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  •                              Bank of America: Mortgage Relief Program

    Many homeowners are faced with losing their homes due to unemployment, underemployment, medical costs or deep debt concerns, but Bank of America has programs designed to stop the foreclosure process and help homeowners stay where they belong; in their own homes.

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    Bank of America has agreed to a settlement with the Department of Justice and the Attorney General’s office called the global settlement.  This agreement allows homeowners to reduce the principal of their loans, lower interest rates, and provide appealing short sales terms.  It also provides loan modifications and refinancing for qualified homeowners.  Bank of America is providing the following per the agreement: (more…)

          Chase Refinancing Plan: A Workable Refinancing Solution for Anyone

    In today’s economic climate, it is easy to get behind on mortgage payments.  The worst thing a homeowner can do is ignore the problem; most banks are ruthless and will foreclose against the property.  Banks loans have become difficult to obtain with the bad credit ratings that come along with falling behind on mortgage payments.  Even if you choose to walk away from the property, the bank can still hold you responsible for any losses once they foreclose. One of the smartest moves a homeowner can make is to contact a bank willing to work with them on a refinancing plan that will have lower, more manageable mortgage payments.

    Chase Bank is currently providing a way out of the current mortgage crisis for existing customers as well as new ones.  (more…)

    Because so many homeowners are taking advantage of the government –sponsored Home Affordable Refinance Program known as HARP there is a problem for many large financial institutions as regards keeping up with the applications backlog. In order to move things along more quickly some borrowers are using brokerages as well as community banks that are not servicing HARP loans.

    Michael Fratantoni who is vice president for research and economics for the Mortgage Bankers Association said that they had heard of waiting periods of 60 to 90 days for those asking for loans at larger banks running at full capacity.

    The weekly survey by the Mortgage Bankers Association released on Wednesday reported that almost 80 percent of the applications were for refinancing. About a quarter of transactions were HARP -related according to previous surveys. The purpose of HARP was to make refinancing easier for those who had mortgages either owned or guaranteed by Fannie Mae and Freddie Mac and who were looking for better loan terms. This program has since been expanded as HARP 2.0.  Mr.Fratantoni explained that  many who wish to refinance do so with the bank that they used for their first loan because they feel that things will go more smoothly and the bank has all the information to carry out the transaction. However the application process is more difficult now that the lending standards are tighter because of the mortgage crisis.

    A real estate lawyer in Astoria , Queens,  Andrew Latos, has represented  homeowners in transactions with big banks and he says that he now charges more for closings  due to the fact that they take much longer to do. He explained that what were two –hour closures are now more in the region of five or six-hour closures.

    Those who would like to speed up the refinancing process are increasingly taking their business to mortgage brokers who claim to have direct contact with the banks and can keep better track of what is happening with their client`s file. Vanessa Thatcher, a senior officer with Atlantic Home Capital in Ronkonkoma N.Y. says that a file has to pass through many hands in a large financial institution .She charges the clients 1 to 2 percent of the amount of the loan.

    Sometimes a broker can be a financial consultant at the same time .It often happens that Mark Yecies, who is the president of SunQuest Funding in Cranford N.J  tells his clients not refinance as he did recently in the case of a borrower who had been told that he was suitable for a refinance. After checking the numbers Mr.Yecies  saw that most of his client`s payment was principal so a refinance didn`t make sense.

    Community banks don`t process HARP loans and normally can do a refinance within 30 days are finding that it now takes longer due to the increased volume of loans.

    The big banks have had to increase staff to deal with the workload but can`t seem to refinance in less than 90 days.

    In Alabama, during financially difficult times , it has come as a help to balance the budget that there has been a national settlement of $25 billion with five big mortgage companies .The settlement may even be instrumental in helping low income families to become home owners.

    $25·3million from the settlement is to go to the office of Alabama Attorney General Luther Strange. This money does not come in a lump sum but is slowly being received in the office and $19·3 million from the total is to be used during the years 2013 through 2015 to fund the attorney general`s office and the district attorneys `offices throughout the state. According to Arthur Orr, R-Decatur (Senate budget committee Chairman) this will mean that money that would have had to be used by these offices from the state General Fund budget can now be released to support other programs. The amount of the settlement when compared with the $1·68 billion of the state`s General Fund budget for the fiscal year starting Oct.1, may seem small he said,” but that helped the overall budget picture”.

    State officials are being approached by two advocacy groups for the poor of Alabama, they are The Arise Citizens` Policy Project and the Low Income Housing Coalition of Alabama, who want the remaining $6 million to be used to give housing to those in need. Jim Cames who is the spokesman for Arise Citizens said that when the Legislature voted last month to set up the Housing Trust Fund it opened up the way to providing affordable housing for low income residents but was unable at that time to put any money into it due to the state`s budget problems. Now that there is mortgage settlement money available it could be that the project can be started off.

    Joy Patterson, the attorney general`s spokeswoman, says that the attorney general would be happy to look into the suggestion although no decision has been made yet as to how the money will be used.

    The $25 billion agreement in February was reached by the federal government along with 49 state attorneys general including Alabama`s attorney general Strange. The five large mortgage companies were accused of improper handling of mortgages including employees signing foreclosure paperwork without reading it. They were Ally (formerly GMAC), Bank of America Corp., Citi, J .P .Morgan Chase & Co., as well as Wells Fargo & Co.

    The total estimated share for Alabama is $106 million and in addition to the amount to be provided to the attorney general`s office Alabama`s borrowers are expected to receive nearly $30 million for loan term changes and other help. Those borrowers who lost their homes due to foreclosures between 2008 and 2011 and who suffered servicing abuse are expecting $20million in payments while those borrowers who`s mortgages are under water are to have refinanced loans said to be worth almost $30 million.

    The amount to be received by the attorney general`s office may be used to help the people who have been hurt most by the nation`s housing crisis.

    Underwater mortgages create a huge problem for homeowners and lenders alike. When your home is worth much less than the balance on its mortgage it takes away much of the incentive for paying your monthly payments because most of us view our home as an investment not an expense.

    The government is trying to give homeowners an additional incentive to keep their homes by offering loan modifications and refinancing that improve the terms of their mortgages. There are four main ways to improve your mortgage’s terms: reducing your interest rate, changing from a variable rate to fixed rate, extending the term of your mortgage and reducing the amount you owe your lender.

    Needless to say lenders are not in love with any of these options with the possible exception of extending the term of the mortgage, which reduces your mortgage payments but can increase the overall cost of your mortgage. However, the less popular mortgage rescue method for lenders is without a doubt the reduction of the mortgage balance. However, research shows that reducing the balance of a mortgage is the most effective way of reducing delinquent borrowers, which is good for both lenders and borrowers. For this reason the government is trying to get Freddie Mac and Fannie Mae to pressure lenders into reducing the mortgage balance of their underwater clients. Fannie Mae and Freddie Mac hold or insure 60 percent of all mortgages in the United States and therefore has the leverage with the large mortgage providers.

    Edward J. DeMarco, the regulator of Fannie Mae and Freddie Mac, does not believe write-downs are the panacea their supporters present them as. "There’s no free lunch" he is often quoted as saying when asked why he doesn’t support he Obama administration’s efforts to incentivize mortgage write-downs.

    Although DeMarco does not support write-downs he is planning to provide lenders with incentives such as increasing financial aid for those willing to improve the conditions of underwater mortgages. Learn more about these incentives in our next post.

    For the last four years, HAMP, the Home Affordable Modification Program has been one of the big sources of help for struggling homeowners. The government mortgage help program provides homeowners with a variety of options to save their mortgage. However, not everybody qualifies for the Home Affordable Modification Program. Fannie Mae introduced the Payment Reduction Plan, also known as PRP, as an alternative for those who could not qualify for HAMP. As of January 1st, 2012, this option is no longer available.

    Why has Fannie Mae cancelled this relief program? According to press releases from Fannie Mae, the volume of applications and existing homeowners in the program did not justify keeping it running. The Payment Reduction Plan started on October 26, 2009, and was first designed as a bridge program to help those who were trying to qualify for HAMP. It later developed into an alternative for homeowners who did not meet the criteria for the Home Affordable Modification Program. The main attraction of the PRP is it didn’t only reduce monthly payments, it reduced the mortgage principal and the mortgage interest rates, which provided “real” help to homeowners. For instance, a homeowner in the Payment Reduction Program could benefit from a reduction of 30 percent in monthly mortgage payments.

    This is in stark contrast of so-called modification programs that simply extend the term of the mortgage or attach late payments to the end of the mortgage. Unfortunately, the application process for the Payment Reduction Plan seems to have been less streamlined as its creators had intended and the volume of successful candidates has dropped in the last two years.

    Sadly, the Payment Reduction Plan was itself a downscaling of the previous “best mortgage rate reduction” in town: Fannie’s HomeSaver Forbearance Program. The HomeSaver Forbearance Program offered homeowners who were struggling with their mortgage payments a reduction of up to 50 percent for qualifying candidates. The argument Fanny Mae offered for the drop in mortgage reduction offered by their PRP program was that 30 percent was a more realistic and “permanent” reduction for mortgage servicers. It seems 30 percent is no longer a realistic or permanent solution either.

    Nevertheless, homeowners looking for government help for their mortgages still have options to consider. For instance, eligible applicants can apply for the Forbearance Relief program Fannie Mae plans to launch in March 2012. The Forbearance Relief program is designed, as the PRP was, to cater for homeowners who do not qualify for the mainstream modification programs, such as unemployed homeowners who have fallen behind on their mortgage payments.

    Up to now, homeowners who are struggling to pay their mortgages had four main options: selling, a mortgage refinance, a loan modification or a short sale. Fannie Mae is trying to give home owners who are struggling to make payments and need a little time to get back on their feet.

    The program is called the Forbearance Relief program and Fannie Mae is requiring all its approved servicers to offer it to unemployed borrowers starting from March 1, 2012.

    The Program

    What does this program offer? It doesn’t reduce the principal of the mortgage, it doesn’t reduce the interest rate. However, it does offer what many home owners need more than anything: time. In a nutshell it provides unemployed borrowers with 6 to 12 months of forbearance to allow homeowners time to get a job and put their finances in order. During the forbearance time lenders are not allowed to charge borrowers for late charges. In the event that a homeowners qualifies for a loan modification while in the forbearance period, the servicer must waive any unpaid late charges.

    This program will simplify the existing forbearance requirements and simplify the application procedure. Freddie Mac—the other Government subsidized second market corporation—will also offer this program, starting from February 1st.

    Requirements

    This is one of the strengths of this program. The Forbearance Relief program is open to most struggling homeowners. This includes delinquent borrowers, borrowers on the verge of delinquency and underwater mortgages. However, it is only open to principal residence homes. In other words, only borrowers who use the home in question as their main residence can apply. Second homes, vacation homes or investment properties cannot qualify for forbearance relief.

    MBS Mortgages

    Mortgages that have been pooled into mortgage-backed securities are a special case in the Forbearance Relief program of Fannie Mae and Freddie Mac. Homeowners whose mortgages have been included in MBS may qualify for up to six months of forbearance, but only if the pools were issued from June 1, 2007 to December 1, 2008. Longer forbearance plans may be offered, but only to mortgages pooled in to mortgage based securities before May 2007 or after January 2009.

    Extensions

    Once a mortgage is approved for the Forbearance Relief program, the homeowner must take steps to reinstate the mortgage payments by the end of the forbearance period. If a homeowner needs an extension, the application for the extension must be filed between day 120 and 135 of the forbearance plan (between month four and five). Note that eligibility for this program is determined on a monthly basis.

    The real estate collapse of the last three years has caused the federal government to come up with regulations designed to avoid this from happening again. Mortgage regulation rules are being presented under the Dodd-Frank Act of 2010. The Dodd-Frank Act is part of the far-reaching financial regulatory reform that sets out to promote financial stability and improve the accountability and transparency of the financial system as a whole. This was a reaction to the list of bail-outs of companies that were “too big to fail” and required on-going hand-outs from taxpayers to stay in business.

    One of the changes proposed under this Act is to force mortgage lenders to take 5 percent of the credit risk of mortgages pooled in securities if the mortgages do not meet certain requirements. These are mortgages that are put together as an investment unit and which can be bought or sold in a similar way to stocks in a company. One of these requirements, which is making mortgage lenders unhappy, is that borrowers must pay at least 20 percent of the home’s purchase price as down payment. The idea behind this rule is to stop borrowers from buying homes they can’t afford just because loans are available. According to some analysts, cheap and available loans were one of the reasons house prices increased artificially and later crashed when the market came to its senses and corrected itself. Canada has a similar down payment requirement as part of their comparatively stricter financial regulatory system, which may have had a lot to do with why Canada was not affected as seriously by the real estate driven recession of 2009.

    Critics of the 20 percent down payment rule claim this will price out many borrowers who can’t afford to come up with 20 percent of a home’s purchase price. Figures from 2010, seem to support this claim. Around 39 percent of home buyers in 2010 put a down payment of less than 20 percent, according to a poll by CoreLogic. The question, of course, is if the low down payments are because people can’t afford to pay 20 percent or because they are not required to do so? Additionally, even if many buyers can’t afford the 20 percent rule, is that necessarily a problem? Could it be argued that buyers who can’t afford to pay 20 percent of their mortgage are simply not in a position to buy and should focus their efforts on saving for a down payment? Of course, the real estate mortgage industry claims it is time for the government to stimulate the mortgage industry not weigh it down with restricting regulations. How do you feel? Is this regulation a much needed protection against another crash, or is it an example of federal government choking the growth the real estate industry so desperately needs?

    Do you know what a mortgage servicer is? Many borrowers do not know that the company which receives their monthly payments and sends nasty letters when they are behind on their payments is often not the company or investor that sold them the mortgage in the first place or even the current investor. In the mortgage industry there are three main players, mortgage originators, mortgage servicers and mortgage investors. Mortgage investors put forward the money for the loan, mortgage servicers handle the payments and communication with the borrowers and mortgage originators sell the mortgage. In some cases, all three roles are played by the same company but often these roles are split between specialized companies.

    Of course, throughout the life of your mortgage fees are paid to the companies that manage your mortgage. The origination fee you pay when you sign for a mortgage is part of the payment mortgage originators receive. Every month interest is paid to the mortgage lender and a portion of the interest and mortgage fees goes to the company that manages your payments. These fees do not stop when you are behind in your payments and you are applying for a mortgage modification.

    Mortgage modifications are paperwork intensive procedures which require a lot of research and communication between borrowers, mortgage servicers and mortgage lenders. This may help you understand why mortgage modifications often take so long to get processed even when borrowers clearly qualify for them. Mortgage servicers receive a fee for their work during mortgage modifications. However, the rules that regulate how much they receive have just been changed.

    Fannie May requires mortgage servicers to only charge a fee, if the loan modification is approved. That has been the case for some time now. However, how much mortgage servicers can charge has recently changed. Why? Fannie Mae states recent simplifications in the mortgage modification process as a basis for the reduction in fees charged by servicers under the government sponsored mortgage assistance programs. The current limit is 0.25 percent of the mortgage amount or whatever the mortgage servicer received before the loan modification.

    The maximum allowed servicing fee for mortgage modifications is not the only change announced by Fannie Mae. Mortgage investors and mortgage servicers must also adapt to changes in foreclosure time frames and rules on mortgage delinquency management. Now, if mortgage servicers exceed the allowed time frame to assess a loan modification, Fannie Mae will impose penalties so servicers remediate the problem and improve their performance.

    CitiMortgage, the servicing side of CitiGroup’s lending sector is promoting some new alternatives for homeowners who do not qualify for loan modifications. These alternatives work in conjunction with CitiMortgage’s new “Road to Recovery Events” program which aims to help homeowners benefit from government and private loan modification programs. According to recent figures, 65 percent of applicants at these events are successful. What happens to the 45 percent that are not granted a mortgage modification? CitiMortgage is offering a special foreclosure alternative program across six states.

    What is a foreclosure alternative?

    There are two main types of foreclosure alternatives: short sales and deeds-in-lieu of foreclosure. A short sales occurs when the lender allows the borrower to sell the property undergoing foreclosure at a price below the mortgage balance to avoid foreclosure. A deed-in-lieu of foreclosure occurs when borrowers agree to return their deed, and therefore their legal claim to the property, in exchange of avoiding foreclosure. These alternatives can be beneficial to borrowers as long as the lender agrees not to attempt to collect any difference between the mortgage’s balance and the sale price.

    What is New?

    Up to now, nothing new. Short sales and deeds-in-lieu of foreclosure have been around for a while. However, CitiGroup through its branch CitiMortgage is offering some new additions to short sales and deeds-in-lieu of foreclosures.

    Six-Month Break

    If you have no chance of arranging a loan modification or refinance, CitiGroup will offer you up to six months of free month if they agree to exchange the deed for six-months of additional stay in the house. As far as now, there is not completion date for this date, which means it should be open for all homeowners who qualify for the program. This six-month break will allow you to start saving for the new deposit or move and avoid some of the stress of moving after a foreclosure.

    $1,000 Bonus

    Moving home is a huge expense. If you have just gone through a foreclosure, the cost of moving may simply be too much to deal with. CitiGroup, through CitiMortgage, offers borrowers a helping hand here by offering homeowners who agree to a foreclosure alternative a minimum of $1,000 towards moving costs. This will help with a new deposit if you decide to rent or as aid towards the new appliances and furniture you may need for your next house.

    The idea is to reduce the cost and damage of foreclosures to clients by providing tenants with an incentive to be tidy and leave the property on good terms. This does not only help borrowers save money but banks and lenders also.

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