By Nathan Fransen Esq.
Early on in the foreclosure fiasco we are now knee deep in, the Federal government announced a program that was billed as a proactive measure that would provide needed relief to some 400,000 homeowners. The program basically propped up the Federal Housing Authority by insuring loans that otherwise were not insured or insurable.
Lenders were instructed to reduce the principle balance to 90% of the home’s current value and in exchange, the government would insure that loan. There were several other strings attached and the process included the typical bureaucratic inefficiencies. The net effect of this $300 billion dollar allocation was a bit short of the initial expectations. In fact, in the first seven months, exactly ONE homeowner was helped.
Granted, I am sure that homeowner was very relieved, but still, even for the government, not exactly a prudent use of government resources. In defense of the government, they claim they only received 752 applications (as of March 25, 2009). Perhaps they could have discussed this program with the lenders a bit more before launching to size up the demand.
So now, with President Obama at the helm, a new dawn approaches. On May 20th, 2009, it was announced that the HOPE program was being amended. Here’s a breakdown of the changes:
1. Lenders are only required to reduce the balance to 93% of the current value as opposed to 90%.
Although I doubt that extra 3% would make much difference anyway, housing prices have fallen by more than that since the first HOPE program was announced, so lenders will still need to write off as much, if not more as they would have previously.2. Servicers are now paid $1,000 for each HOPE refinanced loan.
Too bad that one servicer that helped that one homeowner did not wait a few more months… They could have picked up an easy thousand bucks.3. HUD will now split their share of the appreciation with the investors who are writing off the balance.
Under the original program, HUD got to split the profits 50/50 on the house at the time the homeowners sells (up to the original appraised value determined at the time the loan was taken out). Now, HUD’s share will be split with the investor.4.The Treasury is now requiring any servicers who are participating in the “Making Home Affordable Program” (aka MAP) to offer homeowners the HOPE program, if the homeowner does not qualify under MAP.
This may actually make some difference, but it is still not real clear how these servicersand ultimately the lenders will comply with this requirement.
Perhaps the most interesting aspect of the new and improved program, is what is not included. Originally, the bill contained a provision that would allow bankruptcy judges to “cramdown” the balance on first mortgages to the current value.
The theory was that lenders contemplating this tool available to homeowners would be more apt to voluntarily provide assistance. The pressure got to Congress, so this provision did not survive, but it wasn’t the first time it was proposed, and certainly will not be the last.
Overall, it will be interesting to see how the changes to this failed program play out. Let’s hope that more than one homeowner is helped.
If you are a California homeowner and you need a experienced loan modification attorney in dealing with your uncooperative mortgage servicer, then please call me for a free consultation. My name is Nathan Fransen and I would be happy to help you in any way I can.
My toll free number is 888-756-2652 or feel free to leave a reply below.
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Interesting site, but much advertisments on him. Shall read as subscription, rss.
“We have repeatedly found that these foreclosure rescue operations are swindling desperate homeowners out of money they can’t afford to lose,” said Attorney General Madigan. “Struggling homeowners need to know that free help is available. The 24 lawsuits I have filed prove foreclosure rescue operators don’t help. They don’t call your lender, they don’t modify your loan, and they don’t represent you in court if you’re in foreclosure. All they do is take your money. By combining our powers, state and federal authorities are sending a clear message to these mortgage rescue scammers: It is not a question of if we’ll come after you; it is only a question of when.”
This situation is indeed tragic, and rife with criminals and scam artists. The public has indeed been victimized and deceived. But not as the foregoing writ of lies and hypocritical threats describes…
First of all, what happened to the concept of “Caveat Emptor”?!!! Buyer beware?! Responsibility? Good faith on both sides of the transaction? I remember when two legal adults could enter into a business arrangement and each party thereafter assumed RESPONSIBILITY for their own decisions! When did we, as American citizens, surrender both our responsibility to make wise fiscal choices for ourselves, and the right to conduct business for profit in a capitalist system – in favor of being provided for and protected by some remote government bureaucracy? A bureaucracy, by the way, whose representatives know far less than most novice loan officers in the private sector about the guidelines and requirements of the products for which they claim to be able to provide “free counseling” to the public?
In examplar, I contacted FHA/HUD in an effort to familiarize myself with the Obama administrations new guidelines on PMI and equity-sharing under the Hope for Homeowners program. I engaged in what proved to be a dialog of stupendously frustrating proportions with one such total ignoramus employed at the call center for 1-888-995-HOPE. He knew NOTHING about consumer real estate lending in general, and even less about the emerging impact the policies of our current administration would have on existing mortgage relief programs. He finally transferred me to an authorized HUD counselor (NovaDebt) whose voice mail system informed me that no representatives were available, and cordially invited me to leave a message in the Great Black Hole of this obviously overwhelmed non-profit consumer assistance agency. I left my information and hung up in disgust. THIS was the free counseling being made available to over 9 million homeowners?! “Good God, they’re all doomed!” I mused bleakly.
That was directly before I came across a fiercely-blustering page and a half of vitriolic flummery in the form of the above referenced article on FHA.gov. Herein we find our elected representatives acting in collusion with the minions of the Federal Reserve, rattling their sabers & making grandiose vows to crush the “con artists” in the private sector. While I certainly recognize that there exists rampant corruption in many businesses in the financial services industry, and that I have observed such tendencies to some degree in many companies in the Loan Modification business, as for the people at ALS (AffordableLoanServices.com), we are acting in good faith, trying to undo a tiny slice of the damage these SISA / NINA loan products did over the past decade. We can not be the only ones trying to do right. And yet, we are slanderously accused of being “scammers” by the very officials who created this entire situation! Google Chris Dodd, Barney Frank, Credit Suisse… The authorities who became criminals are now become our accusers and judges.
This is a perfectly infuriating example of the effect that the centralization of power in the Federal Government and the central banking system has upon the quality of service to the consumer public and the attitude fomented against those of us who are legitimately attempting to assist said public with calamitous reality our own banks & government caused. What a calumny. What an utter disgrace!
I cite Cisero’s quote of Marcus Aurelius regarding the aristocrat’s duty. “If the Senate can set an example to the rest of the citizens, we have accomplished our final goal.” Oblige Noblesse indeed. GONG!
Well said! Some of us are doing it right! I have been in the mortgage industry since 1999 and am proud of my vocation. I have recently started doing loan modifications and am exited about helping people out. There are good people in every industry, even in the Loan Modification Industry. Good luck everyone…
LOan modifications are key to help the housing market and your blog is informative and enlightening. I
LOan modifications are key to help the housing market and your blog is informative and enlightening. I
Can you tell me who can help in Nevada? Don’t know who to trust anymore.