific reasons for the denial are not revealed. Finally, Treasury has not established a process for homeowners to appeal the denial of a permanent mortgage modification.”
The latest figures from Treasury show that servicers have initiated just over 900,000 trial modifications, but according to the Congressional Oversight Panel, home foreclosures across the nation have increased faster than the rate of new HAMP trials, by more than 2 to 1.
Towns also noted that the servicer progress report issued last month demonstrates that certain institutions have made “dismal progress” in modifying loans, even though they service a large number of homeowners potentially eligible for HAMP.
Chairman Towns says he expects specific data requested for the investigation and a response to his inquiry from the Treasury Department by February 18.
Towns’ concerns echo similar accusations made by foreclosure counselors and distressed homeowners alike over the past several months that servicers still may not be equipped to handle the excess workload brought on by the government program and may be letting an unsettling number of borrowers slip through the cracks.
WASHINGTON – As part of the Administration’s ongoing housing market stabilization plan, the U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released updated guidance for servicers participating in the Administration’s mortgage modification program. This guidance refines the documentation requirements in order to expedite conversions of current trial modifications to permanent ones.
“With more than 850,000 homeowners in trial and permanent modifications, we are providing immediate relief to struggling homeowners,” said Phyllis Caldwell, Chief of Treasury’s Homeownership Preservation Office. “Today’s guidance represents our commitment to more efficiently move qualified homeowners into permanent modifications.”
“Increasing the number of borrowers receiving permanent modifications under HAMP is critical to our efforts to preserve affordable and sustainable homeownership,” said HUD Senior Advisor for Housing Finance William Apgar. “While we continue to meet our goals to provide immediate assistance, the updates announced today should enable servicers to transition borrowers more quickly and easily from trial to permanent modification.”
On December 23, 2009, the Administration required most trial modifications to be placed in a temporary review period to ensure that all borrowers are being fairly evaluated for the program. During this temporary review period, servicers were not permitted to cancel an active HAMP trial modification for any reason other than failure to meet the HAMP property eligibility requirements. This allowed servicers to convert a significant number of trial modifications to permanent ones. In fact, the total number of conversions more than doubled in December. Guidance released today will help improve this conversion process for the future.
The updated process requires that key documents, including proof of income, be obtained from the borrower before a borrower evaluation can begin. This more robust requirement of upfront documentation will make it easier and quicker to convert trial modifications to permanent modifications and enable servicers to use their resources more effectively.
Guidance Details
Supplemental Directive 10-01 provides guidance on two major issues:
1) New Requirements that Documentation be Provided Before Trial Modification Begins
Today’s guidance refines the documentation process and makes it easier for eligible borrowers in trial modifications to get permanent modifications quickly. Under this guidance:
A simple, standard package of documents will be required prior to the servicer’s evaluation of the borrower for a trial modification. This process will be required for all new HAMP modifications that became effective after June 1, although mortgage servicers may implement it sooner.
2) Converting Borrowers in the Temporary Review Period to Permanent Modifications
In December, Treasury implemented a review period through January 31 to provide servicers additional time to collect and submit missing documentation for borrowers in trial modifications, to require that borrowers be notified of any missing documents, and to give borrowers an opportunity to dispute and correct any erroneous information in their applications. Today’s guidance clarifies for servicers the proper procedures for conversion of those borrowers who are current on their monthly payments to permanent modifications.
Background
The Home Affordable Modification Program aims to help responsible American homeowners maintain a sustainable monthly mortgage payment through a pay-for-success framework that aligns incentives of borrowers, lenders and servicers. Over 900,000 Americans have begun trial modifications since the program’s inception and over 110,000 have been approved for permanent modifications as of December 31, 2009. The median monthly savings for individual homeowners is more than $500 per month. Over 100 servicers have signed up to participate in HAMP, covering more than 89% of mortgage debt outstanding in the country.
January 28, 2010
Supplemental Directive 10-01 is available at https://www.hmpadmin.com/portal/docs/hamp_servicer/sd1001.pdf
The Federal Trade Commission has proposed a new rule that would prohibit third parties, including loan modification specialists and loss mitigation attorneys, from collecting payment for foreclosure prevention services until after they obtain a documented offer from a lender or servicer for a modification or other form of mortgage relief.
“Homeowners facing foreclosure or struggling to make mortgage payments shouldn’t have to contend with fraudulent ‘companies’ that don’t provide what they promise,” FTC Chairman Jon Leibowitz said. “The proposed rule would outlaw up-front fees so companies can’t take the money and run.”
The FTC has brought 28 cases against companies suspected of foreclosure rescue and mortgage modification scams, and state and federal law enforcement partners have brought hundreds more. According to the agency, generally these cases charged that companies do not provide the services they promise and that they misrepresent their affiliation with the government and government housing assistance programs, including the Making Home Affordable program.
The FTC notes that historic levels of consumer debt, increased unemployment, and an unprecedented downturn in the housing market have contributed to high rates of loan delinquency and foreclosure, and the agency says this mortgage crisis has launched an entire industry of companies purporting, for a fee, to obtain loan modifications or other relief for consumers facing foreclosure.
“Far too many homeowners have paid up-front fees to bad actors who promised loan modifications but never delivered,” Treasury Secretary Timothy Geithner said. “I commend the FTC for proposing a strong set of safeguards to protect consumers from these predatory practices.”
The proposed rule also would bar providers from telling consumers to stop communicating with their lenders or mortgage servicers. It would also require them to disclose to consumers that they are for-profit businesses, the total amount consumers will have to pay, that neither the government nor the lender has approved their services, and that there is no guarantee that the lender will agree to change their loan.
The rule would apply to all for-profit companies that, in exchange for a fee, offer to work with lenders and servicers on behalf of consumers to modify the terms of mortgage loans or to take other steps to avoid foreclosure. Entities that own or service mortgage loans are exempt, and attorneys would have limited exemption if they represent the consumer in a bankruptcy or other legal proceeding.
The FTC is seeking public input, particularly from attorneys and other professionals, on the notice of proposed rulemaking.
A short sale may be your best alternative if you have financial trouble and a house that will not sell for enough money to pay off all the debts associated with the home. It is not for everyone. It is not for people who do not have a financial crisis, because they will not qualify with their lender. Lenders will not let you fail to pay back a loan just because you do not feel like it, it has to be impossible for you to pay it back.
Realtors used to say they could not help homeowners who were “underwater” where their home would not bring enough to pay off the liens and the homeowner did not have the money to pay the balance. Short Sales are a tool just for this situation. Price the house so that it will sell, and negotiate with the lender to pay everything possible on the loan.
You need to evaluate the alternatives. You can let the bank foreclose. But, that has worse effects on your credit and the image of the sherrif evicting you from your house may be something you do not want your children and neighbors to see. If you have only one lien (only one loan and no other secured debts), you might consider giving the bank a deed in lieu of foreclosure. That may work for some people, particularly if you negotiate a full release form the rest of the debt. However, it has worse consequences on your credit. You can try a loan modification. With the new legislation and regulations, there may be a way where you can get your payments in line with what you can afford so that you can keep the home.
A short sale is not an easy process. You have to get the buyers to be patient, as the lenders may take a while to review the offer. You need to realize that you might pay income tax on the amount you do not pay back, as discussed in a complete post on this site about tax consequences. You may qualify to pay no income tax if it is your primary residence being sold and you meet other requirements. You need to look into whether the bank will accept the payoff in full settlement of the debt, or whether they are going to chase you for the balance owed after the sale closes.
Some people will tell you that you have to be behind in your payments to do a short sale. That is not true, although some banks have some odd rules.
Some people will tell you that you cannot do a short sale on an investment property. That is not true, but you stil have to show financial hardship.
One oddity of this process is the real negotiation is done with the bank and lien holders. Normal negotiations in real estate sales are between the buyer and the sller. But, if you are not paying income tax on the amount you are not paying back to the bank, you may not care what the house sells for. Also, a lower price will make it sell quicker and elmininate your pain faster. However, the bank will only accept a sale that is close to market value, so you have to price the home well. Just like Goldilocks, the price cannot be too high so that the house does not sell and it cannot be too low so that the bank does not approve the sale. Pricing has to be just right.
If you have a Realtor who sent you to this website, you have found someone schooled in short sales, so read what you need here and listen to their counsel. If you do not have a Realtor to quide you through this complicated process, contact us using the form below, because our mission is to get more short sales done by properly trained Realtors throughout America so we can get out of this financial crisis.
If you would like to sell your house in the Char/Meck area of North Carolina, or be referred to a short sale expert anywhere in America, use this form. It is secure and we keep your information confidential.
