About the Author
Moe Bedard is a leading expert and trusted authority in regards to loan workouts and loan modifications. Moe is the founder and President of Loan Safe Solutions, LoanSafe.org and the main contributor to LoanWorkout.org. He has blogged on this subject more than any other person on earth and has personally been involved in over 300 loan workouts and mortgage audits.
The FHA Secure Flop and The No Hope Now Plan = 2 Strikes for the Bush Administration
In only the first 4 months of FHASecure, more than 40,000 households have refinanced under the new housing insurance program to protect their families’ investment in the American Dream. Announced by President Bush on August 31, 2007, along with HUD Secretary Jackson and Treasury Secretary Paulson, FHASecure is already helping thousands of American families, faced with the possibility of foreclosure because of rising interest rates, to keep their homes.
More good news is that an additional 20,000 are in the pipeline and their approval is expected by the end of December. That will mean that in the first 4 months of the program, FHASecure will have helped 53,000 families and received more than 127,000 refinance applications from families whose loans are current or past due.
After reading an article by Patrick Rucker from Reuters in which he reported that government data indicates that only 266 borrowers have successfully refinanced using the FHA Secure. We then reported these figures on Wednesday. After the post we had many people point out the HUD press release and the claim that over 40,000 have refinanced using the FHA Secure. It has caused quite a debate in the blogsphere.
From Reuters;
WASHINGTON, Dec 17 (Reuters) - A program unveiled by U.S. President George W. Bush in August that is trying to save tens of thousands of homeowners from foreclosure has aided just 266 borrowers so far, according to government data released on Monday.
How can HUD’s figures be off by 39,000 plus? Why would they claim that these many borrowers have been helped and there are another 20,000 in the pipe?
My good friend Peter G. Miller who operates one of the most detailed FHA websites on the internet, FHALonapros.com, forwarded me the stats that are directly from HUD for the last period (Nov. 16-30) for the month of November.
There are no specific mentions on this report to the FHA Secure and Peter and I believe that the delinquent mortgage application category in this report would be the FHA Secure.
This period Last Period % Change
| Conventional to FHA (Delinquent) | 557 | 641 | -13.1% |
So this indicates 1198 total FHA Secure applications thus far.
Then here are the completed delinquent mortgage refinancing under FHA which we believe to be the FHA Secure.
| Conventional to FHA (Delinquent) | 87 | 68 | 27.9% |
This indicates that 155 FHA Secure refinances were completed in the month of November.
Yesterday Paulson was interviewed by the Los Angeles Times and downplayed the much hyped rate freeze;
Treasury Secretary Henry M. Paulson Jr. on Wednesday downplayed the mortgage-rate-freeze element of the Bush administration’s program to help the sinking housing market, saying it wasn’t the principal focus of the plan — despite the raised hopes of some struggling homeowners.
In a meeting with Times reporters and editors in Los Angeles, Paulson suggested that there had been too much emphasis in the media on the rate-freeze aspect of the pact that major loan servicers and investors reached with the administration Dec. 6.
At the time, Paulson said about 600,000 homeowners with adjustable-rate sub-prime mortgages might quickly qualify to have their lenders voluntarily freeze their loan rates at current levels for five years, rather than face a big increase at the reset date in the next 2 1/2 years.
But Paulson said Wednesday that the administration’s program “was never about how many interest rates people could freeze. . . . This is about foreclosure avoidance.”
I am getting the feeling that this is turning into a game of, “OK, America, the Bush Administration is coming to the aid of struggling homeowners. Actually, no were not because this isn’t about a rate freeze, it’s about foreclosure avoidance. The FHA Secure has helped 40,000 borrowers. Actually, our data shows 266, but don’t read our data, read our press releases.’
Huh?!
What?! What is really going on here. When the FHA Secure was hyped up. Claims were made it would help 80,000 borrowers.
When the Hope Now rate freeze plan was released, the Treasury chief said that in addition to the 600,000 sub-prime borrowers who might qualify for a rate freeze, another 600,000 could qualify to have their loans refinanced at more affordable rates.
But now just 2 weeks later, it seems like Paulson is doing damage control and downplaying the hype he helped create.
Paulson told the Times;
But Paulson said it was crucial to avoid a “market failure” in housing that could bring on “chaos.”
Wow, that is a heavy statement that the Times did not seem to dwell too much on, and I am not going to get into my conspiracy theories today. But, folks, when our Secretary Treasurer says “market failure” and “chaos”, I would be worried. Just FYI.
It appears that the Bush Administration has swung twice at the foreclosure crisis and now has 2 strikes. What had the appearance of a homerun swing, as they warmed up in the batters box, has so far garnered 2 big fat strikes and big disappointment in the FHA Secure and Hope Now plan to homeowners everywhere.
Eh, batter, batter…..eh..batter, batter….eh batter, batter, batter, swing!
Popularity: 11% [?]
Dec 20th, 2007 at 4:28 pm
Moe,
How would you solve the problem? You seem to have a loan level understanding of the issues? What are the steps to resolve it?? I would love to hear your game plan for fixing the problems as quickly and fairly as possible? What are the action items and steps to solve the default problems?
Dec 20th, 2007 at 5:28 pm
Bill,
The facts are that this housing and foreclosure crisis is like a run away train going through every state in the nation.
There is only one way to stop it and that is a temporary moratorium on foreclosures and loan rates and then a massive loan modification to rework these mortgages one by one.
Lenders need to be forced to hire thousands of loss mitigation personell and out sourcing companies to clean up the mess that they helped create. They are firing people when they need to hire them to now clean up the toxic mortgages.
The homeowners that cannot afford their homes will be forced into and exit strategy and perform a deed in lieu or cash for keys program with integration back into the community.
That is my fast track program and we need to do 200,000 loan workouts a month starting with the highest risk loans in order for this to work.
Dec 20th, 2007 at 5:30 pm
Bill,
The solution is let them default. They can go back to renting like they should have been all along. Wall Street put products out there that made it very easy for borrowers to obtain loans. There are a ton of people that bought homes in 2003-1st half of 2007 that wouldn’t be able to find a loan today.
There is no getting out of this mess. The govt is trying their best to make it go away, but that isn’t going to happen.
Dec 20th, 2007 at 5:43 pm
The government needs to place a moratorium and call a national state of emergency.
I gurantee we will see this in early 2008. Our whole economy is affected by it. There is no way they will just let is keep going this way.
Any bets? Wagers?
Dec 20th, 2007 at 6:06 pm
Moe,
So you would stop all foreclosure actions in process? Vacant properties, BK 7 discharges, straw buyers? Would you stop foreclosures that have been going on for 24 months in Cleveland or 18 months in the New York?
I agree that servicers need to hire more staff for their shops and actually get deals done.
As you work with servicers across the country what is the organization structure of a perfect loss mitigation shop? What makes a good shop? What makes a bad shop?
Dec 20th, 2007 at 6:12 pm
Moe, while I agree with you 100% that we need action now, who is going to actually pay for it? Make lenders drop interest rates on these loans at their expense and let the chips fall where they may… Keep free enterprise alone and any plan mentioned should only include lenders money and / or home owners money. Leave us law abiding, wait and be prudent folks alone!!!
Dec 20th, 2007 at 6:39 pm
I read this morning in the WSJ that the actual number is closer to 600. How did that grow to 40,000?
Dec 20th, 2007 at 6:51 pm
You can’t sustain the current bubble and hold this market together with loan modifications or any freeze.
The inevitable fact is that unfortunately the market needs to crash in order to correct itself from this overinflated bubble. All we are doing is prolonging this recession and credit crisis for another couple of years.
Values will continue to decline, lenders tightening, and inflation rising, so there is no resolution but to let the market correct without bailing out banks. Home prices need to reflect income and until that happens, we will not get out of this pit that we have fallen into.
If the Fed keeps printing money like it’s going out of style, then we will have a dollar collapse compounded by the mortgage market debacle.
Band-aids can’t keep together this mess from spilling over.
Dec 20th, 2007 at 6:57 pm
Bill,
Yes, stop all foreclosures. There is going to be so many lawsuits from all of this that our courts will be clogged for much longer.
The perfect structure would be the same structure as a brokerage. It flows from the loss mit rep to processing who in turn works with underwriters and investors and a universal tracking system that lenders have to report daily, a third party agency over seeing this like an escrow would work, to close the deals.
Stu,
Lenders need to pay for the clean up. Just like Exxon had to clean up the oil spill, so should Countrywide Citi etc. needs to clean up thier toxic loans.
LOAN RECALL!
While they get cash invusions of billions, homeowners get kicked on the street for owing a few thousand dollars.
Stephen, all I know is that there is some funny reporting going on here and it’s not from me.
Dec 20th, 2007 at 7:02 pm
Moe’s plan (temp. mortgage moratorium+loan mods @ ~200,000/mo….) sounds good at 1st but would just cause exactly the sort of thing that he is trying to avoid…
Who the heck is gonna invest in the US if we don’t honor our contracts? Who is gonna eat the costs of loan modification and this mortgage moratorium? You and me thats who…. We’d just be another banana republic “nationalizing” the debt (read: privatizing the profits, socializing the losses).
All these attempts to weasel out of the costs of our actions won’t do anything but make the results that much worse and protracted. Let the fools who took out the ARM’s and IO loans get their just deserts, same for those big Wall Street firms.
Dec 20th, 2007 at 7:15 pm
Theo’s plan just let the country’s economy destruct into massive recession and possible anarchy because we need to honor contracts for defective credit instruments that should have never been sold in the first place.
Who is going to eat it a million times more, if we just let 2 million more homes go into foreclosure? you and me, that’s who Theo.
Don’t worry, we will still get investors.
Dec 20th, 2007 at 7:21 pm
Self employed or 1099 borrowers, which many people are can no longer qualify for loans or refi out of their arm programs - most of these borrowers have always made their mortgage payments on time and did their loans as Stated income because they have many expenses and tax write offs, they also have 700+ ficos and they can no longer qualify to get a loan. And if their loan amount is more than 417K forgetitaboutit. Alt A loans are non existent Stated, No Ratio, NINA, No Doc, even though they were good borrowers in the past they now can no longer refi so they are forced to sell or walk when the adjustable rate comes due. If you think it is bad now just wait until 2008. It will get worse,homes are already declining everywhere, If declin,ing in value lenders cutting back to lower ltvs forcing borrowers to come in with more money, lenders no longer doing condos in FL, some lenders no longer doing investor loans( where is Carlton Sheets these days) guidelines have become so strict to buy or refi that if you are not working for a company for at least 2 years and do not have a 660+ fico you are probably not getting a loan. I have turned down over 8M in loans for November mostly because borrowers ficos have dropped below 680+ because of inquiries -I will have more declines in December- full doc loans here, low ltvs 80%, ficos around 670, these are good borrowers that banks and lenders are turning down- these are your neighbors and friends- it is only getting uglier, do not believe we are not going into a recession- we are in one now and it will get worse, watch all the home depots and Lowes get hit, watch all the businesses that have anything to do with home services they will get hit the hardest and probably be forced into Bankruptcy-watch the airlines and hotels resorts get hit hard next because a lot of folks will not have any discretionary income to spend anymore, curios to see how retailers will actually do after the holidays- some say their up and other say their down waiting for the real story, ask a lawn maintenance company or a pool guy how little business they are doing these days- do not believe these cnbc analyst- they dont know caca,they are not actually trying to make loans- I dont think there is really anything lenders will be able to do besides ride this out. Yes I am a lender and tired of people that are putting their 2cents out there that dont know the details. The mortgage industry implosion will hurt everybody sooner or later.
Dec 20th, 2007 at 7:50 pm
Moe,
Stopping all foreclosures will not solve the problem. Remember that most foreclosure actions are judical so they are already reviewed by the courts before a judgment is entered and a sale date is issued by the court. If a dispute needs to be resolved it can be done and loss mitigation can be mandated by the judge. This happens all the time. Sadly many times a customer needs to be served by a process server so they will pick up the phone and finally contact their servicer. A survey last year demostrated that 50% of customers that loss their property to foreclosure sale never contacted their servicer to request workout options. A standard servicing shop will make outbound dial atempts daily to past due customers in an attempt to understand the customer’s reason for default and customize a workout option to their needs. Mail is sent via certified mail, regular mail, and overnight asking the customer to contact the servicer.
Many servicers fail in handling the basic functions that are required in doing good loss mitigation and that is a failure of the industry needs to deal with.
President Bush signed into law today the fix that will help and allow servicers to fix the issues that were caused by greedy mortgage brokers that sold crappy product to customers. Waiver of 1099 tax ramifications will allow servicers to fix the problems that were caused by the front end.
Instead of stopping foreclosure, you should be talking about ways to hope the doors of communication between customer’s and the servicer.
By the way tell us about your day job? How much do you charge a customer to help them get a workout? Couldn’t this money be better used pay down their arrears and help them keep their property?
Dec 20th, 2007 at 8:08 pm
Moe,
You are not getting it. We WILL HAVE to pay for excesses of few last years one way or another. There is no way to avoid recession. However cost shall be born by those who made stupid decisions not overall populations. Trying to socialize costs of these excesses will MEET STIFF opposition from responsible 70% of US population. I gave you the numbers the other day, the mess was perpetuated by irresponsible debt hole digging of small chunk of US population. Now they should dig themselves out. If they can’t, thankfully we don’t have debtor prisons and they should file bankruptcy.
The moment you put a ban on FCs, secondary market for MBS WILL DRY UP, you saw what happened to FHASecure MBS pools. Do you really think there will be NO market adjustment ? Who is going to lend money ? All the HELOCs lines will be gone overnight. The only thing is going to happen either cash transactions or something like >50% down payments or like 50000USD unsecured for >800 FICO and 500USD for subprime. It will do wonders to house prices and economy putting it in such deep shit that you wouldn’t even imagine is possible. FNMA, FHLC, GNMA won’t be able to sell a thing on the market and as you know without secondary market they have pretty limited funding capacity.
As far as ban on FCs I would wager a bet: YOU WON’T SEE IT IN 2008.
Dec 20th, 2007 at 8:12 pm
I’m so tired of ignorant people placing the blame on mortgage brokers. Listen, ALL LENDERS WERE GIVING THE SAME LOANS!!! EVERYONE!!
Guess where us mortgage brokers were getting the products to offer all home owners???? INVESTORS!!!!
WE ONLY OFFERED WHAT WAS AVAILABLE. Stated, No income, No doc, etc. The root of the problem was the investors not realizing what the outcome will be…they only realized how much they could buy and sell stocks for… PERIOD.
Everyone is a little to blame, but honestly in my opinion the main perpetrators are the investors i.e. the nerds with Master’s degrees in Finance.
Dec 20th, 2007 at 8:17 pm
I read somewhere if the BK laws were changed to allow the court to modify the payment on the mortgage that would then shock the lenders into being more proactive in working with the homeowners. Evidently this is how the farm mortgage problem of the 1980’s got resolved.
Dec 20th, 2007 at 8:46 pm
Kev,
I blame all orginators (Broker / Retail), that pushed appraisals, changes documents, coached customers, didn’t explain what an ARM is or what will happen in 2 years for a customer. Closed the loan, got a bonus, and than packaged it and sold it into a pool. It is gone, hopefully they will perform and make payments……The mortgage industry is funny….we pay 100K- 200K to sales staff and take them on trips for non-performing loans. Yes, I’m a servicer that has to clean up your $100,000 mistakes and than gets yelled at about my REO loss serverity.
Dec 20th, 2007 at 9:27 pm
We have to have free markets. We have not had a real recession in years, a recession is about cleansing. You can not have the good without the bad. By freezing rates, it will cause other problems down the road. Without risk there is no reward. If you take out the risk of getting a mortgage there will never be a reward.
Will there be a recession, more than likely possibly even a depression. There are steps that can be done to soften the blow. We can create a national work program to put people to work. Our infrastructure is in shambles we need new bridges, highways, electrical systems, new sources of energy.
Its not about keeping house prices at astronomical levels, its about keeping our people working and putting food on the table. Paying for over priced mortgages has lowered our standard of living.
You can always find a place to rent at an affordable price. People are not entitled to houses. The world isnt going to end because someone loses their house. Its a learning lesson, hopefully they are young enough to learn from it. As long as they have a job, can put food on the table they can find a place to rent or move in with their folks for a short time, then thats what its going to take. Its not about enabling the dope addict. Its about tough love.
Dec 20th, 2007 at 10:40 pm
Chris, well said inside look at what’s going on. People are screwed now and it will get worse for everyone. People seem to think that I am Mr. Negative, Captain Doom.
NO, I’m realist and this is real. The sky isn’t falling. We’re not going to fall into the sea, but we are already in a recession and a depression will soon follow, if we do not do something. FAST!
Bill, my way is the only way. Your way, we’re screwed.
Do you know what people get when they do reach out to their lenders? They get a under paid debt collector that lies and abuses the borrower to they extort every last penny from the homeowner.
There needs to be a layer between the lender and homeowner.
I talk about ways all the time to open communication. Lenders need to put some damn effort and skin in the game and stop the BS.
My day job? This is it and no, I am not hiring.
Alan, the MBS’s are drying up. A recession and a depression will result in no one buying anything anyway. If we can show strength and work through this then that will spark confidence. All this is doing is causing uncertainty and certain CHAOS! WE WILL SEE IT IN 2008, wanna bet?
Kev, glad you can come here and rant…….don’t let the browser kick ya in the ass on your way out
Dud, if the BK bill passes, the lenders will be screwed, royally, so it’s just best they voluntarily modify loans en mass.
Bill, well said.
Bob, I think we are in a recession and it will get worse as you wish. Free markets? I believe in that but some of these free market participants need to be ejected form the game and some, prison. I’m sure we will see more of both.
People are entitled to safe, reliable, honest products. Doesn’t matter what it is. These loans are anything but.
They are toxic and need to be recalled. Regardless of who and what? Don’t matter. We clean it up and the ones that truly can’t afford these loans and homes will be purged from the system and a nice, friendly and humane way.
Home values have all ready went down and they will continue, even with a rate freeze. It’s abvout saving our economy Bob, don’t you get that?
Oh wait, you wish for famine and anarchy, my bad.
Sometimes I feel like people are just from like Mars or something.
Dec 20th, 2007 at 11:22 pm
Moe, Moe Moe
Google the Oropezas. Then tell me if not FC’ng their $840K property in CA (after they fled to TX and bought a $280K house) is morally correct. Oropezas are a tip of the iceberg who gamed the system. Who’s the predator here?
Dec 20th, 2007 at 11:41 pm
I saw that. It will get much worse with the new tax forgiveness bill and if lenders do not work woth borrowers, then they just can walk away.
Lenders have 2 options now. Work with borrowers, or be royally screwed when hundreds of thousands of borrowers just decide to walk away.
Is that what should happen? What’s better, just let em walk or work with em? I say it is beter to do loan workouts for the homeowners that deserve and want to be saved.
Why? Because it is the right thing to do.
Dec 21st, 2007 at 12:46 am
They tried all these same solutions in 1931. What we need is a history lesson.
Dec 21st, 2007 at 1:10 am
Moe,
were set for a deep Japan-style recession no matter what, you’re way will ensure that it lasts for several decades, my way perhaps 1 or 2. Your way will also reward the fools who made and bought the loans, my way will teach them a lesson that they won’t ever forget.
Yes people will still invest in the US….at ruinous interest rates/requirments in order to cover the risk of doing business in a country that changes the rules when it pleases. You think lending standards are getting tight now and causing problems, imagine what it’d be like if you needed 30%+ down, total DTI less than or equal to 30%, full documentation/proof of income, and 3-6months worth of payments ready to go in the bank. People have a hard time coming up with 10% right now, hell even 3% is too much for many!! Real estate sales would halt to a damn near standstill until either inflation made up the difference or prices came down which would be slow in happening…
Dec 21st, 2007 at 1:12 am
2LATE,
yup, Moe needs to read his history for both the US and the world. Everything he is talking about has been tried time and again, it always fails.
Dec 21st, 2007 at 4:54 am
Someone sounds like a scared little canary. Perhaps a depression is on the way, lets look at the glass half empty for a moment. This country got through it. Not everyone was out of a job. Whats important is that there is food on the table.
Like I said its not about keeping prices artificially high for our childrens children to endure. Its about keeping people working which can be done quite easily. Instead of inflating asset prices, we need to inflate incomes. People are still making the same $8.00 an hour at burger king that they did 15 years ago. Create jobs that this country needs. We need plenty of infrastructure jobs. We should be creating those work programs now. Instead of pumping phony money into the country for people to borrow, why not make them work for it.
All thats important in life is food on the table, and a roof over your head. Nobody is entitled to own a house, they have to show responsibility for it. They have to take care of it and be able to make the payments. If they cant, there is no shame in renting. There are plenty of good landlords out there in need of rents.
Dec 21st, 2007 at 6:25 am
Bob,
I don’t believe anyone here has said that depression is on the way or that we couldn’t survive it… But a deep decade+ recession? Sure, I’d its likely, guaranteed even. We’ll survive it, but things are going to suck in general for most everyone during that whole time period. What gets me worked up is that it could’ve easily been avoided, and what gets me angry are all these pie in the sky bailout attempts that’ll hurt more than help by increasing the costs and rewarding bad personal investments.
Unfortunately inflating incomes won’t work this time around… In order for them to inflate fast enough to ease the bubble+avoid deep recession they’d have to resort to hyperinflation which would likely ruin the US economy… Take a long hard look at what happened in Argentina just a few years ago. They tried the same thing and now things are going to hell there. Also bear in mind that to some extent we have a world economy here… How you gonna pay Americans top dollar to do manufacturing/production work when you can outsource it to China/various poor 3rd world countries who will work for pennies on the dollar? Thats why wage growth has been stagnant for the last 5 years or so…
Oh, you can try to legislate a certain percentage of every corporations’ goods/services be locally employed, but again thats a oooooold trick that has been shown time and again to have little or no effect. You could always tax the heck out of forgein goods to “promote” sales of nationally produced goods, but history has shown this to be self defeating as well (see the Smoot-Hawley Tariff…).
Things just got too out of whack this time around, plus they never really allowed us to go through the recession that we should’ve had after the .com bust, so there is no easy way out.
Dec 21st, 2007 at 7:37 am
One thing they did differently in the 1930s, once they realized they had a colossal and unmanageable number of (sub-prime) defaults and resulting empty deteriorating homes, was instead of negotiating short sales, they allowed a transfer of ownership to the bank with the logical renter still in place - the defaultee.
One could argue that this type of smooth transfer of wealth is exactly what the banks want and it is why the inflationary cycle followed by deflationary cycle is induced by central bankers, but at some point you have to concede defeat or embark along a path of mutually assured destruction. We have to choose.
They also recognized the specter of soft money, and decisively moved to harden it. Some (Bernanke in particular) blame the scope of 30s depression on this tactic, but it likely shortened it. You get Japan when you refuse to acknowledge the infection and, instead of amputating the limb, you aggressively treat symptoms until it invades and destroys the entire body.
What we cannot repeat is the big political move to unabashed socialism and a repeated FDR style government meddling and contract modifications, causing business to throw up their hands and walk away. Were it not for the untimely burden of rules changes and ultimately the the New Deal, the 30’s downturn would’ve have blown over fairly quickly.
One could easily and probably correctly argue that this depression is reverberation of the New Deal, since 49% of our federal budget today is the New Deal.
Dec 21st, 2007 at 8:51 am
Moe,
I’m still looking for a straight answer to my last question. If a customer that is in foreclosure comes into your office how much do you charge them to “help” them call their servicer and put together a workout package? I think that you need to give a little better disclosure on what your purpose and reason for this website really is. To help you make money on “helping customers” do something that they could do themselves.
Dec 21st, 2007 at 9:10 am
There is one act the government could do to help us out. This will not help the people in foreclosure but might help some to avoid it. In the old days we were not allowed to use a currently listed property to set value. We were also made to use like consessions to set values. If they want to stop the devaluation they need to change the policy on appraised value. Lets use like sale for like sale. Not everyone can buy on a short sale so why are we being forced to use that to value the property. I work in the mortgage industry and the biggest issue I see is not the adjustable arms it is the current value dropping. There are people who used to have 20% in equity that are now upside down due to this and we cannot help them.
Just a thought !!!!!!!!!!!!!!!
Dec 21st, 2007 at 11:21 am
Theo- This is going to become a depression worse than the 1929. You cannot let a fraudulently ran free market just work itself out. This market is out of control and we will maybe see a revolution of the American people, if it continues down this route.
Bob - So everyone is going to just rent from lenders after they take millions of homes back? Lenders will own half the country before this is all said and done.
Bill - Why don’t you go to http://www.mizna.com, call them and see if we charge homeowners to help them? NO, we don’t we are hired by lenders as an out source company to handle loan modification field services.
Plus I dedicate about 6 hours a day to help homeowners for free through my forum at http://www.LoanSafe.org, emails and phone calls.
What do you do for a living Mr. Bill? You seem to be riding my blog leg quite a bit.
Kris, that 20% will go down to 50%, sooner rather than later. We will see a mass exodus in the coming year, if they do not do something.
Dec 21st, 2007 at 11:40 am
We are approaching the Dec. 21, 2012, deadline when the Maya’s “Long Count” calendar marks the end of a 5,126-year era. Could the Mortgage mess have anything to do with it????
Dec 21st, 2007 at 12:28 pm
Moe,
I actually keep people in their houses that are behind on their payments by actually doing workouts daily. I personally approve hundreds of loan modifications, short sales, repayment plans, partial claims, deferments, special FB plans, and short pays a month. I make sure that my loss mitigation shop answers the phone, returns phone calls and treats each customer with respect and gets deals done.
I personally approve hundreds of foreclosure referrals a month, do you know why they get approved? The customer isn’t calling back, isn’t responding to letters, and isn’t asking for help. I would never approve a referral if the customer is trying to work it out. Why would any lender want a property back in REO? The average loss in close to $60,000 per asset.
The only way that a servicer makes money is collecting payments since we get paid a percentage of each payment collected. Almost all PSA (Pooling and Servicing Agreement) the document that controls what the way in which loans are serviced provides incentives to a servicer to complete workouts. Fannie Mae pays $500 for a modification, $1,000 for a Short Sale. Most private MBS deal offer more money than that to do deals.
People that read this blog need to understand that you aren’t an unbiased housing advocate but person that is making money off the poor lending decisions that people made over the last 5 years. That when you write you have an agenda.
Have a great Christmas and remember that by their fruits you shall know them……we will be watching your fruits MOE
Dec 21st, 2007 at 12:55 pm
Moe — your over the top on this one … curtail your hysteria … try having a glass of egg nog for the holidays. The so-called “housing crisis” or “credit crisis” will not lead to a depression. It is actually limited event when you look at it on a global scale.
True, we here in America are going to have to suck it up. And those people who played the game are going to be hit the hardest whether they be a borrower, broker, AE, lender or investor. The easy money that created most of these jobs has evaporated and so have the jobs.
As far as foreclosure workouts … the reasons need to be looked at before decisions can be made. With refi borrowers … 1) why did they refi … cash out or pay down bills. 2) if they cashed out where’s the money … gone with the wind. 3) if they paid bills and lowered their monthly payments why are they in trouble now … new bills. 4) what kind of cars do they drive … 10+ year old as i drive … or a newly leased luxury car … 4) do they own more than one home 5) did the money they cash out go to buy a second home… 6) was the money that they cashed out used to fund an IRA, 401K… 7) was the money that they cashed out used to start a business. And so on …
If they purchased …. why is their income not sufficient to make the payments? 1) they stated sufficient income on their application 2) their bills were in line at the time of purchase 3) they had savings as stated on their application. So, what’s the problem? Some of the reasons above or did they have an acutual unforseen hardship … medical, business or employment.
I can to help those who have had unforseen hardships … however … those that simply used the system to get what they wanted and now are crying that they were forced into making bad decisions … it’s time for them to move in with more financially responsible family members (mommy and daddy) or to rent again.
Dec 21st, 2007 at 4:46 pm
Bigcityloans,
While I agree with you that most need to pay the piper for their decisions, I thinka depression is certainly a possibility. How can one not draw the possible conclusion based on what is unfolding that a depression is in fact a very possible outcome from all of this?
What are the ramifications of 2 million people in good paying jobs thrusted out into the work force with not only no job prospects available in their respective fields, but no jobs even close to the level of income they were used too? We are talking jobs lost for the forseeable future and ones available being of the garden variety.
I am not saying that we will enter a depression, but I am saying that possibility has an outside chance of actually happening IMO. I am starting to see it take shape at the infant stages already to be perfectly honest. People taking jobs in our call center at entry level positions dressed in suit jackets and even suits at times. Trying to make a splash while looking for that elusive prime job like they had. All the while using CC’s to be sure to pay the mounting bills they are fast falling behind on.
This is far greater than a subprime market and don’t you be naive in thinking otherwise. Alt-A’s and Prime resets were generally much longer adjustment periods. 6-10 years being much more common than the 1-3 year subprime reset time frames. We have lot’s to get through and many years before we get through it. How the job market performs during this downward period will determine just how bad it gets. My caution is that the job market is one of services and those are the jobs that are shrinking. We need manufacturing jobs with the management hierarchy that it brings to replace the jobs lost as far as income is concerned. We don’t have them any longer or atleast not nearly enough of them to absord the workforce that is looking for them, or put more bluntly need them and now…
Dec 21st, 2007 at 4:48 pm
We’re already in a major depression in at least five states. California is ready to officially declare it the worst fiscal emergency in the history of their State (to include the depression of 1929-1954), as they are currently totally broke and going under for at least the foreseeable future (25 years?).
This is a major crises. Jim Cramer is right, we have Armageddon. Right now the chances are heavily against the USA surviving it recognizable form. What we are on the other side is anyone’s guess, but it won’t include the lifestyle we’ve built for the last 230 years. That is gone forever, as far as the currently living are concerned. The great margin call of 2008 will transform us into what we are and have been for quite some time, the poorest developed nation on earth.
Dec 21st, 2007 at 4:48 pm
Bill- So you work for a lender and your run a loss mitigation department? I call BS! Yeah, attention America. Moe makes a lving by helping people stay in their homes and donates 30 plus hours a week to consumer activism. I sleep well, while thousands of people go into foreclosure under your watch.
And that is BS, that homeowners do not ask for help. That just shows you do not work in loss mit and your just most likely a homeowner hater that I have pissed off in some forum or someowhere.
Instead of trying to attack me, why don’t you offer some advice to the struggling homeowners that visit the blog?
Bigcityloans- Egg Nog sucks and I am feeling a bit like the grinch.
you said this, “The so-called “housing crisis” or “credit crisis” will not lead to a depression. It is actually limited event when you look at it on a global scale.”
You are joking right? If they do not get a handle on this, it is going to do what Paulson describes as “chaos”. This is a nationwide threat and yes, the sky is falling.
Do you work in loss mit?
Dec 21st, 2007 at 5:13 pm
The main issue in all of this is solvency. How much off our current life styles in this country are solvent? Not too many IMO. We have as a nation lived far beyond our means. To reverse that trend and bring savings into play as the new mantra and dispelling the notion of keeping up with the jone’s will be difficult to say the least.
We are a nation of have’s and need to become one of have not’s. This is a mind set that has been perpetuated for many decades. On the backs of our future generations mind you. They are the ones that soon will here “NO” as a word they have not heard in their lifetimes. How they deal with this new phenomina will determine how well we come out of this crisis. The next generation 25+ will be the most harmed by all of this. They will drive the change and our ability as a nation to whither this storm IMO.
Voter turnout will be higher this year IMO than the last decade or more. If it isn’t then that will tell us what direction we are heading in and that won’t be pretty. If it is as I think then we have a shot at coming out of this OK… not great but OK IMHO.
Dec 21st, 2007 at 6:12 pm
Moe,
Moe
Once again you show that you have no real knowledge or experience in managing and handling a default mortgage and the steps towards resolution. I didn’t say customer’s don’t ask for help…What I said was that the only time that I approve a foreclosure referral is when a customer isn’t return phone calls, has filed a BK 7 and has been discharged from their personal liability of the debt, the property has been vacated and isn’t not moving towards a resolution. If no workout is pending what other choice do we have????
Distress Customers should follow the following path to start and resolve their mortgage.
1. You must understand what type of mortgage that you have. ARM, Fixed, Option ARMS and Etc
2. What is the status of your loan. How many months past due, pre-foreclosure, active foreclosure, active foreclosure with a confirmed sale date. All of these items will go into the decision process for approval of any type of workout.
3. Who is the owner of your loan (FHA, VA, Fannie, Freddie, or MBS) This will be critical in the type of workouts that can be offered.
4. Put together the following information: hardship letter, budget form (comparing your income to expenses), two paystubs, two bank statements, and tax returns.
5. Contact your servicer and find their loss mitigation, loan resolution, home retention deaprtment…..tell them that you want to keep your house and find out the process flow for a workout.
6. Send in your package to a specific person that is assigned to your file.
7. Follow-up every other day until a decision is made. Depending on the shop this might take a few weeks. Sadly at times because of the nature of your fin. position no workout can happen. If you can’t qualify for a customer based resolution (MOD, repayment plan) than you need to look at a collateral based resolution (Short Sale, DIL). This means that you help the servicer liquidate the property via sale of the asset or deeding the property back to them.
8. Remember that your servicer doesn’t want your house. They want you current and making payments monthly (Remember that is how we make money) and that each REO is a $50,000 loss waiting to happen.
In my shop we have a saying “The best customer we will ever have is the one in the house, it is our job to keep them there.”
Moe,
Let’s test your default mortgage knowledge……..since you are a self-described workout expert
1. What is the post foreclosure redemption timeline in Michigan…how many months long? What is the normal reason that this redemption can be shortened?
2. At what amount of arrears capitalization in a loan modification does Fannie Mae require a servicer to re-record a loan modification?
3. Why does the changes in the tax code just signed yesterday make it possible for servicers to finally fix the problems?
Moe this is your chance to shine…..show that you understand the issues facing the default servicing industry and the housing market. The answers to my questions are key to the resolution of the problems and why at times we can save every customer’s loan.
Dec 21st, 2007 at 7:32 pm
Bill- Thanks for taking some time and helping out. My goal when I started this blog as just to be a conduit for lenders and homeowners to work these loans out.
OK, now to your complex questions to challenge me on my blog. You asked me questions earlier and were polite. I answered. You then attacked me in a few different comments. Fine, who cares? Now you want me to jump through your little hoops so you can get the satisfaction of proving I’m an ass.
I will be dammed if I do and dammed if I don’t. How do I know you’re not Angelo Mozilo and this is some counter attack on me??? haha
Well, this is the last comment/hoop I will jump through. I feel like a rabid poodle in a Bill’s dog show.
I would rather just report how good of a shop you have and have Bill give tips to my readers. I am sure you know more than I do, if you do in fact manage or run a loss mitigation department, but there are very few people like you and even I, that know anything about this.
This blog is for the homeowner and I don’t get into all of the complicated jargin. You know as well as I that these are complex questions. This is it, I mean it Bill…………..
1. What is the post foreclosure redemption timeline in Michigan…how many months long? What is the normal reason that this redemption can be shortened?
If the property is four units or less and does not exceed three acres in size, then if the amount that remains unpaid on the loan is more than two-thirds of the original debt, then the borrower still has six months to redeem. If a property is over four units or three acres and has not been abandoned, then the time period for redemption is one year from the date of the foreclosure sale. If the property has been abandoned, and if the balance is over two-thirds of the original loan, then the redemption period is one month.
2. At what amount of arrears capitalization in a loan modification does Fannie Mae require a servicer to re-record a loan modification?
Fannie Mae has changed their recording guidelines from recording $10,000.00 to $20,000.00. Fannie went from a 108% UPB to 115% UPB limit on Mods in 2007 - and many lenders up until 2007 would not allow more than 8% capitalization Fannie has taken the level to 115 and I have seen as high as 142% on Sub Prime.
3. Why does the changes in the tax code just signed yesterday make it possible for servicers to finally fix the problems?
I haven’t thought about it till you asked. But I would guess that it means that lenders can now book their losses now and in Moe’s words, servicers are now crapping their pants because if they do not work with borrowers and on short sales, then now all tax liabilities will be on them and not on the borrower. This leaves less skin in the game for borrowers and more for lenders.
That’s it Bill. No more hoops please. I need to help homeowners. Why can’t you just help me help you or vice versa or whatever. All I want is for the homeowners that want to be saved and deserve to be saved, get saved.
Dec 22nd, 2007 at 4:10 pm
Moe,
Define “deserve to be saved”. The only folks who deserve to be saved who didn’t bite too much for them to chew. Who qualified at the time for FNMA 30 year fixed but were coerced to go with land mine loan. Number of these type of borrowers is in absolute minority.
Dec 22nd, 2007 at 4:45 pm
I stand to correct you Alan. There was a recent report I just read and let me see if I can dig it up, that shows that about 50% of the borrowers who refinanced in the last few years that are in subprime loans, could have recieved conventional financing at the time. So, I guess 50% then Alan. Deal or No Deal?
Dec 23rd, 2007 at 3:37 pm
Moe, I would like to see the report. According to study from Federal Reserve Bank of Boston only 25% of subprime loan borrowers qualify for normal product.
http://www.boston.com/business/globe/articles/2007/12/04/falling_prices_driving_crisis/
http://www.bos.frb.org/economic/wp/wp2007/wp0715.pdf
The same study also points out that primary driver for foreclosures ain’t rate resets but: “Second, house price appreciation plays a dominant role in generating foreclosures: homeowners who have suffered a 20 percent or greater fall in house prices are about fourteen times more likely to default on a mortgage compared to homeowners who have enjoyed a 20 percent increase. We attribute most of the dramatic rise in foreclosures
in 2006 and 2007 in Massachusetts to the decline in house prices that began in the summer of 2005. Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages.”
Dec 26th, 2007 at 6:41 pm
I can’t locate it, so you win there, for now.
I agree that house appreciation plays a major role in foreclosures, but what drove that appreciation up, up and up??????
Easy money Alan. It was every where.
Easy money=people buying more houses=prices go up=people buying houses they can’t afford, but qualify for with a licensed professional, with lender underwritten easy money=values go up higher= OH NO! NO more easy money= mass foreclosures=the US economy is crashing=REALITY
Dec 28th, 2007 at 5:27 pm
What Cleveland State University Law Professor Kathleen Engel is purported to say about hamstringing an industry is utter NONSENSE. The recording system has been around for centuries. And that recording system exists for the protection of the mortgage investor as well as the homeowner.
In years past, NO COMPETENT ATTORNEY would ALLOW a financial institution to invest in a mortgage WITHOUT recording their assignment. Now, failure to RECORD has become commonplace. Without regard to the ORIGINAL assignment, if the original had been RECORDED, the plaintiff could obtain a certified COPY of the assignment for use in a judicial foreclosure action. The difficulty in locating the assignments isn’t merely a paperwork issue, it reflects the FAILURE to RECORD the assignments in the first place.
ANY RATINGS AGENCY THAT RATES MORTGAGE SECURITIES ISSUES FOR WHICH THE UNDERLYING ASSIGNMENTS HAVE NOT BEEN PROPERLY RECORDED OUGHT TO BE HELD LIABLE FOR INVESTOR LOSSES ARISING OUT OF THAT RAHTER BASIC FAILURE.
Why would ANY jurist, state or federal, allow an entity to proceed with a foreclosure absent actual evidence of ownership of the mortgage giving rise to the action? Judge Christopher BOYKO has shown the COURAGE to do what EVERY Judge nationally SHOULD HAVE BEEN DOING ALL ALONG!
Any attorney defending against a judicial foreclosure who fails to raise arguments as to the plaintiff’s standing and/or capacity to bring the action is an IDIOT. Any attorney facing a judicial foreclosure in teh name of Mortgage Electronic Registration Systems OUGHT TO particularly raise standing and capacity and OUGHT TO WIN EVERY TIME (NO, the Florida appellate decisions are MEANINGLESS, because they were decided upon FALSE FACTS established at the trial level). Any attorney who does NOT know HOW to win these cases probably needs a crash course in various foreclosure defenses. And almost ALL are in need of a good expert witness.
May 24th, 2008 at 7:45 pm
Dear Mr. Roper:
Are you an attorney? I am not, but I am a lic. Florida real estate broker. I have advised many of my customers to contact an attorney whenever they are under threat of foreclosure. I am finding that many plaintiffs have lost their assignment documents and also have not recorded the assignment of the note and mortgage! Seems like grounds for dismissal of any such foreclosure action to me. I find your comments interesting.
Sincerely,
Ron Clark