Radio Show #9: Home Affordable Modification Program (HAMP) Update Issued 4/28/2009 by Treasury Department!!

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Home Affordable Modification Program Update of 4/28/09 First of all, here is a link to the actual new Update!  Very Exciting Stuff!  This is followed by the transcript of the Radio Show for today!

THE NEW MAKING HOME AFFORDABLE MODIFICATION PROGRAM UPDATE of April 28, 09  Here is the transcript - I’ll put the podcast for the show onto this as soon as the show has aired.  Please by all means listen live at 2: PM Pacific Time today, if you like by going to www.kcaaradio.com and clicking on Listen Live or wait until the podcast is here and download it onto your computer and listen as many times as you like or send it to your friends!!

Good Afternoon, this is Connie Saunders and Welcome to the Foreclosure Freedom Network Show.  I’m a Licensed California Realtor and a Certified Loss Mitigation Consultant and have been in Real Estate for 20 years, which means I’ve learned the ropes of mediating between the homeowner and lender and hope to help every homeowner understand this crisis better and what the remedies may be for you, if you’re in trouble on your home loan.

Today I’ll be discussing the new Making Home Affordable update, which was just issued two days ago.  Very Exciting Stuff!!  I’m on the edge of my seat!!

An important note on these programs and updates.  Many lenders (or staff of lenders ‘who know best’), even when appearing to ‘volunteer’ to participate in these programs are bent on altering them wherever possible, leaving many a person high and dry when they otherwise could qualify for one of these programs.  At the same time, don’t let me generalize.  This was yesterday, but I have to say that I’ve grown more skeptical with time, so I don’t want to promise everyone that this is the answer to all of their prayers; however I do pray that these modifications do help launch all programs out there into full use - they certainly CAN!!  I had a lender just yesterday quote this new update telling me that the Hope 4 Homeowners program was ‘now cancelled’.  No, lender, it is not cancelled! but again - not all of them are on the same page you need to be on - That Page IS what IS actually out there for you and how can you get it!!  And I’m very excited about the possibilities that this new update gives all of us!!

Why were or are these programs failing anyway?  The Key to this is WHO is the underlying ‘investor’ who owns the mortgage?  You think it is owned by your mortgage Lender or Servicer (let’s say Countrywide - for example, or ING Direct).  You think Countrywide owns the loan; they don’t!!! though they may appear on legal records as the owner, that’s for the ease of instant servicing needs.  The actual underlying investor - the guy with the gold coins, may be Fannie Mae or Freddie Mac, other Government Loan -, which is good for loan mods!  You can BY THE WAY go to the Fannie Mae or Freddie Mac Web sites to see if your underlying investor happens to be either of them,- it’s very easy to do - but most of our loans nowadays are not; unfortunately, owned by the Government enterprises.  Most are owned by some other lending institution or your loan is part of a very large pool of loans and that pool is managed by a loan servicing company and it is very likely that all communications you receive are from this loan servicer and therefore you believe they own the loan, but most of the time they just service it.  Very important to know.  Some of these large pools of loans are used as the collateral backing up securities on the stock exchange which are sold to investors.  These ‘Securitized loans’ back what is termed Asset Backed Securities or ABS.  Some of these have protection or insurance against the credit risk of the underlying security, making it slightly more secure, but we all know the potential for risk with too much loss with AIG’s massive bail out, so even with this feature or particularly because of this feature, manipulation by modification of these loans could cause huge swings in the market itself.  The list of varied derivatives and features connected with a pool of ‘securitized’ loans can go on and on and daunt the most educated Servicing Manager, no less a mere negotiator.  So rather than diving in to these securitized loans, lenders have burdened our Senate with huge lobbies and rallies against passing any bill that would interfere with this most fered of tasks OR they have boycotted, ever so seemingly cooperatively, the Hope for Homeowners Program or H4H loan and Home Affordable Modification Program or HAMP loan products which show some promise in government support but are not getting pushed through with these non GSE loans when they are backing pools of securities.

The value of this securitized debt is very mobile, changing dramatically and the potential is great for instant losses if you meddle with them in the wrong way.  , and because of this any meddling with the underlying collateral could have drastic effects - so Loan Servicers don’t want to do it, they are very muzzled in this.  But on the opposite side of the same coin not being able to meddle with this  - by way of doing sustainable loan modifications - is having a much more significant, long lasting dramatic effect on being able to do any more than a lip service loan modification.  Those are the ones where they bundle up all the past payments and penalties and tack it all on the tail end of the loan and hope it all goes away and you just start paying them again.  Or better yet, they charge the borrower half of the arrearages to reinstate the loan and tack on abundant penalties and interest to the tail end of the loan to boot, increasing the principal balance of an already oversized loan tens of thousands.  In order to remedy this and allow these servicers to actually offer the kind of loan modification needed What’s needed is clear cut legal direction.  Servicers need to know what is the standard way to proceed with these loans.!!!  It’s kind of like babysitting your bosses child of three and not being able to do more than ask them what they want to do when they are having a tantrum in the playground.  Not very workable.  Clearcut workable rules, however, and you can get that child up and playing again!

Most often, if your lender tells you that they aren’t allowed to tell you who actually owns the loan they are servicing ~ it’s one of these. Meanwhile the standard Fannie Mae and Freddie Mac owned loans have been most cooperative and people are now getting loan modifications when they have these entities. Also, there are over 12 lenders now who have signed on to the new HAMP (Home Affordable Modification Program) - hopefully more today and tomorrow too!!  There is  Chase Home Finance, a division of JP Morgan Chase - which now includes WAMU and EMC, Wells Fargo, CitiMortgage, GMAC, Saxon Mortgage and Select Portfolio Servicing, Green Tree Servicing, Bank of America, which now includes Countrywide, Ocwen, Wilshire Credit Corporation, Home Loan Services all signed up for it.  Treasury is projecting with this that 75 percent of all the loans in the country are covered.  We have yet to see these more complicated loans come back with reasonable loan modifications, so I’ll keep you posted on that.

This new Home Affordable Modification Program is now updated to include provisions for handling Second Lien Mortgages.  This Program will work hand in hand with the first lien modifications offered on the Home Affordable Modification Program.  Even where a first lien may be affordable, without the cooperation of the second mortgage holder, they still may end up in foreclosure.  This new Second Lien Program plans to help up to 50 percent of the at risk mortgages with second liens.  Of course those which will be excluded from this and all other plans are ones to assist income property owners, which is approximately the other 50% of the home loans out there so these targeted percentages may be a bit off.

Also, separately, as part of the Making Home Affordable Program, there is planned to be an improved Hope for Homeowners program to help underwater borrowers increase the equity they own in their homes.  This initiative is now requiring that Servicers seek Hope for Homeowners Refinancing while initiating and using Making Homes Affordable Trial Modifications.  We’ll be back in a minute to go over this!  Get your pencils out because we’ll be going over the details of this program point by point.  We also have the transcript of this show available on my Blog which you can get to at www.ForeclosureFreedomNetwork.com and then click on the Blog on the left hand side of the screen.

Hi again, this is Connie Saunders with the Foreclosure Freedom Network Show. Today our topic is the New Addendum to the Making Home Affordable Program.  Taking care of second mortgages and giving incentives for the H4H loan refinance program for Loan Servicers; encouraging them to go ahead and get this program off the ground.

With this new program Making Home Affordable (the government) will share the cost with the second lien holders for their monetary reduction of their interest rate on the second mortgages to 1 percent from whatever the first mortgage interest rate is set at.  Participating Servicers’ will be required to follow these steps to modify second liens:

• Reduce the interest rate to 1 percent:
• Extend the term of the modified second mortgage to match the term of the modified first mortgage.
• Forbear principal in the same proportion as any principal forbearance on the first lien with the first mortgage holder.
• After five years, the interest rate on the second lien will step up to the then current interest rate on the modified first mortgage, subject to the Interest Rate Cap on the first lien (which is a Freddie Mac Rate set).
• Investors will receive an incentive payment from Treasury equal to half of the difference between i. The interest rate of the first lien as modified and ii. 1 percent.
• There will be a ‘Pay for Success’ Incentive for Servicers and Borrowers on this program, paying $500 up front for a successful modification and then success payments of $250 per year for three years, as long as the modified first loan remains current. Borrowers can receive success payments of up to $250 per year for up to five years, to be applied to pay down the principal on the first mortgage and help build up the borrowers’ equity in the home.
• On top of this there is now a payment schedule to compensate lenders for extinguishing a Second Mortgage. Here the second mortgage holder can get some immediate compensation for its participation in the Hope for Homeowners program!! Based on length of delinquency, the rate of compensation ranges from 3 cents on the dollar up to 12 cents on the dollar and there are specific schedules set up for Servicers’ to follow on this.

I do hope that the lenders go for it.  Unfortunately to date many have held out, despite literally continuing to cause the country to go into a deep recession.  Frankly I think we need to have a back up plan.

I’ve had a person in the queue since the beginning of the year with WAMU to receive Hope for Homeowners, however the negotiator closed the file because the homeowner was ‘non cooperative’.  Initially this accusation of non cooperation was because he wouldn’t short sell his property.  But he wanted Hope for Homeowners - we pushed!!  Later his file was noted that he didn’t answer his phone.  Oh, come on now lender!!  Anyone else see something wrong with this picture?  Now that the file is closed we are being told that they no longer offer the Hope 4 Homeowners program to new applicants because it’s too much trouble to administer.  Why?  Hopefully this was just a mistaken employee.

Now Servicers must analyze every homeowner using a trial loan modification to see if they qualify for the Hope for Homeowners product.  Where they get a participant into the H4H the servicer receives $2,500 up- front incentive payment for successful H4H refinancing.  This is a great win and higher servicing fee than that granted for the other programs.

Lenders who originate new Hope for Homeowners refinanced loans are eligible for a success fee of up to $1,000 per year for up to three years, so long as the refinanced loan remains current.

With these clear standards, hopefully Mortgage Servicers’ will actually act in the best interest of their investors instead of stalling like a stunned doe waiting for the truck lights to hit them.  If they don’t, now we have a clear cut guideline to dispute their loan modification offerings - which is excellent news for the loan modification business!!

Will this happen?  I dunno.

So What is the Solution if this doesn’t happen???  Hate to say it, I would have never been an advocate of bankruptcy prior to this, but getting the new Bankruptcy law S 61 that is up for approval through the Senate and if approved would resolve these ‘on the fence’ loans once and for all.  This bill S 61 is designed to Help families Save their Homes in Bankruptcy by getting the BK Judge to help to modify the loan terms.   So Servicers’ - watch out - you’re about to be bypassed if you can’t figure out how to do this on your own!!  Enuf is Enuf!!

New Bankruptcy Law S 61 now in the Senate for vote!!! Please vote YES!!

This bill will allow the BK Judge to modify a secured mortgage using something borrowed from farmer law, allowing a payment of the modified mortgage claim regardless of the original amortization, (both interest and time period of the loan can be modified by the BK Judge!!) over a period beyond the life of the chapter 13 plan.  This Bill allows the Judge to modify the loan term to 40 years and allows elimination of all pre-petition arrearages and principal reduction, provided he is given a feasible and affordable plan by the borrower.  Loans may also be modified to be fixed from adjustable rate for the term of the loan!! This is called a Cram Down in the BK world.  There is shared equity if the owner sells this property prior to 5 years, reducing 20 percent a year.  Also, before this can be used, It is required that the property be subject to a notice of foreclosure (in California a Notice of Default).  Also the mortgage can’t have been obtained through misrepresentation or fraud.

That’s it for today!!  I hope you took notes, but if you didn’t - no worries, go to my blog by first going to my website at www.foreclosurefreedomnetwork.com and then pressing the blog button on the left hand column of the main page.

Once in the blog the Radio shows are in the left hand column.  This is Radio Show # 9!!  I’ll also put links to the complete new update, if you want to read all of the language!!