2 Responses to “New trend in foreclosures as moratorium comes to an end”

1. Josef Culik, Esq. says:

   September 21, 2009 at 4:26 pm

   Hi Moe — I am a lawyer in Massachusetts who does a substantial practice in loan modifications and foreclosure defense. In my own loan-modification practice I am seeing more and more clients in need of foreclosure help that are “prime” borrowers — people who had good credit and now, for reasons of joblessness or underemployment, simply can’t make their payments and need interest-rate reductions. Not only are predatory or bad loans a cause of the mortgage meltdown among subprime borrowers, the poor economy is causing a second, parallel mortgage meltdown among prime borrowers. And unfortunately, the mortgage companies that are denying loan modifications left and right for subprime borrowers are doing the same for prime borrowers, exacerbating the crises and making tough action against them necessary.

   Josef Culik
   http://www.maloanmodification.com
2. Nathan Reynolds says:

   September 22, 2009 at 12:03 pm

   I am a mortgage broker I have studied the HAMP guidelines extensively to assist homeowners that my office could not help. I found that if properly cited the HAMP law actually prevented any foreclosure prior to the homeowners consideration for the program. My wife is an attorney, I did the research on this law and she later appeared for a client that had a default judgment entered against them in a foreclosure matter. The judgment entered May 2008 and subsequently set for June 09 to confirm the sale of the property. She succesfully cited the HAMP guidelines and the judge granted the motion to vacate the order previously entered and allowed the homeowner time to submit an application for a HAMP modification. Below is a summary of my findings after meeting with various lenders regarding HAMP that my wife utilized in this case:

   I recently had the opportunity to attend a meeting on President Obama’s Home Affordable Modification Program with representatives from Major Banks and Servicers.

   The Bank representatives from two of largest servicers in the United States boasted servicing one in five mortgages equating to almost 14 Million loans an approximately 8 Million loans respectively. In addition, the first Bank proudly disclosed that they have doubled the number of associates dedicated to home retention to 7,400 this year at which point the other Bank proclaimed that they had 11,000 associates dedicated to home retention.

   The combined resources that just these two major lending institutions have dedicated to home retention is equal to .08 % of their entire servicing portfolio, less that 1/10 of a percent. This abysmal percentage truly represents the Banks intentions to comply with the Presidents HAMP program.

   In order to understand why the Banks and Servicers are not making a good faith effort to comply with this law you must first understand what the HAMP program requires of them:

   Servicers should not proceed with a foreclosure sale until the borrower has been evaluated for the program. Any Foreclosure action must be temporarily suspended, including new foreclosure actions.
   Servicers must establish a property tax and homeowners insurance escrow account and disperse payments to the insurance provider and County and roll this expense into the principle balance of the homeowners current loan (even if delinquent taxes are owed and no previous escrow account was established).
   Servicers must reduce monthly mortgage payments to an affordable level based on the borrowers income, regardless of principal balance owed.

   The HAMP underwriting guidelines require the Banks and Servicers to accept lower payments and pay property taxes to the County and homeowners insurance out of the Banks’ funds! The Banks do not want to concur this expense; it is less costly to foreclose.

   The representative from the housing counseling organization stated at the meeting that day, “We needed another moratorium, or new Law to stop the foreclosures plaguing the city of Chicago”. I stated that, “You don’t need a new law, you just need to enforce the American Recovery and Reinvestment Act of 2009, that President Obama already signed.”

   President Obama signed the American Recovery and Reinvestment Act of 2009 into law on February 17th. On April 6th 2009 the Treasury Department issued uniform guidence for loan modifications across the mortgage industry in supplemental directive 09-01.

   In accordance to the underwriting guidelines for HAMP within this Law:

   Any foreclosure action will be temporarily suspended during the trial period, or while borrowers are considered for alternative foreclosure prevention options. In the event that the Home Affordable Modification or alternative foreclosure prevention options fail, the foreclosure action may be resumed.
   Participating Servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.

   On April 21st 2009 the Treasury amended the supplemental directive 09-01 with Announcement (09-05R):

   Q3. How should borrowers who contact their servicers be handled with respect to HAMP if the servicer does not yet have the proper documents or is not yet equipped to evaluate the borrowers situation?

   Servicers are required to validate the homeowner’s eligibility for HAMP and capacity to pay. Servicers should begin the process of collecting the required documentation from the homeowner and the information necessary to establish an escrow account on non-escrowed loans. Based on the servicer’s understanding of the homeowner’s ability to pay, a servicer may place a homeowner on a forbearance plan pending its ability to execute a HAMP modification. Foreclosure actions (with the exception of those in Georgia, Hawaii, Missouri and Virginia), including initiation of new foreclosure actions, must be postponed for all borrowers that meet the minimum HAMP eligibility criteria.

   Q8. Must servicers suspend foreclosure or not initiate foreclosure for all borrowers who are potentially eligible for the HAMP?

   To ensure that a borrower currently in foreclosure or at risk of foreclosure has the opportunity to apply for a HAMP modification, servicers should not proceed with a foreclosure sale until the borrower has been evaluated for the program. Additionally, servicers are strongly encouraged not to initiate foreclosure until a borrower has been evaluated and determined to be ineligible for the program or the borrower fails to respond to a Trial Period Plan offer that has been made by the servicer.

   All Fannie Mae-approved servicers must participate in the program for all Fannie Mae portfolio mortgages loans and MBS pool mortgage loans guaranteed by Fannie Mae.

   Legally, Banks and Servicers may not proceed with a Foreclosure sale until the borrower has the opportunity to apply for a HAMP modification. Since the Banks and Servicers have not allocated the resources necessary to process the 4 to 5 million eligible homeowners currently in foreclosure or at risk of foreclosure as intended by the Obama administration, the courts should enforce the law, stop all foreclosure proceedings.