Forbearance Plan Eligibility – A borrower must meet the Home Affordable Modification Program (HAMP) eligibility criteria as well as:

• Be unemployed when request is made;

• Be entitled to receive unemployment benefits in the month of the UP forbearance plan effective date (servicers have discretion to require a borrower to have received unemployment benefits for up to three months before commencement of the forbearance plan); and

• Request an UP forbearance plan before they become seriously delinquent (i.e., miss three monthly mortgage payments).

Forbearance Plan Evaluation — Servicers must follow these requirements when evaluating a borrower for an UP forbearance plan:

• Unemployed borrowers who request assistance for HAMP must first be evaluated for an UP forbearance plan. If they qualify, they must be offered an UP forbearance plan before they can be considered for HAMP.

• Borrowers currently in a HAMP trial period plan who become unemployed may receive an UP forbearance plan if they have missed less than three monthly payments as of the first payment due date of the HAMP trial period plan. If they do qualify, their existing HAMP trial period plan must be cancelled and the UP forbearance plan must immediately begin without waiting until the borrower has received three months of unemployment benefits.

• Borrowers previously determined to be ineligible for a HAMP modification may request an UP forbearance plan if they meet the eligibility requirements.

• Borrowers in a permanent HAMP modification who become unemployed are not eligible for an UP forbearance plan.

Forbearance Plan Terms

• Term must be three months or upon reemployment (whichever is less). Servicers may extend this period according to their investor/regulatory guidelines.

• Monthly mortgage payment must be reduced to less than or equal to 31% of the borrower’s gross monthly household income and may be suspended in full.

Transition to HAMP — Borrowers in an UP loan modification forbearance plan will be evaluated for HAMP at either reemployment or 30 days prior to the UP forbearance period expiring (whichever happens first).

The UP replaces the “Unemployment Benefits” guidance outlined in Supplemental Directive 10-1 (in the Income Documentation section). And for borrowers with trial period plans with effective dates on/after July 1, 2010, unemployment insurance benefits, and other sources of temporary income related to unemployment, will no longer be considered a source of income for HAMP.

A loan provider will be given monetary incentives for every successful loan modification service that it works with. This  will come from the $75B in funds the Obama administration has put aside for this plan.  Thats your tax dollars at work. Basically we cut the schools to pay banks. There are no limits set up with regards to how much the government can give to an individual provider.

In addition to this the lender has the opportunity to receive  additional monies as long as a modification plan is in effect. If homeownter of the mortgage that has been modified continues to make the payments the provider of the mortgage will be able to get an additional incentives. This is done up to three years. This total can help to get a mortgage provider to cover the costs of taking care of a modification plan.

As many processors and attorneys using Captaloans can attest these incentives help reduce the banks reluctance to go forward on loan modifications and while it is unfortunate they are required they are achieving the desired effect.

While the servicer is gathering information to determine if a borrower meets the minimum eligibility criteria for HAMP, it should also be assessing whether the borrower may be eligible to refinance through an FHA H4H loan. This assessment would involve asking the following set of questions:

• Will the loan amount exceed $550,440?
• Has the borrower made less than 6 full payments during the life of the first lien loan?
• Does the borrower have an ownership interest in other residential real estate (including 2nd homes/rental properties)?
• Was the mortgage to be refinanced originated after January 1, 2008?
• Does the property contain more than 1 unit?

If the answer to all of these questions is “NO”, the borrower may be eligible for H4H. In this case, the servicer should counsel the borrower to seek a refinance with an H4H lender. If the servicer’s origination division does not participate in the H4H program, a listing of participating lenders can be found at the following link:

http://portal.hud.gov/portal/page?_pageid=73,7605762&_dad=portal&_schema=PORTAL

If the servicer knows that the related owner or third party investor does not permit principal forgiveness, which is required under H4H, no servicer action is required with respect to that loan. However, the servicer may not refuse to consider a borrower for HAMP or refuse to initiate a trial period plan for an otherwise qualified borrower subject to that borrower applying for and being denied a loan under H4H.

Servicers should demonstrate compliance with this requirement by documenting the date of the referral. Servicers are not – under any circumstances – required to take a loan application from the Borrower.

30 year fixed rates are currently ranging in the low 5% depending on fico score, property type, loan purpose and LTV. FHA rates are in the same range and go up to 96.5% loan-to-value (3.5% down.)

There is a new purchase program called HomePath requiring only 5% down on properties currently owned by Fannie Mae. The rates are a bit higher, but there is no requirement for mortgage insurance which is a big plus.

Jumbo financing looks to be returning to the market place. We are suddenly seeing very competitive rates from Chase, US Bank, Wells Fargo and GMAC. Great news for those with loan balances over the current high-balance Agency limit of $729,000. However, these programs are very conservative in terms of credit, personal liquidity, and loan-to value so you gotta bring the goods to get in on these deals.

Foreclosure Activity Report

Orange County homes that are more than 90 days late topped 8% recently.  The national average is 8.75 % and California averages 11.5 %.  The Obama administration programs to prevent foreclosures are slowing foreclosure rates, but most of these homes will likely convert to short-sales in the near future if they cannot get approved for a permanent loan modification.

Because of the expertise that these fully qualified professionals bring, they can obtain a good loan modification agreement that includes lower monthly payments over an extended term, and many times even a reduced interest rate which means more savings over time.

While not all modifications are the same and there can be no promises made as to how much each applicant will have as a result of this modification, the attorney will explain the chances during the consultation sessions.

When the third party is taking over the paperwork and the negotiations, they ensure that all of the paperwork is complete and organized in the way that lenders like to see it. They also enter into negotiations knowing what to expect and which methods to use if a lender should hesitate. The loan modification professionals generally have more than one option to try so that if a lender should reject one, they have another in waiting. If a lender should have an option, the third party can then try to make it better for their client. They have excellent negotiating skills and work with skilled processors who can often obtain great savings on your loan modification for some clients.

When hiring a third party, check to see if their advice is free and contact them concerning any questions that might need an answer. In hiring a third party to complete this type of work, it saves the applicant from having to either wait on a response from the lender or from having to constantly try to contact the lender as the advisor or attorney will do this work. By staying in communication with the third party, the applicant always knows where they stand in regards to their application.

In Connecticut, the picture is mixed – with almost 3,000 filings in March, foreclosures were up 22% from February, but compared to March last year, the numbers were actually down just over 3%. RealtyTrac executives say they believe the numbers are being held down by foreclosure mitigation programs at both the state and federal level. This week, the Obama administration complained about lenders being too slow to make investments in federally backed loan modification efforts. In Connecticut, lawmakers have just agreed to fund the state’s foreclosure mediation program for another year.

There is a great article on eHowTo that describes the process for the consumer.   Many consumers rely on a company to manage this for them.  If you are a company in the debt settlement consider using Captaloans to manage and track your debt settlement clients.

To stop from becoming one of the families who have received their rejection letter or are still waiting to hear the results, make sure your paperwork is in order and consider getting assistance from various loan modification companies. There are financial advisors available as well as attorneys who have a lot of practice in this area and are more than capable of not just guiding a person through the proceedings but who can also write up the paperwork needed and can negotiate with the lenders for a better deal.

It is suggested that a prospective applicant complete a lot of research on the subject before actually starting this process. While it is imperative not to procrastinate with financial issues, it is also a wise to be educated on the process.

• Members of Congress from Ohio, California and Florida in February introduced the Foreclosure Mandatory Mediation Act, H.R. 4635, as companion legislation to S. 2912.  The federal legislation would require mandatory mediation by lenders of loans with federal guarantees or federal insurance.  The required one-time mediation would involve both the mortgagor and a housing counseling agency and would be paid for by the lender.  Federal Information & News Dispatch (March 3, 2010) (Subscription Required)
• While the Florida Supreme Court ordered each of the 20 circuit courts in the state to establish its own foreclosure mediation process, only three circuits have complied with the order to date.  Florida was hit with an additional 296,000 foreclosure filings in the last quarter of 2009, pushing the number of pending foreclosures to 456,000.  Jacksonville.com (February 13, 2010)
• Nevada judges have stated publicly that they will not impose loan modifications even if lenders do not negotiate in good faith in mediations.  RGJ.com (January 24, 2010)
• New Hampshire has begun a Foreclosure Mediation Program which is voluntary for homeowners and free to both borrowers and lenders.  The program is being funded by grants from several sources.  Nashua Telegraph (January 18, 2010); Foreclosure Mediation Program
• Lenders attempting to foreclose on primary residences on the Big Island of Hawaii must now notify borrowers of their right to mediation by serving a mediation notice along with other documents.  Star Bulletin (January 21, 2010); Judiciary Press Release (January 20, 2010)
• Providence, Rhode Island has mandated a foreclosure mediation process, and the City Council is seeking to add a $2,000 fine for banks or lenders who fail to attempt to renegotiate mortgages with homeowners before filing a deed of foreclosure.  Projo.com (January 25, 2010)
• Maryland’s governor is pushing for the emergency legislation he introduced to institute a mandatory foreclosure mediation program in the state, and would like lenders to support the plan.  Lenders remain concerned about anything that would slow down the foreclosure process.  Maryland looked to South Carolina’s foreclosure prevention efforts, which require a showing that borrowers are not eligible for modification under the federal Home Affordable Modification Program prior to foreclosure.  Governor O’Malley Press Release (February 16, 2010); Daily Record (January 18, 2010)
• Although the governor of Minnesota vetoed the Homeowner-Lender Mediation Act in 2009, it has been reintroduced this year and the Minnesota attorney general will again seek enactment.  Legal Newsline.com (January 6, 2010)

After the mortgage back security implosion where subprime and stated income loans (that eventually went into default in large numbers) were packaged and sold to investors all over the world there were some much needed changes imposed in the industry in hopes of protecting the consumer and also tax paying citizens. 

New laws have been put in place to change the way appraisals are performed, and the manner in which costs are incurred and disclosed to clients. In addition, mortgage originators are now required to register with a national database and to be fingerprinted.  That is some serious stuff and from the way things ran in the past appears to be a great move.

INCOME DOCUMENTATION
Gone are the days of the “stated income” loans.   They may return someday but I would not hold your breath.  This could be problematic for self employed folks who try to “expensed” much of their income in order to avoid taxation.  They are not eligible for a new mortgage in most cases.  But I guess this is fair.  I mean if they are trying to avoid paying taxes they cant really complain.

Underwriting guidelines governing LTV (loan to value), FICO scores, and DTI (debt to income) ratios for all loans are much more conservative than in the recent past for obvious reasons. Unfortunately the pendulum may have swung too far in the conservative direction at present but this is to be expected.  For those of you who have a mortgage try to hang on to it but you might not be able to get one again for a while!

Virtually all lenders now require IRS transcripts of individual tax returns prior to underwriting approval. This ensures that income reported on the application and attending documentation is accurate in an attempt to avoid fraud.   As a result, it is standard practice now to collect full income documentation, to include two year’s federal tax returns with all schedules, W2’s, 1099s, and paystubs evidencing current employment. Also required are bank and asset/saving statements for at least one month, including all pages of the statements. Online statements are not allowed unless they evidence the borrower name and address on them.  

 It is back to “full documentation” in the loan world, just like the old days