MORE BAD NEWS FOR HOMEOWNERS

MORE BAD NEWS FOR HOMEOWNERS

Just when you thought it was safe to go into the water ------ Banks 200 - People 0

The bad news:  The economic recovery has stalled and housing prices are expected to continue to drop

And even worse:

In case you are not aware of the process, most Lenders sell mortgages on the secondary market.  This means that the lender collecting the monthly mortgage payments is really servicing the loan on behalf of the new owner.  Mortgages are bundled together and sold in pooling agreements often several times over the life of the loan.

As many of you know, Fannie Mae and Freddie Mac insure mortgages.  So when mortgages are in default, Fannie or Freddie have to pay up.  How does that affect you, the borrower?  A little more explanation is necessary to get to the point of this article.

Well, now, Fannie Mae wants out of defaulted residential mortgage holdings and it wants out quickly!  Fannie Mae has warned servicers that it will begin monitoring them to determine why there are long delays in moving delinquent loans into foreclosures.  If the services can’t satisfactorily account to Fannie Mae for the hold-ups, Fannie Mae will perform on-site reviews and assess fees to give services “a financial incentive to comply with Fannie Mae policies and to improve the overall performance”.

Fannie Mae has said that legitimate efforts to work out arrangements to avoid foreclose and unavoidable delays will not be “punished”, it is going to hold the servicers accountable for just “throwing the loans into a program and collecting the fees”.  Many lenders also hold the second liens and have been unwilling to take losses on the second liens regardless that a significant percentage of the borrowers are so under water that the second liens are basically worthless – the banks don’t want to write the liens down.

Despite the federal government’s program Making Home Affordable which is supposed to help the distressed homeowner by incentivizing banks to make mortgage modifications, to date over 3 million homes have been either foreclosed or are in various stages of foreclosure, and almost 4.5 million homeowners are at least 30 days behind in their mortgages.

Having set the stage for the topic at hand…………and why this is such a disaster for homeowners!

We have been talking to representatives of various banks to determine this is going to affect homeowners who are behind in their mortgages.   And the answer we received was unanimous: In response to Fannie Mae, if at the date of the foreclosure sale, the modification process has not reached the stage where the homeowner has paid at least one payment under a trial modification, the banks intend to foreclose! 

It has been our experience that if the modification is in review, we have been successful in getting the lender to postpone the sale date until the review is complete and the modification is denied – obviously if it is approved, there will be no foreclosure if the payments during the trial modification period are paid on time.

This is going to be a disaster for homeowners!

 After all, it is the banks for the most part that are causing the modification process to take and unreasonable amount of time.   They don’t hire enough people; and if you are lucky enough to actually speak to someone familiar with your modification, you will not speak to that person again….one almost never speaks to the same bank employee twice during and after the submission of documents; denial letters are sent because documents are missing regardless that the homeowner has furnished them numerous times; denial letters are sent for reasons most home owners can’t fathom because very often the denial has nothing to do with the loan at issue!  I have read many denial letters sent by banks to homeowners citing the reason for denying the modification(s) as being that the homeowners didn’t accept the modifications offered when, in fact, they were NEVER offered any modification by their lenders!  The letters were just wrong – and unfortunately, the results are that the homeowners have to re-start the process again and again!

So while it is obvious that the servicers have been dragging their feet, and while there are so many loans in workout and in limbo, the result of the move by Fannie Mae is likely to be an increase in notices of default and notices of sale to the very homeowners who are trying to work out a solution with their lenders!