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With the Republication party pushing hard to call an end to the HAMP program and other foreclosure assistance programs, the Democrats are fighting back by filing their own bills and hopes of stopping the Republicans.  Barney Frank the top ranking Democrat of the House Financial Services committee has introduced his own bill that would require some of the biggest banks and hedge funds to cough up $2.5 billion to keep those programs alive.

The program that offers assistance to struggling unemployed homeowners EHLP (Emergency Homeowner loan program) and also the NSP program which counts on funding for redevelopment of foreclosed homes and abandoned homes passed the house with a 242 to 182 vote.

On Thursday of last week Frank introduced the Emergency Mortgage Relief and Neighborhood Stabilization Programs Cost Recoupment Act.  (HR. 1151) If this bill passes it would require the secretary of the treasury to impose a levy on financial institutions with $50 billion or more in assets and hedge funds with $10 billion or more in assets.  Each firm would be assessed based on risk and would bring in a collective amount to assist struggling homeowners of over $2.5 billion.

The funding that House Republicans voted to cut for both programs was made available under the far-reaching financial reform legislation that bears Rep. Frank’s name – the Dodd-Frank Reform Act. His new Cost Recoupment bill is being offered up as an amendment to Dodd-Frank and has been referred to the House Financial Services Committee for consideration.

A similar “big bank” tax was initially included in the Dodd-Frank Act, but it was pulled from the final language to win favor from Republican lawmakers.

The earliest version of the levy was written in to raise $19 billion from big banks to cover the cost of reform measures mandated by the legislation.

I truly do not see the government program going anywhere, if anything the loan modification program will probably be amended or revamped but the President has made it clear he will “veto” any bill that comes his way.  We can only wait and see how this decision will impact homeowners as some still continue to struggle to make ends meet.  As short sales and foreclosures continue to hold, some do predict 2011 will be the end of the housing crisis.

Could there be a light at the end of the tunnel?

The report by Center for Responsible Lending CRL, which was released this week, indicates loan modifications in most cases are still better than foreclosures.  Some government officials are pushing for principal write downs and to assist homeowners as much as possible before foreclosing on the property.  Servicers are extremely against principal write downs and a common myth is that Investors who own the mortgages are saying “no” to modifications.  However, according to a Texas based lawyer Talcott Franklin, Investors are very open to modifications versus foreclosures.  He has talked to many Investors and everyone that he has spoken to are in favor of modifications versus foreclosures.  So why do so many servicers seem to blame the Investors for not willing to approve modifications including principal write downs.

So if it is the servicers not agreeing to do mortgage modifications because it affects their bottom line somehow, than they are not being objective and are only hurting themselves and the Investors.  After all, their job is to service the loans, send out payment requests, do collection activity on past due mortgages and handle all communication between the homeowner and lender.

Meanwhile, the number of loan modifications pales in comparison to the number of foreclosures.

Foreclosure prevention programs have found themselves on the chopping block due to low and poor performance, and servicers have said the risk of borrowers who receive modifications falling behind again is pretty high.

But new data suggests that modifications and even write-downs in certain cases might actually be more beneficial to investors as well as struggling borrowers.

Some of the reasons why servicers are not pushing for modifications is the likely hood those same borrowers may end up re-defaulting in the future, but CRL says even taking into consideration re-defaulting homeowners  it would still be more profitable than foreclosing.

Modifications are based on the Net present value test or NPV test, based on the results of the CRL NPV simulation study it shows that NPV ranks modifications as more profitable for investors.  So why are modifications so hard to come by? It partly could be due to poor implementation of mortgage servicers, misalignment of incentives due to servicer compensation structure, lack of investor involvement, borrower confusion and poorly designed program eligibility.

Nevada has one of the highest foreclosed homes in the country, with so many empty homes not only does it lend itself to criminal activity, but the criminal activity may actually start with the homeowners themselves.  Many struggling homeowners have chosen to let their house go into foreclosure or have not succeeded in getting the help they need to stay in their homes.  With that being said many homeowners take more than just the appliances, feeling justified because they did not get what they wanted.

A new bill may be passed In Nevada that would actually make this type of activity a felony and would be homeowners who intentionally damaged or removed any part of the home that the occupant knew was in foreclosure would be considered breaking the law and could face one to four years in prison and fines up to $5000.  Assemblyman Pete Goicoechea R-Eureka is the one that sponsored this bill, did not comment on the proposed bill.

The bill has been getting mixed reviews and some realtors have stated some delinquent homeowners have vandalized properties after receiving eviction notices.  Broker of a local real estate firm believes it would help curb the vandalism.  Others seem to think it is a good intention however; it may be hard to prove to the courts that the homeowner was the one that was responsible for the damage.

An easy fix around that is allowing interior pictures to be taken by the lender once a home goes up for sale (auction), this way the lender already knows the condition of the home before they homeowners get evicted.  After all it is their asset and they should have the right to protect it.

Although I think a hefty fine and maybe a maximum of one year in jail would be enough to keep from some people doing the unthinkable.  After all we certainly do not want to clog up the court systems with more work than they already have.  In general most realtors believe this bill would not change the habits of the homeowners who are vandalizing the property.

As you may or may not know the politicians have been discussing about ending the government programs, Home affordable, Neighborhood works, and some of the FHA programs.  This could be a new trend as seen already in Ohio.  The Ohio Housing Finance Agency’s failure to distribute funding and additional federal budget cuts equals to turning away some homeowners.  A nonprofit foreclosure prevention counseling agency Empowering and Strengthening Ohio’s People (ESOP) will have to stop taking homeowners referred from the National Foreclosure Mitigation Counseling program which was established by Congress in 2007 and administered by NeighborWorks America.

The result for the struggling homeowners as programs begin to slowly disappear will only frustrate many and hurt our economy and may even slow down the housing recovery.  According to Ohio Housing Finance Authority who funded and assisted 820 homeowners through ESOP, the nonprofit agency really helped over 4,000 struggling homeowners, this equals to about 3200 homes saved from foreclosure.  Now I ask you why the government wants to mess with a good thing.

Offices like the ESOP are needed to reach out to the many struggling homeowners out there you cannot afford legal counsel to help them.  With new FTC rules banning third parties from collecting fee’s and with many of the non profits and other free services, soon to disappear due to cut backs of federal funds.  What options does a homeowner have?

Granted the Home Affordable government program has come up short of assisting many struggling homeowners, however there is still a vast need for services for many. Over the years ESOP has helped over 16,000 homeowners with their financial needs.

If the lenders are the only ones available to help homeowners, then we are certainly going to be in a pickle for certain!  In reality it makes you wonder how our government really operates and functions if taking away good programs and funding are essential to our housing market recovery.  As CEO’s of big banks still collect their bonus checks and sues each other, where does this leave middle class Americans?

The sale of Ally’s securities will help pay back over billions of dollars the treasury gave in assistance to the struggling lender through the TARP Bailout assistance program.  According to a statement from Treasury, “All proceeds raised from this first sale would represent a partial recovery on Treasury’s investment in Ally.”

Many help centers have opened up across the country and continue to fight to help save homeowners from losing their homes.  Fannie Mae and Neighborhood Housing Services of South Florida celebrate their one year anniversary.  The center has helped save over 1000 homes since it has been opened in March 2010.  Out of the 1000 home loan applicants, more than 64% have received some sort of housing assistance.  Home retention solutions can include loan modifications, forbearances, and repayment plans.  Usually a process that can take up to six months with certain lenders on average only took about 30 days to complete the process.

So what are some of the benefits of working with a local center? The Help Center enables families to sit face to face with trained mortgage specialists to discuss their financial needs.  These housing advisors also speak many other languages, such as Spanish, and Creole, very common in South Florida especially in the Miami area.  The trained specialists are trained to help the clients go through the many different options of foreclosure.

For many homeowners a center like this is extremely helpful, Diana Dolphin who was a client of the center explains how her income was reduced and how she fell behind on her mortgage.  As a single mother it was terrifying not knowing if she was going to lose her home.  The Help Center worked with her to help her find a solution and reduce her mortgage payments, so she could stay in her home.

With many reports and news about foreclosure scams it has been necessary for lenders and investor like Fannie Mae to reach out and educate the public as well as train honest workers to help curb the distrust in the industry.  Florida is not the only place where you will find these Help Centers; across the country Fannie Mae has opened other centers in the hardest hit cities with foreclosures.

Jeff Hayward of Fannie Mae’s National Servicing Organization states their goal is to open up more centers this year and to reach out to more communities and homeowners.  Their goal is to also help prevent homeowners from being scammed and being taken advantage of by loan modification companies.

The governments Home Affordable program has not reached as many home owners as projected, however, it has helped to stabilize a platform for lenders to follow and produce suitable loan modifications to help homeowners stay in their homes.  The likely hood of homeowners re defaulting on loan modifications within a 12 month period is pretty high.  However, the number of homeowners who have re defaulted has decreased.  Subprime loans are more likely to have a higher default rate versus prime loans.  Overall both sub prime and prime are down slightly by 10 percent in each area.  Because many subprime homeowners have had multiple loan modifications it makes it hard to really pin down how likely modified loans are to re default.

Many mortgage servicers have other loan modifications in place to help homeowners who may not qualify for the governments Home Affordable or HAMP program.  With the increase of lender and mediation services available to homeowners has only lengthened the foreclosure process, this of course resulting in less homes going to sale and going to market.  Although loan modifications have saved a lot of homes, for some this is just a temporary band aid to a financial problem that really is masking a larger problem.  The likely hood of mortgage loan modification defaulting is higher versus a mortgage that hasn’t been loan modified.  In a report by Moody’s Investor service they found that modified loans were three times more likely to default.  This report also found that the size of the borrower’s monthly mortgage payment reduction had a much greater effect on the presence of the borrower defaulting than the equity in the home.

The average delinquent loan that was not backed by a government agency was about 22 months behind, according to some the projections the current pipeline of distressed loans and foreclosures will take about four years to clear.

With the effects of the government and lenders modifying home loans, the default rate has been decreasing and the real estate market will eventually recover although it will be a very slow recovery.

If you have not heard about the Republican stance against continuing the government’s Home Affordable Modification Program HAMP, you will want to know the House has already passed the bill and it now moves on to the Senate, which it is expected to reach more resistance.

However, last week Congressman Steve Cohan Democrat of Tennessee introduced a bill aiming to help prevent more foreclosures across the country.  Cohen believes the latest Republican bill to end the HAMP program will “harm homeowners”.  His proposed bill would help establish a grant program for state and local governments to help provide mediation between homeowners and lenders and overall prevent more foreclosures. “Foreclosures evaporate middle class wealth” according to Congressman Cohen (D-Tennessee), he proposes his bill would help homeowners avoid foreclosure and the stress and difficulties brought on by going through a foreclosure.

His bill called The Preventing Homeowners from Foreclosure Act of 2011would help communities to establish their own foreclosure mediation programs. Mediation would postpone Sheriff Sale dates on owner occupied homes, until the lender and homeowner could meet to discuss their options through a mediation process. Many states already have mediation type programs in place, but for the states that do not have the funding this would give them a better outlet to help distressed communities.  The bill would require that any state that received help from the grant program would be required to keep a record of all mediation carried out, thus including the nature of any loan modification.

Increase pressure continues to build for mortgage servicers and lenders to do more, especially with homeowners who are upside down in value versus what they owe.  Hopefully, in the next few months both parties will be able to come to terms with agree how to precede forward and what will be the best solution for all parties involved.

Mortgage servicers still face a possible settlement with a new revision to how they do business.  A settlement is possible over the next few months, according to Tom Miller the Iowa Attorney General.  It certainly will not be a “slap on the wrist” changes need to be made and the 50 state investigations only prove there is much room for improvement.

New policy changes in regards to reviewing and processing income for the Making Home Affordable and Home Affordable HAMP program have been released and the 170 page manual for servicers has been updated to reflect these changes.

We will review some of the key changes to let you know what you should watch out for and see if they may apply to you.

1)      Prior to you receiving a trial payment plan (TPP) or non approval notice the servicer must verify the borrower’s eligibility for HAMP using the original documentation provided by you in the initial packet.

2)      If you fail to send in a trial payment plan (TPP) prior to the lender sending you a non approval notice, the servicer must recalculate your income based on the original documentation you sent in. The re-calculation must be completed by a new employee who was not involved in the first review process. No new income information or verification should be included in the recalculation.

3)       If the result of the recalculation will exceed 10 percent or more the correct TPP, the servicer must cancel the initial TPP and offer a new TPP with the corrected calculation. If homeowner does not make the new TPP payment by due date then trial plan will be canceled altogether.  If the result is the initial TPP was correct then servicer will follow guidelines to cancel the TPP set forth in manual.

4)      Servicers are not required to recalculate the TPP if there was some kind of life change for instance: (divorce, unemployment).

5)      Servicers must complete the recalculation within 30 days of the initial TPP payment default.

Self employed borrowers must provide recent quarterly or YTD profit and loss statements.  Servicers will calculate self employed income as follows:

-          Include borrower’s net profit plus any salary/draw amounts that were paid to the borrower in addition to making allowable adjustments used in analyzing tax returns for the business.  To decrease gross income (non recurring income), or to increase gross income (expenses, depreciation and depletion).

These are some of the changes to the HAMP income for the servicers, part 2 will go into more detail of the other changes that have been amended to the 170 page manual.

If you are struggling with your mortgage payments and you are wondering if you should contact an attorney to help you, here are some instances where an attorney may be helpful.

With new legislation and laws recently passed by the Federal Trade Commission, it is now prohibited for third party loan modification companies to charge upfront fees.  In knowing this, it may be in your best interest to at least talk to an attorney.  After all the lenders have attorney’s to fight for them shouldn’t you?

• You have received a Summons and Complaint for foreclosure and are now being sued by your mortgage company. You are in danger of losing your property and usually have 30 days or less to respond.
• A collection lawyer sends you a letter that gives you a deadline to catch up on delinquent mortgage payments and also threatens foreclosure. The next step is for the bank to sue you.
• Your mortgage company sends out a notification that your payments are in default. The next notification you receive should be a letter from the mortgage company’s lawyer.
• If you are knowingly behind on your mortgage payments, go ahead and contact a mortgage defense attorney to plan a strategy and confront the problem head-on.

If any of these hit home and you are in a similar if not in the exact same issue, then you should contact an attorney to discuss your options.  An attorney will not only give you legal advice, but also will help support you as you both work through the loan modification process or foreclosure.

Make sure when you are choosing your foreclosure attorney that he/she has experience dealing with lenders and understand the terms of going through a loan modification.  There are many strategies the lawyer may try in order for you to stay in your home.  Be proactive and available to give any documentation necessary to assist the lawyer in doing their job.

Having someone to help you can make the difference of you keeping your home or simply walking away.  Don’t you think you owe it to yourself to do the right thing and keep your home, an asset you have worked very hard for?

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What is a traditional modification and how does it differ from the HAMP and MHA modification programs.

If you are wondering what are the differences between a traditional modification and a government Home Affordable Modification Program “HAMP”, or the Making Home Affordable “MHA” program, this article will shed some light on the slight differences.

1)    Traditional modification: The lenders own version of assistance; it may also be called a “in-house modification”.  You may need to come up with more upfront funds or what is called “good faith deposit” in order to be approved for this type of modification.  The interest rate maybe not be, as low as the government program and your interest rate may not be fixed for the life of the loan.

2). HAMP modification: The government’s version of a loan modification.  You may also here this be called the “Making Home Affordable Modification”.  This modification will have some incentives for the home owner(s).  A rate as low as 2%, extension of term to 40 years, monthly incentive going towards a principal reduction. For more information visit www.makinghomeaffordable.gov.

If you do not qualify for either of these programs most lenders have other loan workout options.  The best thing to do is visit their website or call your lender and ask what other options are available.  Some of these could be:

Special forbearance                      Repayment plan

Partial claim                                      Cash for keys

Restructure                                       Forbearance

Reinstatement                                Partial reinstatement

Deed in lieu                                       Short sale

Too see if you may qualify for assistance for HAMP you can visit the above mentioned website or you can visit www.freeHAMPreport.com, a FREE service to homeowners.