Loan modification efforts helping few troubled homeowners

http://www.mercurynews.com/realestatenews/ci_12789161?source=email

I cannot say it is surprising that the banks are not providing enough loan modifications to stop the number of foreclosures that are looming in the not too distant future, with the continuation of high unemployment rates here in Silicon Valley and the rest of the country. The stated goals of the top executive at the lending institutions (of helping keep homeowners in their homes) and the negotiators who directly interface with the borrowers often seem at odds; I don’t know if it is this way by design or by circumstances.

As a short sale agent, I speak almost on a daily basis with loss mitigation negotiators who work in the same departments as the loan modification folks and let me tell you, they are overwhelmed and not in the frame of mind to think about your files to give them just consideration that each hardship warrants. If you don’t know how to deal with them, they will walk all over you and some have been known to flat out lie to the borrowers. Depending on the size of the lender and its loss mitigation department, each negotiator may be working from 200-500 files! Now how much consideration do you think a negotiator can give each file or consider the circumstances when you are file number 301 out of 400, unless they absolutely have to? Do you wonder why you hear horror stories about contacting loss mitigation departments and having to submit documents over and over or waiting on the phone all day to talk to someone?

Another thing to consider that the article does not mention is this: when the lenders do provide some sort of loan modification, it is often not enough to get the borrower out of their financial difficulty. You hear this quite often.

Let me give you a real life example of a past client. She had a combination of hardships that piled on top of each other rather quickly: relocation due to husband’s job, two unexpected medical complications that resulted in huge bills, and a pay cut to keep her job. All of these things and facing an upside down mortgage made her reach out to her lenders (both the same institution) for a loan modification. She needed to reduce her mortgage payments by about $1,400 to be able to continue making payments viable. The primary lender gave her a reduction in rate and a saving of about $700 per month, but added an additional $15,000 which was wrapped into the loan as “interests, costs and expenses” and re-amortized over 40 years. The HELOC (Home Equity Line of Credit) flatly denied any modification when the first thought she warranted a modification. After speaking with her CPA and lawyer, she contacted me about doing a short sale.

Where was the “modification” from the “Home Retention Group” when they simply wrapped the reduction cost back into the loan and offered to reduce an amount that was not consistent with what the borrower needed due to her pay cut? They knew from looking over the financial statement what the monthly deficiency was, yet offered to reduce it by less than what was short? Don’t they know, this is a recipe for pushing their borrowers into foreclosures; or are the negotiators so swamped with files, they simply don’t care. Either way, these types of loan modification are not working out for the borrowers. The lenders lose money when the borrower stops paying and go on the foreclosure track. Why not hire more people in their loss mitigation departments to reduce the work load and have the negotiators really look into people’s financial situation and give them the necessary help they need to keep them in their homes? That would truly be a win-win for the lender and the borrower and consistent with their executive’s stated goals to the congress and to the general public.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

Single Family Residences

Condo/Townhomes

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

Obama's Home Affordability Refinance Program (HARP) raises its maximum Loan-To-Value ratio (LTV) limit from 105% to 125%.

This change finally makes better sense for the average homeowner here in California, who may be facing a distress situation or involved in short sale of their property. Being unable to qualify for a re-fiance if you were more than 105% underwater made no sense in the more expensive areas like California. With unemployment rate continuing to rise unabated, this is a bit of good news.


http://makinghomeaffordable.gov/pr_07012009.html



Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

“He is not a BPO agent, he is a professional appraiser” was what the Bank of America negotiator told me; the subtext obviously being that the latter is better at getting valuation than the former.

Well, regardless of whether he was a professional appraiser or a Realtor, the value was off by more than $70,000 by my valuation. I was shocked: $7,000 off maybe, but over $70,000? I’m no fool, I wasn’t going to challenge this as the appraiser was telling the lender that the house was worth far less than the offer I had in hand. This was going to be truly a win-win situation for my San Jose Short Sale client.

But the valuation was too far off and I needed to understand why it was this way.

I asked that the negotiator provide me with the MLS listing numbers of the comps that the appraiser used to reach his conclusion. I had not seen any recently sold properties that would justify such a low appraisal value. When I’ve asked for comps before, some negotiators would provide them while others would not, so I asked in the nicest manner in which I am capable.

It turns out the appraiser was looking at properties that had one less bedroom, the interior space was off by about 400 square. How “professional” can this appraiser be if he was comparing apples with oranges? I cannot believe he was so far off, especially since he visited the property but it was not to my client’s detriment, so I did not raise a fuss.

However, this does raise a new flag for me and for my future practices. I typically do not ask for comps unless there is a reason to look into them, but from now on, I will ask for comps on all BPOs and appraisals and double check them for accuracy.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

Continuing with my previous topic relating to scams, here is a list of active scams that have been identified by the State of California as being perpetrated on consumers.

Please, if it sounds too good to be true, then it probably is.

http://www.yourhome.ca.gov/hope/predators_lurk.shtml

Contents from the website above have been re-printed below.

Predators Lurk: Avoiding Scams

When a lender files a foreclosure or schedules a home for public auction, the matter becomes public record – easily accessible at any county clerk or recorder's office. Scam artists often access these records and target people in financial distress. 90 Days of Hope seeks to educate homeowners about these risks to help them avoid being defrauded. This campaign will shine the spotlight on some common scams below. However, according to Department of Consumer Affairs director Carrie Lopez, the best advice for consumers to follow is, "if it sounds too good to be true, it is."

"The Bailout"

In this scam, a con will offer to buy the victim's home and promise the victim that they can live in the house for a fixed rent until they can buy back the home. The victim signs a document that turns over the title, but doesn't release them from responsibility of the mortgage (sometimes called a "quit claim deed"). Subsequently, the new "owner" collects the rent without paying the mortgage and lets the loan default. When the lender forecloses the victim is left with no home, a foreclosed mortgage, and bad credit.

"The Bait&Switch"

In this scam, often targeted at non-English speakers, someone shows up at a home claiming to be with the homeowner's loan company. The con asks the homeowner to sign documents so that they can keep their homes. They sometimes even promise to eliminate the debt owed.

The homeowner needs a way out and is overwhelmed by the sheer number of documents they are being asked to sign. One of those documents is a "grant deed" that passes the home's title to a third party – the scammer the scammer who then allows the loan to default. The victim is then evicted, left with no home, a foreclosed mortgage, and bad credit.

"Foreclosure for a Fee"

Opportunists who advertise to homeowners that they can offer "advice" on staying in the home until they are evicted make it seem as though walking away from your foreclosed home has few consequences while charging hefty fees for their products. Don't be fooled - foreclosure is never the first option and comes with adverse consequences to the homeowners and the state. It can take years for homeowners to repair their credit after a foreclosure.

Tips for Avoiding Scams

• Beware of anyone who shows up at your door or calls without you contacting them first. If you meet with someone in person, ask for business cards and contact information complete with the office address.
• Use the State of California databases to check for the licenses of state regulated entities. You can check license status of state regulated mortgage brokers, appraisers, lenders and real estate agents on line at www.dre.ca.gov/gen_lic_info
• Don't sign anything that has any blank spaces. Information could be added later that you didn't agree to.
• Always know exactly what you're signing and never sign a contract under pressure. Take your time to review the paperwork thoroughly -- ideally with a lawyer who only represents your interests.
• Never rely on a verbal agreement. Get all promises in writing and obtain copies of everything.
• Be wary of deals that sound too good to be true. Remember – if it sounds too good to be true, it probably is.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com