The Agent Center Blog

The U.S. Dept. of the Treasury and the Dept. of Housing and Urban Development (HUD) last week released updated guidance for servicers participating in the Obama administration’s Home Affordable Modification Program (HAMP).  The guidelines, designed to help improve the conversion from trial loan modifications to permanent modifications, take effect June 1.  Mortgage servicers may elect to implement the guidelines sooner.

The updated process requires that servicers collect three documents upfront:  A formal application, including a description of the hardship created by the mortgage; proof of income, such as two recent pay stubs or the most-recent profit and loss statement for self-employed borrowers; and a form authorizing the Internal Revenue Service to release tax data to the servicer.

Under the plan, servicers also will be required to respond within 10 days to an initial request for a modification.  Once documents are provided, the servicer will have one month to let borrowers know whether they qualify for a trial modification.

Foreclosure relief program riddled with flaws
Latest effort to save homes having only limited impact, faces challenges

By John W. Schoen
Senior Producer, msnbc.com
updated 6:59 a.m. PT, Tues., Jan. 26, 2010
 
Millions of Americans who are struggling to save their homes from foreclosure are trapped in a labyrinth of disappointment and misinformation created by the very institutions they’ve been told are trying to help them.

Ten months into the government’s third program in two years to stop a record wave of foreclosures, homeowners, housing counselors, consumer advocates and attorneys working with borrowers report that the latest effort is falling far short of its goal. In many cases, lenders are moving to foreclose even after homeowners get approved for loan modification, housing counselors and attorneys say.

The problem, they say, goes beyond the paperwork snafus and staffing shortages at lenders and mortgage servicers that have created massive bottlenecks for the millions at risk of losing their homes. Those have plagued the government’s foreclosure relief efforts since the first government-industry joint program, the Hope Now Alliance, was launched in October 2007.

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Administration plan aims to address emerging problem: Only a handful of homeowners are receiving permanent loan modifications.

By Tami Luhby, CNNMoney.com senior writer
November 30, 2009
 
NEW YORK (CNNMoney.com) -- As foreclosure casualties mount, the Obama administration is expected to announce additional steps on Monday to get long-term help for troubled borrowers.

Under the new initiative, the government will provide more resources for borrowers and will partner with organizations to offer homeowners assistance, a Treasury Department spokeswoman said. The plan also calls for increased transparency and accountability on the part of loan servicers.

The administration's move is its latest attempt to jumpstart its $75 billion loan modification plan, which many fear will fall far short of its goal to help up to 4 million delinquent homeowners.

While some 650,000 people have had their mortgage payments temporarily adjusted, only a fraction have received permanent modifications. More comprehensive data should be released soon, but preliminary figures show the extent of the problem.

For example, fewer than 5% of the trial adjustments on loans owned or guaranteed by Freddie Mac were converted to permanent modifications as of Sept. 30, according to the mortgage finance giant.
Looking more broadly, the figures are even lower. As of Sept. 1, only 1.26% of all trial adjustments were made permanent after three months, reported the Congressional Oversight Panel, which monitors the government's use of bailout funds.

Meanwhile, more and more people are falling into foreclosure. The combined percentage of loans in foreclosure or at least one payment past due was 14.4% in the third-quarter, according to the Mortgage Bankers Association. That's the highest the group has ever recorded.

The struggle to score more permanent modifications highlights the depth of the foreclosure problem: Officials are leaning on banks to offer more homeowners trial relief, but the real test will be whether homeowners will receive lasting help.

"No one is really sure why the conversion rate is so low," said Mike Zoller, assistant economist at Moody's Economy.com. "We're concerned these loans will eventually become foreclosures."

The problems mount under the president's plan, delinquent borrowers are put into trial modifications for several months to make sure they can handle the new payments and to give them time to submit their financial paperwork.

Borrowers that qualify for a long-term modifications can keep making the lower payments for five years. At that point, the interest rate will be set at the rate at the time of the adjustment, or about 5% today.

Loan servicers, however, say they are having trouble getting the necessary documents from borrowers, while homeowners maintain that their financial institutions are repeatedly losing the paperwork.

And once homeowners send in their forms, servicers may find these borrowers don't have enough income or have too much equity or savings to qualify. Or it may just be more profitable for the bank to foreclose on the home than modify the mortgage.

While the foreclosure rate has eased a bit recently, some experts fear foreclosures will start rising again unless more people receive permanent assistance.

"Everyone is going to be shocked at the low conversion rates from trial modifications to permanent modifications," said Guy Cecela, publisher of Inside Mortgage Finance, a trade publication. The president's program "won't result in a significant number of loans being modified and won't put a significant dent in foreclosure rates."

To be sure, the initiative is still in a relatively early stage. The number of trial modifications did not really start ramping up until the fall, after administration officials pushed servicers to get more people into the program.
More recently the administration and servicers have lessened the documentation requirements and even hired firms to go door-to-door to assist borrowers with collecting the necessary paperwork.

Critics, however, say these measures are not enough. The main problem is that the Obama plan does not address the key factor behind the rising foreclosure rate, which is soaring unemployment. The loan modification plan is not designed to help people with little or no income.

Who is getting help?
Announced in February and launched in April, the foreclosure prevention program seeks to put troubled homeowners into mortgages where the monthly payments are no more than 31% of the borrowers' pre-tax income.

Some 650,000 people have been placed in trial modifications, which were originally intended to last three months but recently lengthened to five. To get into the trial period, homeowners only need to meet some basic criteria, including owing less than $729,750 on their mortgage and having monthly payments above 31% of their pre-tax income.

During the trial period, borrowers must send in the documentation needed to verify their income and expenses, including tax returns, pay stubs and bank statements. Homeowners must also be timely with their trial payments to receive long-term adjustments.

At JPMorgan Chase (JPM, Fortune 500), about 92,500 borrowers, or just over half of those in the president's loan modification program, have made more than three payments. But only 26% of those have also submitted all of the required documents.

"We're not sure why we're not getting the documents from people," said Chase Spokesman Tom Kelly, who declined to say how many permanent modifications the bank has completed.

Citigroup (C, Fortune 500), meanwhile, has converted about 1,800 borrowers into permanent modifications, said Sanjiv Das, head of CitiMortgage. The servicer has about 89,000 in trial modifications.

Citi, too, is having trouble with the documents. Often, borrowers send in paperwork that is not complete or has errors, Das said.

But Treasury's recent relaxation of the rules has allowed Citi to ramp up its efforts. In particular, servicers are now able to accept electronic signatures on tax documents instead of having to secure signed forms. As a result, the number of Citi borrowers whose files are complete has soared to 11,000, from 3,500 only three weeks ago.

"It will go up substantially" said Das, who expects Citi to place between 5,000 and 6,000 borrowers in permanent modifications by year's end.

A growing number of servicers are hiring companies to knock on borrowers' doors in hopes of getting the required income and tax statements.

"This will give [borrowers] someone they can talk to who is reliable and knowledgeable so they can turn that trial period into a permanent modification," said Brad German, a spokesman for Freddie Mac (FRE, Fortune 500), which in late September hired a firm to work with servicers to gather the needed documents from homeowners.

Many servicers, including Citi and Chase, are working with such firms. Others have tried other ways to entice borrowers to provide their documents.

Saxon Mortgage Services, which leads the pack with 44% of its eligible delinquent borrowers in trial modifications, has offered homeowners in California and Florida $25 gift cards to come to company-sponsored foreclosure prevention events with paperwork in hand.

Only about 15% of the borrowers took Saxon up on its offer, a spokesman said.

Last week, Fannie Mae announced that it was implementing a new program called Deed for Lease. Designed to help qualifying homeowners facing foreclosure stay in their homes, the program gives them the option of signing a lease in connection with the completion of a deed in lieu of foreclosure, which returns the property deed back to the lender.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of qualified borrowers may also be eligible for leases under the program. In order to qualify, both borrowers and tenants must be able to document that the new market rental rate is no more than 31% of their gross monthly income.

Leases under the program may be up to 12 months, with the possibility of term renewal or month-to-month extensions when the initial term expires.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for [loan] modifications,” said Jay Ryan, Vice President of Fannie Mae. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

While this may be true, the program has made me question its potential effects. I wonder what the overall result will be if the purging of REO’s slows down as a result of this program. If Fannie decides to hang onto properties and lease them for 12 months, won’t that prolong the housing decline? After all REO’s are always sold for far below top dollar, which gives first-time buyers and those in the financial position to buy a home the opportunity to do so, which has been helping the housing market rebound we’ve been experiencing over the last few months.

Also, going into the property management business is a rather dramatic departure for a government agency. Does this program reflect an overall change in philosophy, since up to this point they have not been in the business of owning and leasing homes? Is Fannie Mae now a competitor for other landlords and property managers?

Obviously these are questions that don’t have answers at this point, but I still think they need to be asked and the effects of this new program observed, as it could end up having a profound effect on both the housing market and the lending industry. 

by Brian Wilcher
Staff Writer, The Agent Center

Now, before I get started, please keep in mind that I am not a lawyer, nor should you consider what you are about to read as legal advice. I am just trying to pass something along that I think you should all be aware of.

In case you haven’t heard, on October 5, the Federal Trade Commission issued an update to its Guides Concerning the Use of Endorsements and Testimonials in Advertising--the first update since 1980!

This update is mainly concerned with two things; first, stopping fake blog sites where the blogger is a totally made-up person with a totally made-up story designed to sell something (you know, those fake weight loss blogs, teeth whitening blogs, and money-making blogs we’ve all seen time and again), and second, how advertisements can use testimonials and endorsements.

Now, the blogging aspect is probably not that much of a concern to you (I highly doubt that any of you have created fictional bloggers to tell wildly false stories about deals you never really closed), and I’m pretty sure you’re not too worried about the celebrity endorsement stuff (but, just in case you do happen to have celebrities in your advertisements, you might want to let them know that if they make false or unsubstantiated claims on your behalf, or if you don’t disclose that you’re paying them to say how terrific you are, they may find themselves in trouble along with you!) but the new rule about testimonials is something you need to be aware of and take care to follow!

As you probably know, in the past, you were allowed to use testimonials to describe specific successful experiences clients had with your business as long as you included a disclaimer that said something like, “Results not typical.” In other words, you were allowed to have a quote from your clients, the Joneses, on your web site or flyers that said, “Our agent sold our house the first day it was on the market!” as long as the cover-your-rear-end statement “Results not typical” was written beneath it.

From this point on, however, this is not going to cut it! According to the FTC’s web site, “Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect.”

What this means, is that just putting “Results not typical” or “Your results may vary” on your web site or flyer underneath that stellar quote from the Joneses will not keep you in compliance with the new guidelines. Instead, you’re going to either have to include a disclaimer that says something along the lines of, “Results not typical. The average client’s home sold in x number of days” or not use these kinds of testimonials at all.

So, be aware, be careful, and--when in doubt--consult an attorney so you don’t end up in a heap o’ trouble!

The Agent Center Support Team
Brian Wilcher, Staff Writer

For homeowners facing foreclosure or bankruptcy--or considering a short sale of their property to avoid one or both--the effect the action will have on their credit is undoubtedly a huge concern. Though keeping their homes might not be an option at this point, there could very well be another one in the not-too-distant future, so knowing when they’ll be eligible to qualify for another mortgage is important.

Earlier this year, Fannie Mae updated its credit guidelines for borrowers who experience one of these circumstances. And, in general, the wait time will now range from two to five years.

Homeowners who lose their properties to foreclosure or file multiple bankruptcies within a seven-year period will have the longest wait--five years.

In the case of foreclosure, additional requirements and restrictions will apply after five years and up to seven years as well, which include making a minimum 10% down-payment, having a credit score of at least 680, and having limited cash-out refinance options. Also, the purchase of second homes or investment properties is not permitted.

A shorter time limit (three years) does apply to both foreclosures and multiple bankruptcy cases if the borrower had what Fannie Mae considers to be “extenuating circumstances” that led to the foreclosure. Of course, the borrower must provide evidence and documentation that the action resulted, from, in their words, “...nonrecurring events...beyond the borrower's control that result[ed] in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.”  

Borrowers who experience a deed-in-lieu foreclosure must wait the next longest period--four years. However, if they suffered what Fannie Mae considers extenuating circumstances, then they too can qualify to have their waiting period shortened (in this case to two years).

Bankruptcies--with the exception of Chapter 13 judgments--also mean a four-year wait from the discharge or dismissal date unless--once again--extenuating circumstances apply. In that case, the wait is cut in half to two years as well.

Two years is the standard waiting period for pre-foreclosure or short sales (whether the mortgage was delinquent or not), as well as Chapter 13 bankruptcy judgments. There are no exceptions permitted for extenuating circumstances, however.

In all cases, there are several requirements that must be met before credit can be reestablished. These include:

·    Having all accounts current as of the date of the mortgage application

·    Including a minimum of four credit references (one of which must be housing-related and cover the period following the foreclosure, bankruptcy or short sale)

·    Include no more than two installment or revolving debt payments thirty days past due in the last twenty-four months, or any payments sixty or more days past due since the discharge or dismissal of the bankruptcy or the completion of the foreclosure-related action.

Of course, this is a general overview of Fannie Mae’s new credit guidelines; for more detailed information, please visit their web site.

Knowledge is power, and knowing the credit consequences of the various actions mentioned above can help a homeowner in financial trouble decide which course to pursue. As an agent, having this information to pass along to your clients, and having a resource like The Agent Center behind you to help keep you updated on the latest legislation and guidelines—as well as help you provide them with foreclosure-prevention options—can help make you their super hero!

The Agent Center Support Team

Brian Wilcher, Staff Writer

An October 1 article in Business Week suggests that homeowners may soon have one less option when facing foreclosure--a short sale.  It seems that since some banks are slowly seeing their profits and ability to access capital improve, they’ve decided that they no longer need to be so generous in forgiving the difference between what borrowers owe on their distressed homes and the purchase price.

To this point, short sales have been viewed as a win-win in lieu of foreclosure for both distressed borrowers and the lenders they owe, since short sales do less harm to a borrower’s credit, and banks take less of a loss on the property than they would if they had to pay the legal fees to foreclose on it, then spend money for maintenance expenses before they could resell it. 

But, even though signs of recovery are currently fleeting at best, some banks--even ones who can pass along losses to the government--have decided it’s time to get tough and are now requiring short sale sellers to either pay a portion of the loss at closing or sign a promissory note that will require them to pay it over a period of years.

The problem is, though, that this decision on their part could slow the fragile housing recovery. Since a record 33% of borrowers currently owe more than their homes are worth, and that number looks like it will only continue to rise since values are still falling. And, if short sales are no longer an option, the resulting increase in foreclosures will only depress prices even further.

Banks are taking, on average, 9.5 weeks to respond to short-sale requests this year, compared to 4.5 weeks last year. And, some banks that hold second mortgages are getting tougher too, sine they’re being hit hard by the deep reduction in property values. In some cases, they’re asking for 5% of the sale proceeds to give up their claim on a short sale, when often times in the past they were willing to accept next to nothing.

So, what does this mean for agents who are seeking to profit from our currently depressed market by processing their own short sale transactions? It means that having the support of a third-party source like The Agent Center behind them to help them learn the process, keep them up on the latest laws and regulations, provide them with the documentation lenders require, and offer proven marketing materials to help them find qualified buyers and get the deal done is that much more critical!

So, while it may look like lenders are losing interest in short sales for the moment, how the housing market responds to their actions will ultimately determine whether they keep up the tough-guy routine, or go back to using common sense.

The Agent Center Support Team

by Brian Wilcher, Staff Writer

If you are a homeowner facing foreclosure or bankruptcy--or considering a short sale to avoid either--you need to be aware of the effect the action will have on your ability to get the credit you need to buy another home in the future.

Earlier this year, Fannie Mae updated its credit guidelines for borrowers who experience one of these circumstances. Here are some general questions and answers regarding the new guidelines:

Q: What is the time period after a foreclosure that a consumer must wait before being eligible to apply for credit to buy a home?

A: Five years from the date that the foreclosure sale was completed. And, there are some additional requirements that apply after five and up to seven years following the sale completion date, including:

·    Putting a minimum of 10% down on the property and having a minimum credit score of 680

·    Being ineligible to purchase a second home or investment property

Q: If the foreclosure resulted from "extenuating circumstances," is the borrower eligible for a shorter waiting period?

A: Yes. Fannie Mae considers extenuating circumstances to be "nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations." Borrowers whose foreclosure occurred as a result of such an event--and can prove it with documentation--may be eligible for a shorter waiting period of three years.

Q: What is the waiting period after a deed-in-lieu of foreclosure?

A: Four years from the date the deed-in-lieu was executed. And, there are some additional requirements that apply after four and up to seven years following the completion date. However, a borrower with extenuating circumstances may be eligible for a shorter waiting period of two years.

Q: What is the waiting period after short sale?

A:  Two years, and no exceptions can be made for extenuating circumstances.

Q: What is the waiting period after a bankruptcy (all except Chapter 13)?

A: Four years from the discharge or dismissal date of the bankruptcy action, though a borrower with extenuating circumstances may be eligible after two years.

Q: What is the waiting period after a Chapter 13 bankruptcy?

A: Two years from the discharge or dismissal, and no exceptions can be made for extenuating circumstances.

Q: What is the waiting period after multiple bankruptcy filings?

A: Borrowers with more than one bankruptcy filing within the past seven years must wait five years from the most recent dismissal or discharge date, though a borrower with extenuating circumstances may be eligible after three years.

Q: What are the requirements to re-establish a credit history after a foreclosure-related action or bankruptcy?

 A: In all cases, there are several requirements that must be met before credit can be reestablished. These include:

·    Having all accounts current as of the date of the mortgage application

·    Having a minimum of four credit references (one of which must be housing-related and cover the period following the foreclosure, bankruptcy or short sale)

·    Having had no more than two installment or revolving debt payments thirty days past due in the last twenty-four months, or any payments sixty or more days past due since the discharge or dismissal of the bankruptcy or the completion of the foreclosure-related action.

Of course, this is only a general overview of Fannie Mae’s new credit guidelines. For more detailed information, please visit their web site.

by Brian Wilcher

The Agent Center Staff Writer

National home prices are forecast to shrink another 11%. Miami, Las Vegas and Phoenix will record steep declines, but a few cities will actually post gains.

By Les Christie, CNNMoney.com staff writer
October 20, 2009
 
Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices.
 
Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.
 
In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years -- though it underestimated the scope.
 
Mark Zandi, chief economist with Moody's Economy.com, agreed with Fiserv's current assessments. "I think more price declines are coming because the foreclosure crisis is not over," he said.
 
In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June -- after having already fallen a whopping 48% during the past three years.
 
If Fiserv's forecast holds, Miami real median home price will tumble to $142,000 by June 2011.
 
In Orlando, Fla., the second-worst performing market, Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they're expected to fall 26.8% and then flatten out.
 
Other notable losers include Las Vegas, where prices have already fallen 54.6% and are expected to lose another 23.9% by June 2010. In Phoenix values have already collapsed by 54% and could fall another 23.4%. In both cities, Fiserv anticipates the losses to continue into 2011, but they will be less than 5%.
Prices had stabilized
 
The latest forecast is at odds with the past few months of the S&P/Case-Shiller Home Price index. That report has given hope that most housing markets may have already stabilized because the composite index of 20 cities rose in May, June and July. Nationally, it found that home prices have gained 3.6%.
 
Brad Hunter, chief economist for Metrostudy, which provides housing market information to the industry, however, expects a change in fortunes, however.
 
"I'm afraid Case-Shiller may be just a temporary reprieve," he said.
 
He pointed out that the tax credit for first-time home buyers helped support prices during the three months of Case-Shiller gains. By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors. But the market assistance ends when the credit expires on Dec. 1.
 
Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as California and Florida. In those areas, prices for even modest homes had skyrocketed.
Winners
 
A handful of metro areas will buck the trend, according to Fiserv. Six markets will remain flat, and 33 will actually post gains. The biggest winner will be the Kennewick, Wash., metro area, where home prices have ramped up 8.9% over the past three years and are expected to increase another 3.4% by June 2010.
 
Fairbanks, Alaska, prices are anticipated to rise 2.5%, while Anchorage will climb 2.1%. Elmira, N.Y., prices may inch up 1.8%.
 
The nation's biggest metro area, New York City, will underperform the nation as a whole over the next two years, according to Fiserv. Prices, which have already fallen 21.7% to a median of $375,000, are expected to fall 17.4% by June 2011.
 
Home values in the nation's second largest city, Los Angeles, have fallen 43.3% since June 2006 to a median of $313,000. They are expected to dive another 20.2% over by June 2010, and then start to climb in 2011. Chicago prices, which have fallen 25.2% to $227,000, will drop only 4.1% over the next 12 months and then starting to climb.
 
The Detroit metro area now has the dubious distinction of having the lowest home prices in the country. Prices have dropped 51.7% to a median of $50,000. They're expected to fall another 9.1% and then stabilize.
 

If you are a Californian who has been waiting for the perfect time to buy your first home, take a look at the clock, because that time has arrived!

Now, we all know about low interest rates and affordable prices, but the current state of the economy has made many qualified first-time buyers leery of taking the leap. I mean, what if they were to get laid off? How would they make their monthly payment? That’s the one fear that has kept so many from making the purchase, but guess what? The California Association of Realtors® Mortgage Protection Program is the answer to their prayers and the reason that now (or at least until the end of the year) is the time to make buying their first home a reality.

This program--which C.A.R. announced at the end of July but few people seem to know about--provides qualified first-time buyers with protection that will help them make their mortgage payments if they find themselves involuntarily unemployed. The California Association of Realtors® Housing Affordability Fund (“CARHAF”) has committed $1 million to, as the FAQ page of their website states, “...help build confidence in the purchase of a home and to reduce the fear of foreclosure in the event of job loss.”

This free program (yes, I said f-r-e-e) makes qualified first-time buyers eligible to receive up to $1,500 per month for up to six months to help make their monthly mortgage payments in the event of a lay-off or other qualified job loss. An eligible co-buyer can also participate in the program and receive a reduced benefit of up to $750 per month for the same time period if unemployment occurs. And, this benefit includes taxes and insurance if they are impounded as part of the monthly payment.

In order to qualify for the program, the buyer(s) may not have owned property in the last three years and must open and close escrow between 4/2/09 and 12/31/09, purchase a principal residence in California, be represented by a California Realtor®, and be a W-2 employee. However, there are no income or home price caps. Of course, all the details of the program can be found on the C.A.R. web site.

Hopefully this outstanding program will inspire confidence in those first-time buyers whose anxieties over the economy have made them hesitant to turn their dream of ownership into a reality. And, with only a little over two months left to qualify, the time to contact a California Realtor® who can help them find that perfect home is now!

by Brian Wilcher

The Agent Center Staff Writer