Bill Black CMP

I just wanted to send a quick note to my readers to share a story that occurred yesterday.

I had some clients that were 6 months behind with WAMU. They originated the loan with Long Beach Mortgage which was a sister company of WAMU. They owed $99,000 on the home that was valued at $160,000. The rate was 7.625 with 2 years into the loan. WAMU ignored the clients right up to the end and accepted a loan mod at 5.365 fixed for 28 years. Although my clients had the $7,000 they owed and were ready to pay WAMU or the servicing agent told them they didn't need to pay..... a loan modification has been completed.

So disfunctional-

WAMU sent the first loan mod and it was the wrong persons loan modificaiton! So when #2 came it ALSO had wrong person on the informaiton! Finally on the third they got it right~ My clients signed the docs and returned them today. They are able to utilize the $7,000 for debt consolidation and encouraged them to make sure they had life insurance and start a college fund... 6 kids so very much needed.

This turned out to be a good thing and they thought it was too good to be true. What people need to understand is that this toxic sub-prime loan was in default when WAMU went bankrupt. That means that it was sold off to a group of investors that bought pools of this toxic stuff for .20-.30 cents on the dollar. CITI was actually the trustee so basically a group of investors bought a 100M portfolio for $25M and had CITI be the trustee. (They do this since some investors could be a Church or a publicly traded company and no one wants to be the one to foreclose)

The investor group basically paid $20,000 for this loan and collecting $594.00 a month on that which equlas out to be roughly 28% interest on the investment! Now you can see the reason why in certain situations that loan modifcations can work. Have a great day.

Bill BlackCMP

Mortgage Guru

360-326-8891

Homeowner Affordability and Stability Plan

Executive Summary

The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.

• Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates.
• Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure.
• Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent.

The Homeowner Affordability and Stability Plan is part of the President's broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:

1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices

· Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.

· Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:

o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today's low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.

2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners

• Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability.
• No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.
• Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.
• Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.
• Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:
  • • A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower's monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.
    • "Pay for Success" Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive "pay for success" fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.
    • Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
    • Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
    • Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration -- together with the FDIC -- has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.
• Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC's pioneering work. The Guidelines will be used for the Administration's new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans' Affairs and the Department of Agriculture.
• Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities

  • Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance

  • Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options

  • Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds

  • Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers

3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:

• Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.
  • Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.
  • Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.
• Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
• Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs' retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.
• Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.
• No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.

What exactly is the B-TOREN?

(Bubble Tunnel of Real Estate Nightmare)

Fannie Mae Lifts 4 Property Limit

Beginning March 1^st, 2009 Fannie will fund up to 10 loans after limiting the market to 4! The bankruptcy cram-down and the house passing a $15,000 buyers credit along with low rates could be what we are looking for- I SEE THE LIGHT!

As we squint down the dark tunnel of the Real Estate bubble or the "B-TOREN" "Bubble Tunnel Of Real Estate Nightmare" a shimmer of light glistens for the first time.

Although dim as it may seem, the fact is that it's the first glimmer of light that has a potential of solving some of nations deepest problems when it comes to the foreclosure issues and depleting values. I see these new ideas not to be the fix all, but formed as "survival strategies" that is intended to result in more people keeping their homes, private investors buying the bad debt instead of the government bailing them out and the banks freeing up capital to increase lending in make sense loans- the up to 10 loans for good borrowers.

Some believe this to be the first light that actually may work. I realize each initiative will have its pros and cons so I will try to leave my opinion out and focus on the facts. The cram down and $15,000 credit have not been finalized so let's focus on what has:

Fannie Mae Lifts 4 Property Limit-

New guidelines: 720 minimum credit score with a 20% down for 1 units and 25% down for 2-4 units! (Credit score has NEVER been so important- be sure to attend CCAR dinner meeting to learn how to maximize your score- See front page)

The borrower cannot have any history of bankruptcy or foreclosure within the past seven years.

The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.

The borrower must have 6 months reserves for the subject property and for other properties currently owned by the borrower.

So all you investors out there who have been on the sidelines... it is time to get back in the game. Dust off those calculators and get out in the streets and look at some real estate! The tunnel light has been lit!

Bill Black CMP

360-326-8891 for appointment or a free mortgage analysis.

Good times!

Important Disclosure: This information is meant to be a general guide to consumers about what to expect from a loan modification. I currently do not do loan modification negotiations nor do I receive any money from any loan modification company for referring people to them, although I do assist with processing the required documents and educating my clients on the current market in this arena and refer them to various organizations for help. One thing that I know is that no lender follows the same process and each individual situation is different - so do not take anything here as a “guideline” or a “formal loan modification process” . In my experience, there is no such thing as a formal loan modification process and even within the same company I see variances. The main thing is document, document, document.

Many people that I speak with about loan modification options are extremely frustrated that their lender is “difficult to work with”. Because they have initially started the loan modification process on their own and gotten frustrated, they are now considering hiring an attorney or company who specializes in loan modifications and may have even spoken with a couple of them prior to speaking with me.

Almost without fail, I get asked this question:

“How do I know who to hire? I mean, how do I tell a *good* loan modification company from a *bad* one?”

If you are currently considering hiring a loan modification company or lawyer to help you with your loan modification, here are five simple questions designed to help you identify the “good” from the “bad”.

How do you know if you can help me?

Before you say *anything* about your situation, ask this question. Most of the time, the person shopping for a loan modification will be so upset about their situation, they will look for someone to listen to them explain their situation first.

Resist the temptation.

Ask the loan modification company “how do you know if you can help me” first and let them do the talking. Let them explain how the identify how they know if they can help you or not, what they look for in order to know if they can help someone and what they have seen as far as results.

The more information that you can get from them up front, before you tell them about your situation, the more you will get a good idea if they really know what they are doing.

Do you have 3 people that I can speak with who you helped get their loan modified?

Don’t miss this question and be sure to follow up and speak with their references first.

You will learn more from the three references they give you than you will from talking to anyone at the firm. You will learn what the process was like, how the company was to work with and what their overall impression of “was it worth it” was?

Do you plan to use violations of law in my current loan as leverage up front or later on in the process?

In loan modification, there is an “easy way” to get it done and a “hard way”. The easy way is that the loan modification company starts talking with your lender and negotiates out a loan modification - just based on “what kind of monthly payment you can afford based on hardship”. Many times, the “easy” loan modifications are done in a matter of minutes and really don’t involve any kind of negotiation - because there is not a principal reduction involved - just a modification of payments.

For some situations, this type of loan modification is fine.

But for other situations - for example - for those people who are hundreds of thousands of dollars upside down in their home… “the hard way” may yield better results. “The hard way” involves the loan modification legal staff going through your documents that you signed when you got the loan and looking for violations of law. Many loans have these violations and “the hard way” involves using these violations as negotiation for a principal reduction or even a complete rescission - meaning your entire loan is rescinded and you will no longer even have a mortgage. I would suggest to google QWR which stands for Quality Written Response" and that will give you some DIY help to get started if you can't shell out $5000 for an attorney.

How Much Do You Charge?

Note that this is not the first question to ask.

How much a company charges is an important consideration, but it is not the most important. The most important thing to consider is whether or not they can be successful at getting your loan modified and the question of “how much do you charge” tells you nothing about if they will be successful or not.

In general - expect a fee up front (generally ranging from zero to $3,000) and a fee if they are successful (generally 1-2% of your loan amount) and remember - if someone offers to do it for no money up front but doesn’t end up getting your loan modified, it is more expensive than if you paid $3,000 up front and a 2% of your loan amount as a success fee.

Can you tell me what to expect in my situation when working with <insert your lender>?

Listening to the answer to this question will tell you something about their overall experience. If they say that they have never worked with your particular lender before… it is a sign that they probably don’t have a lot of experience yet.

If they tell you that they have a dedicated person to work with them at your lender - it is a sign that the “easy way” kind of modification will be easy - but “the hard way” is still going to be “the hard way” even if they have a dedicated person because it is going to involve attorneys fighting with other attorneys.

If you are currently looking into hiring a firm to help you with your loan modification, by asking these 5 questions, you will be in a much better position to identify the “good” from the “bad”. And if you are in a situation where a loan modification is an option for you, you can’t afford not to invest the time to choose wisely.

Bill Black