Tag Archive for 'foreclosure help'

You had a job yesterday, but don't today. Your wife got sick. Your car gave up the ghost. And paying your mortgage just got a whole lot harder, maybe even impossible. So what's next? Do you go hat-in-hand to your lender and beg for help? That's been the advice of most columnists and bloggers, including this one--speak to your lender as soon as possible, come up with reams of paperwork, and you will get the help you need. Except that method hasn't been working very well.

Why? Your original lender is probably out of business, the funders got their money back, and the investor who bought the loan was insured. The tax payers bailed out the insurers. That leaves the servicer holding the bag. This company buys the right to collect your payments and keep a small percentage of what they collect, plus all the late fees and other charges. And that's why they like to drag out the process, tacking numerous fees onto your loan and making you jump through a gazillion hoops before ultimately informing you that they can't or won't modify your loan. While they don't really want to take your home, they do want every spare cent they can steamroll out of you. And they don't care if they squish you flat in the process.

So, what should you do then, if having a conversation with your servicer is out of the question?

You want to slow them down first. Maybe a little time can solve your problem--you may find a new job, save money, get well--and get back on your feet. Then, decide what you want to accomplish and how you want to go about it. First, do you want to keep your home or just drag out the foreclosure? If you are underwater and have no way of making payments, dragging it out may be the best outcome you can hope for.

Next, find out if your loan was sold as part of a securitized pool of mortgage backed investments. This means that the lender that underwrote and funded your loan no longer owns it--a source of frustration for those looking for modifications, but which could mean opportunity for you. Fannie Mae and Freddie Mac have been doing it for years, but so do others--that's how sub-prime loans ended up being packaged and sold as high-quality investments. Oops.

The cool thing is that the very thing that makes it so hard to get these loans modified also makes them very hard to foreclose on--if you know how to fight it. If you want to keep your home and you live in a state that does not require the foreclosing entity to take you to court, a non-judicial foreclosure state, you have to sue. Yes, it's intimidating and possibly expensive, but unless the lender has followed legal foreclosure procedure to the letter, you could wind up owning your home without a mortgage. Ask a lawyer. Even if you've already lost your home, you might get it back.

Do you have a MERS loan?

No, it's not a respiratory disease. MERS stands for Mortgage Electronic Registration Systems. It was developed by the real estate finance industry and sold as a way to "eliminate the need to prepare and record assignments when trading residential and commercial mortgages." But now it's biting a lot of servicers on the butt--a MERS filing means that your loan has been securitized in a way that could make foreclosure impossible. Go to your County Recorder's Office or look up your filings online and see if MERS is recorded on your deed. If your loan has been assigned through MERS, your note and the trust deed may have been separated, or the lender may not be able to produce the note at all. Oops.

In a judicial foreclosure state, , the lender has to sue you. So demand to see the original note (not a copy). You may be able to find a TIL or RESPA violation and stop the foreclosure in its tracks. Keep in mind that lenders have been known to try and manufacture evidence--get a good real estate lawyer, not the guy who did your will ten years ago.

Are there RESPA and/or TILA violations in your loan documents?

In a non-judicial foreclosure state, this is your best shot at winning. Loan paperwork can be sloppy and not unlikely to have one or more violations of the Real Estate Settlement Procedures Act (RESPA) or Truth in Lending Act (TILA). You will need a legitimate Forensic Loan Audit to see if there are violations and what your compensation should be. This should cost between $350 and $1,500.

So, to recap:

1. Decide if you want to keep your home or just drag out the foreclosure while you try to save money and find another place to live.
2. See who owns your loan by checking with your county recorder. If your loan is being held by your original lender and not sold, call its workout department and try for a modification.
3. If your loan has been securitized, check to see how foreclosure is handled in your state. Then, call in a good real estate lawyer.

Who knows? You could end up living rent-free for a long time or even getting your home with no mortgage.

This is not intended to be taken as legal advice and does not necessarily represent the opinion of MortgageCreditproblems.com or its publisher.

Starting today, thousands of borrowers facing foreclosure will be able to stay in their homes and avoid the trauma of being evicted. Fannie Mae's new "Deed for Lease" program allows impossibly situated borrowers to transfer their home ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that. Yes, you still lose your home--but you avoid explaining to your kids why they have to squeeze into a crummy apartment and change schools, you don't have to schlepp from landlord to landlord and blush whenever they check your credit, and you don't have to add the joy of moving to your holiday celebrations. Not a small thing.The program is designed to eliminate some of the uncertainty of foreclosure, for instance children having to change schools during the year, and help stabilize neighborhoods shell-shocked by recession fallout. Tenants of landlords in default will also be able to benefit from the program, avoiding eviction by lenders when the owner fails to pay the mortgage.

This is a variation on the practice of accepting a deed-in-lieu of foreclosure, which requires the owner to surrender the property and allows all parties to avoid expensive foreclosure proceedings. But it hasn't been widely used--in the first half of the year, Fannie Mae took back about 1,200 properties through this process, while foreclosing on 57,000 properties during the same period.

The rental program is designed to help homeowners who don't qualify for a loan modification under the Obama administration's Making Home Affordable plan, but still want to remain in their homes. Say for example that you are an unlucky homeowner in Las Vegas. You bought a $300,000 home with 5% down and a mortgage payment of $2,200 a month payment including taxes and insurance. Now that house is worth $150,000, you lost your job, and your new one only pays $2,500 a month. You don't earn enough to qualify for a modification under the Home Affordable Modification Program (yes, you discovered that under making Home Affordable, if you are too poor to make a modified payment, your lender will keep expecting you to make a larger one--go figure). However, you could easily pay the fair market value of the rent on the house at $775 a month. And Fannie Mae will not put your home up for sale during the one-year rental period.

To qualify for Deed for Lease, you have to live in the home as your primary residence and prove that you can afford the market rent. The rent can't be more than 31% of your household's gross monthly income. To see if you are eligible for Deed for Lease, contact your loan servicer.

Yes, rates are low. And if you are paying over 6% on your mortgage, you should probably look into refinancing and saving some money. However, not everyone who could benefit from refinancing will be able to do so. Here are three reasons you may not be able to refinance--and what you can do about them.

I. Your Mortgage Is a Stated Income Loan
Many people chose stated income mortgages in the past, for many reasons. Some had businesses that were making a lot more money than they had done in the past--and conventional underwriting would not allow them to count all of that income. Others had businesses with very long cycles, like property developers--a lot of money goes out for a long time before the profits come in, and normal underwriting isn't equipped to deal with it properly. Some people have income that is hard to prove--ever try to get canceled support checks from an uncooperative ex? Finally, some were just "optimistic" about their income and, um, "exaggerated" it to get a bigger house--and a big payment that they're stuck with now.

But whatever your reasons for taking out a stated income mortgage, you won't be able to refinance with one. For now, those programs are rare-to-non-existent. What can you do? If you get support income, make copies of every check when you get it, and deposit it separately from any other funds. If you have business income, keep very careful records, and in time your financial statements should reflect your cash flows. Make sure that your tax returns show all of your income. And you can always amend your previous returns too. Even to get a loan modification, you have to prove your income--start bringing your finances in line now.

II. Your Property Value Has Tanked
You bought your home with a solid down payment, and expected its value to grow over time. But so far, its value has dropped instead, and your down payment went into a black hole somewhere. You don't have enough equity to refinance, and it's frustrating--you could save a lot of money if you could just get the interest rate down.

Have you tried playing the HARP? The Home Affordable Refinance Program was designed to help people with your problem get a refinance. If your current mortgage is with Fannie Mae or Freddie Mac (click HERE to see if it is) and the property is a one to four unit home and is your primary residence, you can refinance up to 125% of its current value. And if you didn't need mortgage insurance when you bought your home, you won't need it now. If you currently have mortgage insurance, you need the same coverage that you currently have. The challenge is that MI companies are reluctant to write these policies; you will have to get your current policy holder to rewrite it.

III. Your Credit Is a Mess (and Underwriters Are Pickier!)
You were able to get your loan approved before (barely) but since then you may have lost a job, had a medical crisis, or your credit lines were cut just when you needed extra cash for an emergency. Anyway, your credit score is at a lowly 600, just when lenders have raised their minimums to 700. You can't qualify for a better loan right now. Except maybe you can. FHA lenders are still making loans--to 96.5% of your home's value (85% for cash out refinancing). You'll have to prove that you have enough income, and any financial difficulties need to have been put behind you, but a 600 credit score won't stop you from getting an FHA refinance. Check to see if your loan amount falls within FHA loan limits in your area.

If you can't refinance now and are barely hanging onto your home, modification may be the answer. Even if you don't qualify under the Home Affordable Modification Program (HAMP), your lender may work with you to keep you out of foreclosure. Call your lender and plan to hang in there for some time. Here are the rules that some lenders use when determining if they are going to help you out.

1. You have to prove your income and declare your assets. Just like qualifying for a home loan, you have to qualify for a modification. If your mortgage payment isn't more than 31% of your gross income, you won't get a modification. If you have any assets like investment accounts, or even retirement money, you'll have to use them to keep up with your mortgage payments before you'll get help from your lender.
2. If you have equity in your home, you are less likely to get a modification. If a lender can recoup its money by foreclosing, it will probably choose to do so. But if you have equity, perhaps selling or refinancing is a viable option.
3. You have to have enough income to make a modified payment. If you are unemployed or underemployed, and dropping your interest rate to 2%, stretching out your loan term to 40 years, and even reducing the principal to no less than the proprty is worth won't get your payment down to 31% of your gross income, the lender is likely to cut its losses and foreclose.

For those who can't refinance and can't get a modification, credit counseling or bankruptcy are options. If you could make your housing payments but not your other payments, and they aren't tax debt, child support, or things like government-backed student loans, you might be able to get yourself out of trouble with a Chapter 7 or 13 filing. Check with a reputable attorney or credit counseling service to find out.

The Troubled Asset Relief program (TARP) was originally touted to Congress and the public as a request for funds to purchase troubled home loans, helping lenders get them off the books and loosening up money for deserving mortgage borrowers. However, once passed, that plan was junked in favor of less direct help.

TARP: What Happened to the Homeowners?
Instead of buying up bad home loans, Treasury Secretary Henry Paulson elected to purchase stock in the biggest lending institutions, in theory supplying cash to lend and thaw frozen credit markets. Treasury official Neel Kashkari claimed that this would somehow help struggling homeowners. "Our system is stronger and more stable than just a few weeks ago," he said.

New Plan Has Worked Before
The feds believe that putting money directly into mortgage markets is better because the money goes further. For every dollar banks receive, they can make more than $10 in loans because of something called the "multiplier effect." It's the way money works--for example, if a lender has $1 million in deposits it may lend $800,000 and keep only $200,000 on hand for depositors. So in effect that $1 million becomes $1.8 million. And it goes even further--that money is spent, and deposited, and loaned again, multiplying the effect of the original million on the financial system. Thos strategy has worked before: Swedish banks were successfully bailed out in the 1990s when the government bought up their stock and the economy was stabilized.

No Help for Homeowners in Sight
Unfortunately, this change means that no direct help to those in imminent danger of losing their homes will be forthcoming from TARP. FDIC Chairman Sheila Blair and House Financial Services Committee Chairman Barney Frank have warned that the foreclosure crisis will worsen to the tune of up to 5 million foreclosures over the next two years.

What Should Homeowners in Trouble Do?
If your mortgage is pulling you under, you won't get any breathing room from bailout funds. Your best chance to save your home remains with your lender, HUD housing counselors, or FHA. Hope for Homeowners has made some changes designed to help more people, increasing eligible LTVs to 96.5% from 90% and allowing 40 year terms, making refinances available to more homeowners. FHASecure allows those with ARM home loans to refinance even if they are behind on their mortgages or have credit problems--if the problems were caused by an upward reset of their ARM payment. The Treasury Department's current strategy is focused on keeping lenders afloat and driving refinance interest rates down, eventually stabilizing the economy. Those who can't wait for that should not count on help from the TARP program.

List of Lenders Who Are Participating in the HOPE for Homeowners (H4H) Program

HUD officials estimate this program could help about 400,000 homeowners to keep their houses. Today the agency released a still-growing list of lenders voluntarily participating. HUD strongly urges homeowners in trouble to contact the servicing or loss mitigation departments of their lenders as soon as possible.

If they are unable to reach someone who can help or are uncomfortable dealing with their lenders directly, there is help avaible through approved housing counseling services.

The list will be updated on Fridays. If your lender isn't on it yet keep checking. And stay in contact with its workout department. If you truly want to keep your home and can afford it (with reasonable modifications) then don't give up.

And check out the recent NINJA post for ideas on retrenching and keeping that roof over your head.

Outfits have sprung up all over offering desparate homeowners a way out -- making promises like the following, which were copied from one firm's Web site: Your lender WILL NOT be able to call you in attempt to collect! Your lender WILL NOT be able to collect any deficiency or loss they may receive by you walking ...