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Most of the major banks have revealed plans to help troubled homeowners by modifying their loans. These loan modification programs have been created to help a wide range of borrowers and each bank has its own guidelines.
Click on the links below to see a detailed chart of the various modification programs available for each bank. Each chart contains information such as eligibility requirements, who to contact to apply, and costs associated with the program.
Foreclosureradar.com released its California Foreclosure Report for October 2008. Notice of default filings were up by 2.8% but dropped 42.3 when compared to this month last year. The statewide findings are very similar to what we found for Shasta County foreclosures.
| Foreclosure sales dropped by 39.1 percent from the prior month, due to significant increases in cancellations and postponements, the company said.
Under California law, scheduled foreclosure sales can be postponed for a period of up to one year, until they are either canceled or sold. According to ForeclosureRadar, cancellations, where the home is taken out of foreclosure, increased by 78 percent in October, resulting in nearly 20 percent of foreclosure sales scheduled for the month being called off. Notice of Default filings, which start the foreclosure process, continue to be significantly impacted by CA State Senate Bill 1137, as lenders work through the new requirements the law imposes, ForeclosureRadar said. Based on the company’s data, however, Notices of Trustee Sale rebounded after a significant drop the prior month. A summary of ForeclosureRadar’s findings include: – Notice of Default filings increased slightly in October, up 2.8 percent from September, to a total of 16,810 filings. Year over year, Notice of Default filings are down 42.3 percent. – Notices of Trustee Sale, which schedule the auction date and time, increased by 32.9 percent in October, to 25,408 filings. Despite the significant increase, this level of filings remains well below average levels earlier this year, as September levels were clearly impacted by CA State Senate Bill 1137. – Properties taken to sale at auction declined by 39.1 percent from September, to 14,042 sales, with a combined loan balance of $6.39 Billion. This represents a 28.8 percent increase from the prior year. – Lenders took back 94 percent of the properties taken to auction, with a combined loan value of $9.19 Billion. Third party purchases declined 24 percent from the prior month, but increased 25 percent (as a percentage of all foreclosure sales), due to the decline in sales activity. “It is important to note that the significant decline in October foreclosure sales cannot be directly attributed to CA State Senate Bill 1137,” said Sean O’Toole, founder of ForeclosureRadar. “There were nearly 60,000 properties scheduled for sale at the beginning of October over which the law had no affect. The drop in foreclosure sales, therefore, can only be reasonably attributed to changes introduced by the lenders themselves and not in response to SB 1137.” The increase in cancellations was led primarily by Countrywide, ForeclosureRadar stated, which saw a 460 percent increase in cancellations from the prior month, and a 48 percent decline in the number of properties they sold at auction. In early October, Bank of America, which acquired Countrywide earlier this year, announced an aggressive loan modification program for Countrywide borrowers who financed their homes with subprime or pay option adjustable rate mortgages (ARMs). Other lenders in California had similar drops in foreclosure sales, though more often due to postponement, rather than cancellation, ForeclosureRadar reported. Statewide, the percentage of foreclosure sales that had postponed at least once, increased from 36 percent of sales to 58 percent of sales, with the average length of postponement increasing from 24 days to 42 days. “It would be a mistake to conclude that the declines in foreclosure activity indicate that the foreclosure crisis is over,” O’Toole warned. “While lenders now appear to be embracing the concept of foreclosure moratoriums and loan modifications, neither typically address the core issue of negative equity. Most loan modifications focus on lowering payments to affordable levels by using unsustainably low interest rates, not unlike the ‘teaser rates’ that many have blamed for the current crisis.” Based on ForeclosureRadar’s October data, average discounts offered by lenders on the outstanding loan balance at foreclosure auction declined slightly from prior months, and averaged 36.1 percent statewide, with 33 percent of properties taken to auction being offered at discounts of 50 percent or more. |
California Governor Arnold Schwarzenegger unveiled an aggressive proposal yesterday that he says will bring down foreclosure rates in the state by helping both borrowers and lenders modify existing home loans in ways that benefit both parties, and at the heart of his plan is a state-wide 90-day halt on foreclosure proceedings. Earlier today, Schwarzenegger called a special session of the state legislature to immediately address his foreclosure relief plan, as well as other economy and budget issues.
“The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes – and I am presenting a plan to do just that,” said Governor Schwarzenegger. “Curtailing foreclosures will stop the downward spiral of home prices, free up needed cash for homeowners, help save jobs and make an immediate positive impact on our economy.”
Schwarzenegger’s plan encourages loan modifications with incentives for lenders and servicers. Initially, the program calls for a 90-day stay of foreclosure for each owner-occupied home subject to a first mortgage on which a Notice of Default (NOD) has already been filed. But, it also provides for a “Safe Harbor” under which lenders will be exempt from the 90-day moratorium if they provide evidence to the state’s head banking official that they have an aggressive modification program already in place. The Governor’s office defines an “aggressive modification program” as one “designed to keep borrowers in their homes where doing so will ultimately bring investors a better return than simply foreclosing and selling at a loss.”
My sister asked my opinion of home values in Redding about three years ago. At that time I suggested, “sell your home now and rent before the financial markets crash”. Needless to say, no one in my family followed my advice. The subject has come up again and I just sent my sister an email with my thoughts, see below.
| Hello Sue and Uncle Tom,
Well, actually this is your second chance to sell your home (if you have equity). There will be a window of opportunity between now and when Obama’s plans go into play. We are already headed down a perilous financial path and the election of Obama pretty much guarantees financial suicide. However, his plan could possibly work out, more on that in a minute. If you have equity in your home, sell now and find a nice rental. If you don’t have much equity in your home and the economy gets worse, as I expect, stay put as I can show you how to stay in your house without paying the mortgage for at least 9 – 10 months. I’m currently averaging 9 – 10 months with my clients now. The time span could be greater in the future. When I do a short sale for my clients we can often times keep them in their home for a year, MORTGAGE FREE. Now here’s the best part. After my clients have lived in their house mortgage free, the lender offers them cash to move out. When the lender forecloses on the house they typically offer a certain dollar amount to the previous homeowner in exchange for the house keys. In the trade, this is known as “cash for keys” or CFK. If the previous homeowner moves out and hands over the keys, they receive a check from the lender. The dollar amount of the check is typically $3,500.00 or more! There’s your first month’s rent for your new place. Another strategy involves skipping a few house payments and then have us contact your lender to do a “loan modification”. Right now we are negotiating loan modifications with APR rates between 2-4%. Don’t try to obtain these rates if you are a customer in good standing, it won’t happen. The lowest mortgage rates are strictly reserved for only the worst customers! You will get the best loan modification if I do the negotiating for you. Most homeowners don’t stand a chance dealing with ruthless loss mitigators. I guarantee they’ll trick you into singing unsecured notes or modify your loan from bad to toxic. When they are done with you, bankruptcy will begin to look attractive (providing you qualify). They will take advantage of you in a heartbeat! But wait, there’s more! For a limited time if you act fast (within the next 10 months or so) we’ll throw in a principal reduction too. Really, I’m not kidding. With some good negotiating, I have been very successful in getting the lender to lop off an additional $30-$50 thousand dollars or more. This is a principal reduction, you never have to pay it back, it’ yours to keep just for trying my services. Your credit rating will suffer using these techniques but we are finding credit card companies and even lenders are becoming understanding of these unfortunate circumstances. They’re already explaining the situation away by saying “oh, that was late 2007 or early ’08 when the mortgage meltdown occurred, it’s really not your fault.” By now I suspect you think I am being facetious. Well, I’m not. I’m dead serious. This is how I have earned my living the last three years. I’m having my best year ever at the expense of the lenders and the tax payers bailout money! Oh, thank you GOD! Now here’s why Obama’s plan could work. Things are already pretty bad and we could be facing a full-on depression, even without Obama’s help. If Obama is successful in crashing the economy (and I think he will be) the destruction will happen very fast. Just like tearing a bandage off a wound. It’s very painful but it’s over fast. By crashing the economy, everything will become more affordable. As an example, I’m already able to sell homes to first time homebuyers again. Prices will fall across the board including health care. Thus, the burden on Social Security and Medicare etc. could actually become affordable again. And, if you sold your house, you’ll have cash to pick-up most anything you want for pennies on the dollar. Remember, cash is king during recessions or even survival in a great depression. By collapsing the economy we will effectively “spread the wealth” by making affordable the things that only the middle class and wealthy could afford in the past. And…the economic cycle starts over again. Typically, the biggest hoarders of wealth are older individuals and they will be too old to do anything about it and will be dead in 15 years or less anyway. Problem solved! Well, maybe. There are many things I can’t foresee and the plan could definitely backfire. Such as; the biggest contributors to today’s society, the top 3 percent of the population are rich enough to take a financial hit and still continue their comfortable lifestyle. However, when you do this to the top producers of the economy you also take away their incentive to do anything more. Therefore, since they are typically older individuals anyway, they could simply take their bat and ball and go home. And…enjoy the rest of their life while the masses fight over the diminishing handouts. If this scenario actually happens, you and I have little to worry about because it won’t get real bad until you and I are pushing up daisies. In my opinion, the real losers will be the people that are currently under 48 years old while the young people, those under 23 years old will possibly end up with the best deal. That is…if the plan works. Unfortunately, it’s my opinion the plan will experience a wholesale failure for at least a generation or more. To guess what this scenario would look like you have to look no further than any third world country of your choice. -Bill |
Nearly 400,000 Countrywide borrowers could benefit after program launches January 1st.
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CALABASAS, CA – Bank of America today announced the creation of a proactive home retention program that will systematically modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide Financial Corporation customers nationwide. The program was developed together with state Attorneys General and is designed to achieve affordable and sustainable mortgage payments for borrowers who financed their homes with subprime loans or pay option adjustable rate mortgages serviced by Countrywide and originated prior to December 31, 2007. Bank of America acquired Countrywide July 1, 2008. "We are confident that together with the Attorneys General we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained home ownership," said Barbara Desoer, president, Bank of America Mortgage, Home Equity and Insurance Services. "Since acquiring Countrywide in July, we have committed significant resources and developed innovative programs to help as many Countrywide customers as possible stay in their homes." Countrywide mortgage servicing personnel will be equipped to serve eligible borrowers with new program elements by December 1, 2008 and will then begin proactive outreach to eligible customers. Foreclosure sales will not be initiated or advanced for borrowers likely to qualify until Countrywide has made an affirmative decision on the borrower’s eligibility. The centerpiece of the program is a proactive loan modification process to provide relief to eligible borrowers who are seriously delinquent or are likely to become seriously delinquent as a result of loan features, such as rate resets or payment recasts. Various options will be considered for eligible customers to ensure modifications are affordable and sustainable. First-year payments of principal, interest, taxes and insurance will be targeted to equate to 34 percent of the borrower’s income. Modified loans feature limited step-rate interest rate adjustments to ensure annual principal and interest payments increase at levels with minimal risk of payment shock. Modification options include, among others:
The program applies to eligible mortgage loan customers serviced by Countrywide and who occupy the home as their primary residence. Under the national program, Countrywide will not charge eligible borrowers loan modification fees, and Countrywide will waive prepayment penalties for subprime and pay option ARM loans that it or its affiliates own. Some loan modifications will be subject to compliance with servicing contracts and some will require investor approval. "Now more than ever homeowners and home buyers are looking to Bank of America as the lender they trust and as a leader that can renew America’s confidence in home ownership," said Desoer. "Combined with our strong track record in responsible lending and previously announced lending practices commitments, this bold new program makes it clear that Bank of America is committed to be the leader in responsible mortgage lending practices." As part of agreements to resolve outstanding claims against Countrywide by certain states, borrowers in participating states will additionally be eligible to access their share of:
As part of the state agreements, Countrywide is further committing to eligible borrowers in participating states that it will waive late fees associated with a borrower’s default in finalizing modifications under the program. In addition, states that have not yet become participants in Bank of America’s program will be provided an opportunity to do so, which would enable their residents to become eligible for these benefits. "Our program represents principal and interest reductions over time to borrowers on loans Countrywide owns and on loans Countrywide services on behalf of investors," said Joe Price, Bank of America Chief Financial Officer. "By taking projected foreclosure losses and instead directing those funds into these proactive foreclosure prevention efforts, we create a solution in the best interests of both our customers and the investors whose loans and securities we service. Of the eligible loans, about 12 percent are now held by Bank of America. The cost of restructuring these loans is within the range of losses we estimated when we acquired Countrywide." |
More information can be found on Countrywide’s website
Interesting article today on DSNews.com. According to a study by Credit Suisse & Moody’s a lot of loan modifications are failing and borrowers are becoming deliquent within 8 months.
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One third of all subprime loans modified in the third quarter of 2007 were delinquent again within 10 months, according to a Credit Suisse report. A study by Moody’s ratings agency showed similar results. Looking at subprime adjustable-rate mortgages (ARMs) modified in the first half of 2007, the agency found that by March 2008, only a third were still current or had been fully paid, and two-thirds had fallen back into default.
Last month, the HOPE NOW Alliance reported that its members had made 98,000 loan modifications in September alone – a monthly record for modification workouts. While the industry is pressing forward with trying to preserve homeowners’ American dreams by offering modifications instead of proceeding with foreclosure, these studies show that there are still challenges to lenders’ loss mitigation efforts. Consumer groups argue that part of the re-default problem is lenders’ reluctance to make the sorts of changes that will really improve a homeowner’s chances, a report in Time magazine said. Many think of a loan modification as lowering interest rates or reducing the overall loan balance. However, one of the most widely used adjustments is to simply spread missed payments over the remaining life of the loan, which has the contrary effect of raising, instead of lowering, the homeowner’s monthly payment. According to the nonprofit Center for Responsible Lending (CRL), nearly half of the loan modifications reported by HOPE NOW have left homeowners with the same or higher monthly payments, Time reported. Going back to that Credit Suisse study, researchers found that 44 percent of loans with increased monthly payments became at least 60 days delinquent within eight months. On the other hand, reducing interest rates or principal had a much better chance of working. According to data from Credit Suisse, only 15 percent of loans that had received an interest-rate reduction and 23 percent in which the principal balance had been reduced were more than 60 days delinquent after eight months. With approximately 3.5 million U.S. homeowners currently behind on their mortgage payments, lenders face pressure from every side to find a workable solution to stave off foreclosure. Long-term modifications that bring mortgages into the range of “affordable” allow homeowners to stay in their homes, lenders and investors to recover more capital than they would see from a foreclosure in today’s market, and mean that fewer vacant, foreclosed properties hit the marketplace. Many would argue that’s a “win” on every side. |
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