Posted by 101livescan on 9/6/09 1:33pm
Msg #303034
Why foreclosures won't subside
http://www.cnn.com/2009/POLITICS/08/31/homeowners.mortgage/index.html?iref=newssearch
We need more pressure placed on lenders to help troubled homeowners. The lenders won't do it on their own.
| Reply by roxierox/TX on 9/6/09 8:27pm
Msg #303042
I work in the home retention division of a major bank. We have been modifying loans and drafting repayment plans for homeowners who have become delinquent for a very long time. Mortgage Loans are sold on the secondary market in groups of loans call pools. These investors pay us to service their loans.The lenders who are actually loan servicers can only operate per investor guidelines. If the investors say that they won't modify a loan, there is nothing that the servicer can do. The investor owns the loan, so they call the shots. Making Homes Affordable or what is better known as the Obama plan is not available to everyone. There is certain criteria that must be met. This is not the lender saying this. These are the guidelines that have to be followed per the plan. Another thing is that not every investor is participating in this. The VA is not participating and FHA just came on board 8/15 and even then, not everyone meets the criteria. It is very unfortunate. The main thing is for the homeowners to work with thier lender and not pay one of those so called modification companies any money. They can't do anything for the homeowner.
| Reply by 101livescan on 9/6/09 8:46pm
Msg #303044
I am so glad you clarified this, this is more than most people know. Certainly, if they knew the politics, they wouldn't sit down and pay $3-$5 to a "loan modification company" to try to fix their dilemma.
I worked with an attorney who purchased pools of loans at a discount and resold them to other investors at a profit. They are not interested in helping homeowners to stay in their homes.
| Reply by Jim/AL on 9/6/09 9:47pm
Msg #303045
Please explain what you mean by "These are the guidelines that have to be followed per the plan" What guidelines? Do you mean it has to be okay with the owner of the loan?
Not being ugly, just trying to understand what you mean.
I think it is a crying shame that the VA is not willing to be or forced to be a part of helping ppl save their homes, what a way to treat our heroes.
| Reply by roxierox/TX on 9/7/09 2:14pm
Msg #303077
No problem. There is cetain criteria that must be met, per Making Homes Affordable Plan Guidelines. Not every homeowner is eligible. Rmember, if the investor is not participating then it is a done deal. Most of the private investors and the VA are not participating.
Below is the check list.
1.The home must be the primary residence.
2.The amount owed on your first mortgage must be equal to or less than $729,750.
3. Next the homeowne must be 60+ days delinquent. (This means that if you are current on your mortgage, you don't qualify)
4. The current mortgage must have been aquired before January 1, 2009.
5. The payment on the first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) must not be more than 31% of the current gross income.
If just one of these criteria is not met, then they don't qualify and these are the rules of the Making Home Affordable Plan. So you can see how not everyone qualifies. Not many make it through the checklist.
There is also the Making Homes Affordable Refinance that is available to some homeowners who have Freddie Mac and Fannie Mae as investors. So if you are current and you have an investor other than these two, then you don't qualify.
Now with the standard modifications, most investors require you to be 90 + days delinquent before you can be considered for a mod. However, there are some investors who do not allow mods of any type and have strict guidelines regarding repayment plans. So say for instance a mod is not an option for you and you owe so much that a repayment plan is not an option either? What do you do? It is either a short sale, or forclosure. A short sale is when you put your home on the market and sell your home for less than what is owed. You have to have had the home listed for at least 60 days and then that is subject to investor guidelines as well.
The bottom line is that this is an investor driven business. It does not matter if Countrywide or Wells Fargo originated the loan or is servicing the loan, it all depends on the investor and the guidelines of the given program.
Please let me know if you need more information regarding this subject. This is what I do full time. I would love to have a full time notary business, but that was over after the refi boom.
I do have a passion to educate the public on the above information. So ask away.
| Reply by MikeC/NY on 9/7/09 10:18pm
Msg #303100
"A short sale is when you put your home on the market and sell your home for less than what is owed. You have to have had the home listed for at least 60 days and then that is subject to investor guidelines as well."
Also to keep in mind: in a short sale, the owner walks away with nothing other than a lesser hit to their credit rating. They don't pay any fees - their attorney and the RE agents are paid by the lender/investors - but they have virtually no say in the process. Short sales do take longer; sometimes the lender/investors will sit on an offer for months before making a decision.
And the homeowner may still be subject to a deficiency judgment for the balance of the mortgage, depending on the lender/investors and the negotiating skills of your lawyer. It's important to work with a lawyer who knows what he or she is doing; we have a couple in this area who handle virtually nothing but short sales, and they're very good at it.
| Reply by Ilene C. Seidel on 9/7/09 7:41am
Msg #303052
Thanks so much for the info. You were very informative. I had no idea how this worked.
| Reply by roxierox/TX on 9/7/09 2:17pm
Msg #303078
You are very welcome. I am trying to find a forum where I can get this information out to the general public. It is as if the mortgage business is a secret society. It is so overwhelming for the homeowner just to ge through the loan process. If I didn't work in loan servicing, I wouldn't know either. It has been very helpful for me as a homeowner
| Reply by MikeC/NY on 9/7/09 8:32am
Msg #303053
The new big thing
There was an article in yesterday's NY Times about the latest scheme Wall Street is preparing to launch - buying structured settlements of life insurance policies, securitizing them, packaging them, and selling them to investors much like they did with mortgages.
They would reduce the risk by only purchasing settlements from people who are old or sick, and further reduce it by mixing the settlements in the packages so that they're not all patients with the same condition - some cancer patients, some Alzheimer's, some AIDS, etc. The performance of these instruments would not tied to the economy or the stock market - people either die, or they don't. The investors win big if the patient dies within a year or two; they lose if the patient hangs on for 3 or 4 years, and lose big if new treatments emerge that can extend the patient's life, or if a cure for the condition is found. The latter is why they would mix different medical conditions in each packaged security...
On the surface, this sounds sick, but consider this - when you buy life insurance, you are essentially betting that you will die sooner than the insurance company thinks you will. With a structured settlement, you get a good chunk of that money now while it can still do you some good - a LOT more than you would get by just cashing in - and then some faceless 3rd party is assuming your side of the bet (they have to keep paying the premiums to keep the policy in force).
As a strictly financial transaction, it makes sense; I'm not sure if I'm comfortable with the ethics involved. Also, insurance companies will be affected; they know that historically a certain percentage of these policies would lapse because people just stop paying the premiums, but this may keep more policies in force so they would end up paying out a lot more. That could result in their charging higher premiums across the board, which means consumers would pay more for insurance.
According to the Times, this is not being done yet. If and when it happens, there could be a lot more structured settlements coming down the pike, and that could translate into more work for notaries...
| Reply by Shoshana/AZ on 9/7/09 9:24am
Msg #303056
I don't see this as a good thing.
As a matter of fact, it's been going on for awhile and has been banned in some states. It became big quite a while ago when they were going after AIDS patients who had one foot in the grave, so to speak.
I see elder abuse here. Greedy relatives forcing an older, sick person to sell off their life insurance policy so they can get their hands on the money.
I was once working for a company for whom many of us work. I was in the home of an elderly, sick woman. Luckily her friend was there. The sales person at the other end of the phone was trying to talk her into selling off her annuity payments. Luckily, her friend kept urging her to talk to someone, a lawyer, her son, etc. Thank goodness she listened and refused to sign.
It was pretty ugly.
| Reply by MikeC/NY on 9/7/09 11:09am
Msg #303063
Re: I don't see this as a good thing.
This concept takes it to a new level, though. This is not just doing structured settlements, it's buying up a bunch of them and turning them into investment-grade securities, similar to what was going on with the mortgages. What is holding it up right now is that the bond-rating companies, whose reputations took a huge hit when they gave AAA+ ratings to the sub-prime mortgage packages, are being more cautious this time. They haven't completely worked out the requirements yet for ratings, and without a rating the banks can't sell the bonds.
I agree with you that it has the potential for abuse, but there are some situations where it could make sense. For instance, long-term illness and all savings or other assets have been drained, this is the last asset left, and bills have to be paid. Other than that, I would generally be opposed to it on moral and ethical grounds. Financially, it makes sense on the investment side. Making sense doesn't make it right...
As for the greedy relatives looking to grab the money - we're only talking life insurance policies here (lump sum payout), not annuities, so the dynamics are a little different. All they have to do is exercise a little patience and they'll get the whole thing eventually... Though I wouldn't be surprised if the banks started adding annuities to the securitized packages, just to get some money flowing back to the investors while they waited for the Grim Reaper to show up...
| Reply by 101livescan on 9/7/09 9:26am
Msg #303057
Re: The new big thing
Those big brains on Wall Street are always just one step ahead of us, aren't they?
| Reply by Dennis D Broadbooks on 9/7/09 10:17am
Msg #303059
I Heard a Commentator...
...on the radio last week talking about this & how it's already been tried over in Britain. According to this gentleman the purchasing of American life insurance policies as structured settlements was already taking place & they were losing their shirts due to those darned Americans living too long. I've tried to do an Internet search for more information but haven't come up with anything definitive, so this could just be anecdotal.
| Reply by MikeC/NY on 9/7/09 11:17am
Msg #303069
Re: I Heard a Commentator...
Here's a link to the NY Times article; you might have to register to read it, but registration is free and they don't spam you...
http://tinyurl.com/nys5b3
| Reply by Dennis D Broadbooks on 9/7/09 3:56pm
Msg #303085
Interesting Article...
...& I was hoping it would lead to a link to the article about Great Britain's experience in this area. This article does mention how the two individuals overseeing this project for DBRS went overseas to research firms already involved in this kind of investment.
| Reply by ReneeK_MI on 9/7/09 8:52am
Msg #303054
and helping stop foreclosures is double-edged ...
It is tangled and complicated and investments are NOT my thing, but once you get your brain around the gist of things ...you kinda wish you could 'unknow' it and go back to sleeping at night.
Simplified - the lenders began mixing high-risk loans into those loan pools that the investors were buying. Loan pools rated as A or Alt A or whatever would then have a bunch of B & C (and worse) loans in them (sub-prime, high-risk for default). The loan pools that should've produced high yields to the investors began ...not so much producing.
Those investors had this money (that they were losing) in YOUR money - in your 401k, in your Money Markets, in stocks, all over the place. That's why YOU were losing YOUR money when they were losing their's.
Like putting food coloring in the water supply and then watching it mix into the streams, rivers, eventually the ocean.
So ...when we say "help them!" we're saying "help us all", and when they lose their house, we lose more investment money, and when we 'save' them ...it's with our own losses as well. It wasn't such a simple thing that happened, and the 'fix' (if there is one) isn't going to be any more simple.
| Reply by Todd/OH on 9/7/09 7:36pm
Msg #303095
I'm familiar with this stuff - and there's alot of it
I once worked in Secondary Marketing, a banking function that sells the loan portfolio to investors. The investor has NO obligation to allow anything to be modified. If he bought into loan pool containing 200 loans and one or two go bad, he might notice it but not do much. It isn't worth the cost to him to have them modified. He would require the loan to be repurchased rather than allow it to be modified - lot's of paperwork.
I have the biggest problem with the originating point of the loan. The 'B' and 'C' paper is our biggest headache. These people had no business getting a loan and the broker was the thief that took the upfront points and commission. Go find the broker and lock him up. There's a paper trail and who cares if he's delivering pizzas now - or worse, writing loans under another name. Lock him up.
| Reply by Philip Johnson on 9/7/09 8:14pm
Msg #303098
Wasn't the B & C paper underwritten by the bank?
There is at least 2 people in every transaction and the bank in the end okayed the transaction and lent the money. If these people had no business getting a loan, why would the bank lend them the money? There's plenty of blame to go around, I'm not sure that stringing up the brokers would salve the wound.
| Reply by Philip Johnson on 9/7/09 12:18pm
Msg #303074
What happened to personal responsibility?
Adults over the age of 18 signed contracts promising that for the bank to lend them the money they'd pay it back. The terms were there, they signed the note and they moved in. Now that they can't for whatever reason meet their end of the contract, it becomes the lenders responsibility to "help" their partner in continuing to meet the contract.
One of us in this conversation says that bad on the VA for not stepping up to protect vets. The VA didn't lend the money they (us) guarantee the loan in case of failure. So now they are in a sticky situation. Do they enforce the contract that the vet signed, upholding contract law? Or do they put the force of the government on the bank to bend the rules this time to help the vet? If they do the latter than I want the VA to call my lender and tell them to offer the same deal to me even though,I'm in no danger of defaulting. Fair is fair.
Personal responsibility and contract law is the backbone of our society. A deal is a deal and for the folks who on this topic thinks things should tilt toward renegotiation. Would you have that same feeling when the TC who owes you (the lender in this case) a great deal of money for work completed says: " Things are tough for us this year will you take 75 cents on the dollar for the work completed and for all the upcoming work"?
I bet the first thought that comes forward is a deal is a deal and no thank you.
| Reply by Shoshana/AZ on 9/7/09 2:50pm
Msg #303081
Re: What happened to personal responsibility?
So, what about the good responsible people who lost their jobs (through no fault of their own) and if they can find one at minimum wage, it isn't enough to pay the mortgage?
What happens to these people who always paid their own way? Now they have no health insurance. They also have no idea how to apply for food stamps, etc. If they do find out, they are told that they are making too much money. So, they fall through the cracks because they don't know how to "work the system".
As for health care, I am not in favor of Obama's plan the way it is right now. But I will tell you that when people on welfare have a sick child, they go right away to the emergency room. They are not like people with health insurance who call the doctor first. We are paying for that!
It's the law that if a person shows up at an ER, they have to be treated whether or not they have insurance or money to pay for the treatment.
| Reply by Philip Johnson on 9/7/09 4:03pm
Msg #303087
So these folks never thought tomorrow would come?
They didn't lay back any money just in case? Using your example, what would the average loan modification be for someone making minimum wage in AZ? Here I would think they wouldn't qualify at all for even the most basic of houses, let alone keep what they have.
Rather than holding on to an asset that is bringing them to financial ruin by cashing out 401k's, payday loans, etc. Why not give the house back move into rental housing and get your finances back into order and take another run at it down the road?
Bad things happen to good people all the time, most financial happenings can be mitigated by prior planning and saving. All of us can recall during the heyday how housing was being used as an ATM, well it looks like the bank is calling and they want their payment.
| Reply by Susan Fischer on 9/8/09 12:39am
Msg #303111
Wow. Blame the victim: They didn't lay back any money just
just in case?" Can't pay the mortgage? Just rent, because it's so easy to do.
Just give back the house? No problem, they're being foreclosed on anyway. Jeez.
"Mitigated by prior planning and saving." No kidding. But not everyone is like you, Philip, they don't have your advantage, and your privilege. The savings are gone. One uncovered medical thing, and the savings are gone. Grandma lost her life savings to the rescession and has to move in - the savings are gone. Engine blows up, savings gone. Day care for for working and looking for work families is very expensive, savings gone.
There are millions of families homeless, for cryin' out loud, and the jobs weren't lost because they were bad workers. "...get your finances back into order and take another run at it down the road" You do realize that the culture of cash and carry was replaced by charge like there's no tomorrow? The PR and Ad companies perfected that scam. Then the lenders gouged, with incomprehensible "contracts" thanks to deregulation while making bankruptcy more complex and exclusive as a remedy. Blame the consumers for buying the media hype? Pfft.
The economy is precarious, and people are really suffering. It's not all their fault; and punishing the unemployed, the un and under insured, and all of the nation's children who are no longer a part of the middle class trying to get even basic a education, punishing them is just plain icky.
There are incentive programs in the works to make it easier for the working stiff to save for retirement. I wonder what problems will be "found" with that long term plan to help all Americans save.
When one listens to the people's stories, instead of the talking heads on the lucrative cable channels, one can expand one's understanding and empathy. There but for the Grace of God, go I. I'm blessed, as are many on this board. Others are struggling, and may find little or much comfort here, depending. My voice is toward fixing the problems, inch by inch and row by row, back to a culture of prosperity - rebuilding the middle class. Learning from mistakes, and turning this country back on the road to a prosperous, and productive nation.
Others see every new opportunity to help those in need as an opportunity to cash in too - even as they have so much. Even as they wallow in their abundance, blaming the victims of all this corporate greed.
| Reply by Shoshana/AZ on 9/8/09 8:33am
Msg #303118
Re: Wow. Blame the victim: They didn't lay back any money just
My sentiments exactly. Thanks for being so articulate.
| Reply by Philip Johnson on 9/8/09 9:55am
Msg #303127
Privilege and advantage?
Privilege and advantage? My folks were a carpenter and a school crossing guard/Nursery owner and I joined the Army. Our spoons came from Kmart not Macy's and they certainly weren't made of silver. I guess the advantage I had was that my folk's taught me and my brothers the value of hard work and wise spending. So I guess I do have an advantage.
So be a victim if you want Susan and claim that the world's forces are aligned against you. As for me I'll continue to use my advantage and continue to plow forward.
| Reply by jba/fl on 9/8/09 10:25am
Msg #303129
Re: Privilege and advantage?
Gee, Philip, did they also tell you
1. penny saved is a penny earned?
2. don't put all your eggs in one basket?
3. Save for a rainy day?
4. Don't charge, do without and save up?
5. If it is worth having, it is worth waiting for?
6. Fish (hunt) and you will eat forever?
7. What a victory garden is?
8. How cousin Billy traded and bartered from roller skates to a car?
9. Reduce, reuse, recycle before it was a catch phrase?
10. Fix it, don't discard it?
11. Show/teach by example?
My parents were product of the depression and I heard over and over how it was. Thankfully I remember a lot of it and am able to apply to my lifestyle.
| Reply by jba/fl on 9/8/09 10:26am
Msg #303130
hit post too soon: I was privileged to have this advantage. n/m
| Reply by JanetK_CA on 9/8/09 2:43pm
Msg #303168
Re: Privilege and advantage?
All good advice. And I'm sure we'd all be better off if more people had followed it more closely! However, all it takes for most - even the ones who have lived by these principles - is one bad diagnosis, accident or other crisis, to find out that it may not be enough anymore.
| Reply by jba/fl on 9/8/09 6:23pm
Msg #303195
That is so very true Janet. n/m
| Reply by Shoshana/AZ on 9/8/09 8:32am
Msg #303117
Re: So these folks never thought tomorrow would come?
Yes, Marie Antoinette, Let them Eat Cake!
| Reply by jba/fl on 9/8/09 1:07am
Msg #303112
Re: What happened to personal responsibility?
"They also have no idea how to apply for food stamps, etc. "
This is not the first time you hav e made this statement. Disagree strongly. Google is your friend is not a foreign concept to anyone who is computer literate, and most in the US are computer saavy. I would hazard to guess that many don't want to be on food stamps instead of not know how. Apply online - very easy.
"It's the law that if a person shows up at an ER, they have to be treated whether or not they have insurance or money to pay for the treatment."
I don't know where that is "the law", as in FL the only thing that is required of the ER is to stabilize the patient, then send them on their way. Treatment is sometimes not an option. I have been to the ER and have asked people who are waiting how long they have been waiting - some over 24 hours, and still they wait. Was trying to gauge our wait, but the seriousness must have been greater (or the money available - I don't know) Perhaps they left when they felt better, again I don't know. But, if one comes in with a heart attack, once they are stable, they are sent home.
| Reply by jba/fl on 9/8/09 1:07am
Msg #303113
Re: What happened to personal responsibility?
"They also have no idea how to apply for food stamps, etc. "
This is not the first time you hav e made this statement. Disagree strongly. Google is your friend is not a foreign concept to anyone who is computer literate, and most in the US are computer saavy. I would hazard to guess that many don't want to be on food stamps instead of not know how. Apply online - very easy.
"It's the law that if a person shows up at an ER, they have to be treated whether or not they have insurance or money to pay for the treatment."
I don't know where that is "the law", as in FL the only thing that is required of the ER is to stabilize the patient, then send them on their way. Treatment is sometimes not an option. I have been to the ER and have asked people who are waiting how long they have been waiting - some over 24 hours, and still they wait. Was trying to gauge our wait, but the seriousness must have been greater (or the money available - I don't know) Perhaps they left when they felt better, again I don't know. But, if one comes in with a heart attack, once they are stable, they are sent home.
| Reply by MikeC/NY on 9/7/09 4:02pm
Msg #303086
Re: What happened to personal responsibility?
"Adults over the age of 18 signed contracts promising that for the bank to lend them the money they'd pay it back. The terms were there, they signed the note and they moved in. Now that they can't for whatever reason meet their end of the contract, it becomes the lenders responsibility to "help" their partner in continuing to meet the contract."
Yeah, but - the lenders who took federal bailout money to stay afloat owe a little "quid pro quo". And while it's true the borrowers should have known what they were signing, the lenders aren't standing there with clean hands - they knew or should have known that they were making risky loans, and they certainly didn't go out of their way to disclose the dangers. To suggest that only the borrowers bear a responsibility here is to only look at one side of the story. Greed blinded everyone in the transaction.
The problem now, as someone else pointed out, is that many of these lenders don't own the loans - they were sold to investors, and the investors call all the shots. Even if the lender WANTED to help, their hands are tied. It's so confusing that there's a judge in Brooklyn, NY, who has been dismissing foreclosure lawsuits because no one knows who legally holds the note.
Probably the only lenders who have free rein to modify the loans now are the ones who kept the loans in their own portfolios - and most of those didn't make risky loans in the first place...
| Reply by Shoshana/AZ on 9/7/09 5:15pm
Msg #303092
Re: What happened to personal responsibility?
Sure they did. The most well-known portfolio lender who did options arms was World Savings. I believe they invented the option arm.
| Reply by MikeC/NY on 9/7/09 10:37pm
Msg #303101
Re: What happened to personal responsibility?
Could be, but they were bought by Wachovia in 2006, and Wachovia has since been bought by Wells Fargo. Any portfolio lender that still exists today cannot be surviving on risky loans made 5 or 6 years ago and now going south...
The point is that they're the only ones who can easily modify loans if they want to, because they actually own the loans. Once the mortgages got sliced, diced, and securitized by the investment banks, the fate of the loans were out of the lender's hands.
| Reply by Joan Bergstrom on 9/7/09 10:55pm
Msg #303104
What sort of "hit " does a homeowner take on a short sale?
How much worse does your credit rating go when you do a short sale and miss 90 days of payments compared to a foreclosure where you have probably missed several months of payemtns?
| Reply by Shoshana/AZ on 9/7/09 11:54pm
Msg #303108
Nobody can tell you that for sure.
However, I have heard that a short sale is less of a hit than foreclosure.
| Reply by MikeC/NY on 9/8/09 9:39am
Msg #303124
Re: What sort of "hit " does a homeowner take on a short sale?
It's factored into the FICO score, so I don't know what the hit really is - only that it is less than a foreclosure. It may have something to do with the amount they were short. They will definitely take a hit - the bank may have forgiven part of the debt, but they still didn't pay what they owed and that will affect their credit rating. My understanding from talking to mortgage people is that a foreclosure stays on your credit record for 7 years, while a short sale stays for 4 or 5. I'm not sure how accurate that is.
You don't have to be in default to do a short sale, so they aren't necessarily 90 days late. In fact, 90 days late will probably cause the lender to file a lis pendens - then you're in foreclosure proceedings, and that just complicates things even more. The attorneys I know who do this kind of work counsel their clients to stay current if they can.
| Reply by Shoshana/AZ on 9/7/09 11:58pm
Msg #303109
Re: What happened to personal responsibility?
I have heard that homeowners can find some relief in bankruptcy court, no matter who owns the loan.
Actually, option arms and stated income loans were still being closed as recently as 2007. World was still writing loans in 2007. I know because I closed mine in March 2007.
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