Loan Modification Explosion

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BofA/Countrywide Lags Other Lenders in HAMP Loan Modifications

Oct 17

Posted by admin in Bank Of America, Featured, Foreclosure Crisis, Loan Modification News, State Help | 1 Comment

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Hampered by its takeover of Countrywide with its huge mortgage portfolio, Bank of America is lagging other big lenders in getting loans modified under the government’s Making Home Affordable program.According to Treasury Department data, only 11 percent (about 95,000) of Bank of America’s delinquent borrowers potentially eligible for the program have been given a loan modification, the Washington Post reported.

That compares with 27 percent, or 117,000, for JP Morgan Chase; 33 percent, or 68,000, at Citigroup; and 41 percent, or 32,000 for Morgan Stanley’s Saxon Mortgage Services.

At its Dallas area command center for the program, BofA is scrambling to get 125,000 loans into the Home Affordable Modification Program (HAMP) by the November deadline set by the Obama administration, the Post said.

BofA has doubled the number of employees handling loan modifications to 11,000, and the bank still has 240 openings.

But other lenders have done more, the Post reported. Wells Fargo said call volume tripled after HAMP was announced in February, prompting the bank to hire an additional 5,800 employees for loan modifications. Citigroup increased its loss-mitigation department from 450 employees in early 2008 to more than 4,000.

BofA’s effort has been hamstrung by a staff shortage and by adapting its computer systems and even fax machines to the scale of the program, the Post said.

Also, the bank initially took a conservative approach, requiring that borrowers document their income and complete other paperwork before granting preliminary approval for a modification. In August, BofA eased the requirement and began authorizing some modifications without getting all the documents first.

There was also a letter to eligible customers that gave them wrong information about the requirements and suggested BofA was not participating in the program, according to the Post.

BofA’s more than doubled its mortgage portfolio with the acquisition of Countrywide, which had a loan portfolio heavy with risky mortgages and delinquent borrowers.

Bank of America has a lot riding on the foreclosure prevention program, the newspaper said. The company stands to collect about $6 billion – some of which will be passed on to investors – of the $75 billion the administration has set aside for the Making Home Affordable program.

Federal Foreclosure Prevention Program Reaches Goal Early

Oct 8

Posted by admin in HUD, State Help | No Comments

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The Obama administration reached its goal of signing up 500,000 borrowers for its foreclosure prevention program three weeks early, government officials said Thursday morning.

The program, known as Making Home Affordable, got off to a bumpy start when it was launched in March, prompting the administration to set a goal of helping 500,000 borrowers by Nov. 1st. Under the $75 billion government program, lenders are paid to lower borrowers’ mortgage payments and the administration has said it will help up to 4 million borrowers before expiring in 2012.

“We’re very pleased to have reached this goal of half a million borrowers almost a full month ahead of target, but we obviously have a lot more to do,” Shaun Donovan, secretary of the Department of Housing and Urban Development.

Senior industry executives are meeting with Treasury officials to discuss progress on the program Thursday afternoon. The Treasury Department will also issue its monthly report card ranking lenders’ performance on the program.

Some lenders are already trumpeting their progress. Wells Fargo said it had nearly doubled the number of modifications it started last month to 62,989. “To help Americans coping with this tough economy, we continue to work hard at keeping people in their homes,” Mike Heid, co-president of Wells Fargo Home Mortgage, said in a statement. Using the government and other loan modification programs “there is still much work ahead to preserve homeownership and to further reduce the number of foreclosed ad_icon

Bank of America said it had helped 95,000 borrowers under the program so far, and was on track to help 125,000 by November. “We feel really good about the momentum,” said Steve Bailey, Bank of America’s home retention strategies and policy executive.

The government program has likely depressed the number of foreclosures this year by about 7 percent to 8 percent during the last six months, said Paul Dales, U.S. economist for New York-based Capital Economics. But some of the borrowers helped by the program may have been able to avoid foreclosure on their own and others may still default on their loan later, said Dales.

“What it won’t do is stop foreclosures from rising,” Dales said. “It will just rise by less.” But not all parts of the government program are operational. After announcing in April that borrowers with a second mortgage could see payments on those loans reduced significantly as part of the program, the administration has yet to sign contracts with lenders to implement it. Homeowners and consumer groups continue to complain that qualified borrowers are being rejected by lenders and that there isn’t a clear appeals process.

The administration has said lenders would be eligible for incentive payments under the program if they signed up borrowers to Hope for Homeowners, which refinances distressed borrowers into cheaper mortgages. But unlike a traditional modification, this program lowers the borrower’s principal balance, potentially providing equity to hundreds of thousands borrowers who owe more than their home is worth because of falling home prices. But months later, the Hope for Homeowners program has not been relaunched.

It is also still too early to tell, for example, how many of those borrowers will make it through the trial period of a modification, the first three months, or might redefault on their loans later, a senior administration official acknowledged. Under pressure to accelerate progress on the program, it will be critical to determine whether all of the modifications can be maintained, said Howard Glaser, a housing industry consultant and a housing official during the Clinton administration.

“I think there is no question that loan modification efforts have accelerated. They are moving at a respectable clip,” Glaser said. “That said, when the numbers come out they are going to require some scrutiny to make sure they are sustainable modifications being made.”

Mortgage delinquencies continue to rise across America

Apr 8

Posted by admin in Featured, State Help | 4 Comments

Foreclosure RatesMortgage delinquencies continue to rise, and re-defaults of modified mortgages are high, and getting worse, according to a report released Friday by regulators who oversee banks and thrifts.

The report, which covers the fourth quarter of 2008, showed that fewer than 90 percent of mortgages were being paid on time, a three-percentage-point drop from a year earlier.

The Office of the Comptroller of the Currency and the Office of Thrift Supervision report covers mortgages serviced by nine large banks and four thrifts — two-thirds of all outstanding mortgages.


Subprime mortgages, which were issued to people with checkered payment histories, have the highest level of delinquency, but the delinquency rate among prime borrowers is growing fastest. From March 31, 2008 to Dec. 31, 2008, the percentage of prime borrowers who were at least 90 days late on their mortgages more than doubled, to 2.4 percent.

There are now more than 550,000 prime mortgages more than 90 days overdue, and for the first time, that number surpassed the subprime tally. The subprime loans are failing at much higher rates, however — more than 16 percent are seriously delinquent.

Servicers are trying to do workouts with borrowers who have missed payments or who know they cannot pay once an adjustable rate takes effect. But a significant minority of those modifications fail. For modifications done in the first quarter, 41 percent of borrowers defaulted again within eight months, and for those in the offered during the second quarter, 46 percent defaulted again.

Third-quarter modifications, which only had five months of history at the time of the report, had already shown 43 percent re-default rate.

In all those cases, borrowers had missed at least two months of payments in that time.

Regulators said it’s not clear whether the worsening economy is to blame, or the unrealistic original mortgages. But one factor is the fact that mortgage workouts don’t necessarily translate into a more affordable mortgage. Because many lenders add the late fees and missed payments to the cost of the loan, in 32 percent of cases, the borrowers had a higher payment after the modification.

When modifications lowered payments, re-defaults were much lower.

“This new data shows that, in the current stressful environment, modification strategies that result in unchanged or increased mortgage payments run the risk of unacceptably high re-default rates,” the Comptroller of the Currency John C. Dugan said in a statement released with the report.

Lee writes for the Washington Business Journal, an affiliated publication to the San Antonio Business Journal.

Loan Modification Frequently Asked Questions Hud.gov

Mar 10

Posted by admin in Loan Modification Tips, State Help, free foreclosure help | 7 Comments

A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.

Question 1: In utilizing the Loan Modification option to bring an asset current, can the mortgagee include all fees and corporate advances?

Answer: Mortgagee Letter 2008-21 states in part: Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.

Question 2: May a mortgagee perform an interior inspection of the property if they have concerns about property condition?

Answer: Yes, the mortgagee may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the mortgagor’s continued ability to support the modified mortgage payment.

Question 3: Can a mortgagee include late charges in the Loan Modification?

Answer: Mortgagee Letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the Loan Modification.

Question 4: When utilizing a Loan Modification option, can a mortgagee capitalize an escrow advance for Homeowner’s Association fees?

Answer: HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow Obligations states: Mortgagees must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage.

Question 5: Is there a new basis interest rate which mortgagees may assess when completing a Loan Modification?

Answer: Yes, Mortgagee Letter 2008-21 states that the new basis interest rate is 200 points above the monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of 10 years.

Question 6: Will HUD subordinate a Partial Claim, should a mortgagor subsequently default and qualify for a Loan Modification?

Answer: If a mortgagor subsequently defaults and qualifies for a Loan Modification, HUD will subordinate the Partial Claim.

Question 7: Are mortgagees required to perform an escrow analysis when completing a Loan Modification?

Answer: Yes, mortgagees are to perform a retroactive escrow analysis at the time the Loan Modification to ensure that the delinquent payments being capitalized reflect the actual escrow requirements required for those months capitalized.

Question 8: Is the mortgagor eligible for the upfront premium refund at payoff of a modified loan?

Answer: It depends upon when the closing date occurred. For assets closed:

After July 1, 1991 but before January 1, 2001, the 7-year unearned premium refund schedule shown in Mortgagee Letter 1994-1 remains in effect,

On or after January 1, 2001 that are subsequently refinanced, the 5-year refund schedule shown in the attachment of Mortgagee Letter 2000-46 applies, or

On or after December 8, 2004, refunds of upfront MIP are eliminated except, when the mortgagor refinances to another FHA insured mortgage. The refund schedule attached to Mortgagee Letter 2005-03 has been modified to a 3-year period.

Question 9: Can a mortgagee qualify an asset for the Loan Modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?

Answer: Based upon this scenario, the mortgagee should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the mortgagee should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.

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