The Termination of All Loan Modifications
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so what about the 5 of the 10 that do succeed? Guess you don’t need to worry about your family and friends who lost their homes? It is hugh and devastating for someone to lose their homes. Yes, 5 do foreclose and 5 do not. Glass half empty or half full? At least the ones remaining in their homes are established in neighborhoods and communities. How about the stats after these 2nds have been forgiven and people are in homes with market values actually in line again? The excessive seconds have been reason for a lot of the foreclosures.
Depends on where you are at and the type of loan. For purchase money loans, there are anti-deficiency laws that prohibit deficiency judgments after foreclosure or short sales. That is why it is important to know the legal and tax facts before making any decisions.
Instead of doing modifications which fail 50% of the time, due to the fact that the lenders are doing modifications based on the amount of the loan that the homeowner’s owe, why not offer them a short refinance instead? This would help keep homeowners whom are underwater in their homes, lower their interest rate to today’s market lows as well as lower the principal balance on the mortgage. Thus making it a win for the lender and homeowner and less likely for the homeowner to default. The reason for the default is that the lender is doing nothing to reduce the principal balance, which is higher than what the house is worth. If they foreclose, the lenders get less, why not take the hit now instead of going through the entire foreclosure process and occuring additional fees and expenses. They should start working smarter not harder.
IF you foreclose and/or short-sale ALL the problem properties in this country, WHAT do you do with all the homeless people that will be generated? You’re just looking at this as a dollar and cents problem when it’s the PEOPLE you should be concerned about. Figure out how to help the people LOSING their homes, then you will have SOLVED the problem. It’s not such a difficult problem, really.
We should have done deeds in lieu and foreclosures- how many homes are sitting out there with no for sale signs. The old saying pay NOW or pay LATER is true.
We should have just hammered the market wth houses and let it work out over 1 or 2 years- I think a ton of invnetory not on market still- we will see in next 6 to 12 months -
Since I’m in the process of getting one I say leave it alone.
I hear what you’re saying about the failure rate but when the govt is paying the banks for their losses and has been I see no reason to not modify a loan if the client can pay his bills.
Since the taxpayers have eben on the hook for this financial debacle, and none of the banks have lost JACK! I see nothing wrong with giving some of the money back to the taxpayer.
If they would paid down loans and rewrote loans in the beginnning instead of giving the banks bailout money this problem would have been solved years ago.
And yet it drags on and the bansk make more money and it all comes from the taxpayer.
If there is such a large default rate on modifications, it is because of inferior underwriting and/or guidelines
OMG… how much more restrictive can underwriting get ? It takes the hand of god to get someone approved now and even then it’s taking almost 90 days to do !! Agree, there is a problem if 50% of mods are bellying up, however I don’t think it’s underwriting..
Hey Guys
Love your show daily… but now I’m having problems receiving it… I used to just click on the link in the email and it would go straight to your site with your daily video… but now it takes several tries for the link to work and also when the link does work, it takes F-O-R-E-V-E-R to download the page and vid… What’s the deal? This never used to happen… Please help
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You have missed the boat and i will never have the answere back from you guys. The reason the new owner may stay longer is in the fact you have not infactualuted the reduced price the new buyer is into the home at big factor buddies the average is 65% of forclosed amount hell if the orginal owner could get reduced to that they would still be in house. You guys are not in the loop talk to an expert.
Make the AMOUNT of the modification REAl and it would work. They just gave out reductions of tiny amounts that were doomed to fail. I’d rather have a realistic payment for 40 years than the phoney reduction of $250 (in CALIFORNIA) that only puts off the inevitable. And, incentivize the banks more than $1000 or $2000 to complete the \new loan\.
Would someone please click this Change dot org link provided below and then report back here and explain why banks don’t allow homeowners to raise money and pay off their entire mortgage when they get in a foreclosure situation.
http://www.change.org/petitions/us-bank-allow-the-gearing-family-to-purchase-their-own-home-back-from-foreclosure?alert_id=xPKiXLgKWX_DgBOvNndEP&utm_campaign=11404&utm_medium=email&utm_source=action_alert
Somehow, there is a very important point that keeps getting missed by you guys. You keep assuming that the banks are actually in possession of a Note, and the Deed of Trust has been transferred properly, and that the foreclosing entity has the right to foreclose. The majority of these foreclosures are happening BECAUSE that’s the only way for them to get possession of the house, to re-lend on it and keep the money flowing back to them. Loan mods were not happening because they had no Note to modify. Nothing has changed there. They still have no Note to modify or foreclose on. While I agree to stop paying the banks for pretending to try to modify and put that money towards the deficit, it’s important to know that a huge chunk of that deficit is comprised of the monies that we gave those poor ailing banks to begin with. How do we forget something that we all know, and that is that mortgages were pooled and sold on Wall Street. sold. yes, sold. They got their money way back when, and it’s the investors that took it in the shorts already. And you investors buying at auction, I hope you’re checking the chain of title, cuz you may be buying nothing.
Also, what you seemingly fail to recognize is that whether you foreclose a home and resell it or short sale a home, the net result is that the (new) loan is at CURRENT market value. IF that is REALLY what you are proposing, why not trully refinance the existing homeowner, actually reducing the loan principal to what the current market would dictate, then either full-doc qualify OR disqualify the existing homeowner. But giving something to the existing homeowner would not be allowed, would it.
If the purpose of the modificaiton programs is to stabilize housing markets AND stimulate the economy a bit, modificaitons should be available ONLY to the folks who have managed to stay current in their existing contractual payments.
providing mods only to those who have already failed to pay as agreed is a guaranteed recipe for the kind of disaster we have seen in the modificaiton-defauilt rate and is \helping out\ exactly the wrong people.
[...] here—->http://tbwsdailyshow.com/2012/10/01/the-termination-of-all-loan-modifications/ Social [...]
Great idea!! I would LOVE to see this happen!!!
Sorry boys… buffoons it is.
Your argument ignores the fact that the high default rate starts with the presumption that you are looking at a group of people that need the modification in the first place, so it’s a flawed sampling. To argue that lenders would never consider making loans if the default rate was 35% is not comparing apples to apples. It’s only considering the limited sample size.
And, do you really think the gov’t would re-allocate those savings to the debt? C’mon… they’d just find some other program to spend it on. They might even invest in the TBSW Show for another bailout.
What We need ! PERIOD THE END – see below
If you are and have been current on YOUR home, primary residence and have owned it for at least 4 (or 5 years), never late, never missed a payment. IF you have identified this as your primary residence on your tax returns, therefore you are filing tax returns !
Have evidence property taxes have always been paid and proper insurance has always been in place THEN DEAR Friends – these folks QUALIFY and automatically get rolled into a Fannie / Freddie backed – new 30 year mortgage at best current market rates available !!! No principal write down, but also no brain damage about about the rolling the HOME into 1 new loan – who cares how many liens are on it now. By definition from above these are homes NOT houses. The folks I reference have always been current – why not help them get rates their LTV, recent income, etc typically DING them from.
The lenders just need a NEWBOXTOCHECKMARK and we are done.
How many people in HOMES, not houses are and have found ways to remain current, but yet are not only underwater, but also – paying 1 or 2 or 3 points above best available rates on 1, 2 or 3 mortgages. WHY NOT help these PEEPS ???
The rest of the programs, yes move them to foreclosure or encourage the short sale as it is cheaper on the bank than the FC.
All my best, keep up the good work
Modifications are not bad in and of themselves. They are bad because the loan servicers abuse the process to create more profit for themselves and the expense of the investor.
With all of the brilliant economists in Washington, one of them should have realized in 2008 that this was going to be a disaster of monumental proportions. Everyone knew that the loans were beginning to go into default because of the sub-prime liar loans which were going to default as soon as the interest rates adjusted.
Can you imagine what would have happened if, instead of bailing out the banks, we took that $800 billion and gave it to the investors in exchange for immediately modifying all loans down to 5% fixed? Whatever was paid on each loan would be tacked onto the principle. Sure, there still would have been foreclosures, but I believe that there would not have been as many and we might have had a 10% drop in home values rather than the 30-50% that we did have. Water under the bridge.
I tell people to walk away after seeking legal advice. People who had their homes foreclosed in 2008 are now eligible to buy a new home with a decent loan.
As Ronald Reagan once said, government is not the solution … government is the problem.
Whats the diff. in welfare and home mods? Welfare is for people that don’t want to get a job and home mods are for folks that once had the means and fell on hard times. Do not get rid of mods. AND the banks already got bailed out so they can take the hit instead of those that did fall on hard times. It’s the trickle down effect.
depends on the Agreement. There is also the spectre of the IRS, who may look at loan forgiveness as unearned income, and they will want to tax you for that!
Ever heard of this? Hmmmm…Obama might have done something after all to benefit all of us hurting homeowners who have to go through this.
http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
Also, we tried and were unable to obtain a modification from B of A for nearly a year, and were advised within a mere 45 days of missing the first payment late in nearly 8 years, that sending in a payment after the foreclosure process had begun would not be prudent, that it wouldn’t be applied to our loan anyway. I wish I had a $ for every minute I spent on the phone with B of A, and believe me…I know how to get my way on the phone. We mailed in every document they required, over and over and over again, only to be told that they never received it. As the year went by, our credit, what was left of it, went down the tubes completely. The modification could have saved us about $400 a month, which really adds up. But all was to no avail; we finally pulled together any and all funds we could to bring the loan current. Our previously good credit rating is tanked, and we can’t even get a small secured loan right now. To add insult to injury, if we had lost our home to foreclosure, I would have lost my real estate license, to boot. Sigh…but let’s make sure and let those guys and gals from the big TBTF banks keep collecting those big bonuses. Do enjoy those vacations, kids. Just glad that HBO has a great line-up of shows this year. =)
Homeowners who walk away still owe money on the home they walked away from, no?
Depends on where you are at and the type of loan. For purchase money loans, there are anti-deficiency laws that prohibit deficiency judgments after foreclosure or short sales. That is why it is important to know the legal and tax facts before making any decisions.
Just to clarify, IN SOME STATES there are laws that prohibit deficiency judgments after foreclosure. Here in New Hampshire (and Massachusetts as well) there are no such laws. If you allow your home to go to foreclosure in New Hampshire, your lender has the right to go after the deficiency and they have 20 years to do it. As far as I am concerned that is the NUMBER ONE reason to pursue a short sale if you are in danger of foreclosure. Assuming that the person handling your short sale KNOWS WHAT THEY ARE DOING, the deficiency will be forgiven as part of the short sale approval.
The problem with this discussion is that “Loan Modifications” are being lumped in with HARP2 Refinances. A loan modification is done by the existing Note holder, and as mentioned in several of the comments below, is a very painful, time-consuming process. I am not sure what Lenders are currently requiring of the home owner, but in the recent past, the home owner was required to begin missing payments before the Beneficiary would even talk with them. The banks were actually telling the owner to do this! This ruined many credit ratings and colored the entire process. I believe that the statistics these guys are referring to as far as re-default is based on these true Loan Modifications.
HARP2 refinances, on the other hand, require that the borrower not have more than one late payment in the past six months. They can even have a 2nd trust deed/HELOC in place, and/or have Mortgage Insurance on the existing 1st TD, and the refinance can be accomplished within 2-3 months, instead of 6. As for statistics on failure of loan mods, the data quoted is probably not relevant to this segment…yet.
Another point about Mod’s vs Refi’s is that the Mod usually has a few 1/8ths shaved off the existing Note Rate, with balances-in-arrears tacked on as a baloon payment, whereas a Refi will get a new rate at about 4%-4.125% (and perhaps less if rates keep dropping), which makes a significant reduction in monthly payments for the Borrower who does a Refi. Plus the fact that their FICO score has not been (as) impacted if they are current on all payments as opposed to missing 3 or more payments.
True, one could walk away from an upside-down mortgage and purchase a new home in a few years, but there is no telling what will become of the interest rate levels or the home prices. We should not lose sight of the volatility of various markets in light of what we have all experienced in the past 10 years. In other words, there are no guarantees in real estate!
But wait, there’s more. The HARP2 refinances are being offered to those homeowners who recognized that walking away from their home and mortgage was a “PRINCIPLE”, a moral decision that they chose to endure. I hope you realize that when a homeowner walks away or is foreclosed upon, the recipient of the Federal largesse is the BANK! So who are we fooling by saying that if we just have the banks foreclose on all upside down loans that the HARP funds won’t be spent? Of course they will! It will all just go to the banks. I wonder why these guys don’t see that?
And one more thing…don’t lose sight of the fact that it was Congress and the Office of the President (no, not Obama) who encouraged “flexibility” in lending practices to enable more home ownership in the first place. PRINCIPLE begins their, as does the BUCK STOP.
ya gotta think outside the box on these issues, and not be fooled by the talking heads, from wherever they opine.
oh, almost forgot another salient point that has not been addressed in this string, at least as far as I can tell. What about the OTHER THIRD?
HARP2 encompasses loans serviced by FNMA and FHLMC, but NOT the loans originated by the likes of Countrywide, IndyMac, Bear Stearns and other wholesale and retail lenders who never sold their servicing or mortgages to the GSE’s?? There is a huge inventory of home loans that cannot qualify for HARP2 refinancing due to this exception. Just wait for the other shoe to drop.
We have two problems; Principal and Principle
The 1st is an equity situation the 2nd is a moral position mixed in with a business decision.
I believe that the UNDERWATER POSITION IS GREATER then 25% in that you need a 10% equity position just to break even considering selling costs involved. Of those that default (or re-default) I would say 98% are negative equity properties. We need a write down policy or some sort of equity participation proposition. As to the 2nd problem, we have or are loosing our moral obligation to honor debt and are now able to justify the default, No strings attached and no societial shame resulting from it.
Many are quick to put place blame on the homeowner and how they seem to have no moral obligation to honer their debt obligations without any societal shame. There are always two sides to every story and it appears most do not look closely at the fraud the banks perpetrated on the American public.Everyone is very quick to turn a blind eye to this and not hold the banks accountable for doing outright illegal things in the name of the almighty dollar. Don’t they have a moral obligation too? Im sorry to say that many realtors are quick to kick homeowners to curb looking only at the surface because they are motivated by money they would make on a sale.
These statics that you are quoting, do they include only those who have received a modification or are pursuing a modification? Does it include those people who are selling on a short sale, but have to apply for HAFA before they get approval?
Your statement that the modifications aren’t working suggests that the blame rests solely on the homeowner.
Where I think the modifications fail is with the bank offering the modification. Months and months in process, by the time those few are finally approved the homeowners have given up.
You’re right, modifications aren’t working because the banks have set the homeowners up to fail.
I really, really hope you read this.
This argument sounds like the military (in which I served): If one person f#@*s up, everybody pays for it.
How horrible of you to be advocates for taking people’s homes because of this mess. Why don’t the banks have to pay for causing this in the first place? Instead, they get PAID for it. By us. The people who got screwed. What a Country! It’s so much easier to continue to hurt people and their families than to come up with workable solutions.
A SOLUTION? Instead of taking away any opportunity for someone to keep their home why don’t you pursue a more honorable route. Nobody gets a principal reduction, because frankly that’s a risk any investor/homeowner takes. EVERYBODY. I mean everybody, gets a one shot loan mod that wants one. Dragging this out for years is where the bottomless pit is. Forget this qualifying crap. Everybody’s qualified. UNTIL THEY’RE NOT: If they are late in any month for the first 2 years, then that’s it. The property goes through a strict timeline of foreclosure or maybe the homeowner even agrees to deed-in-lieu under new terms for repossession by the bank. Draw up airtight docs that prevent BK’s or anything else from stopping the repossession. This alleviates the animosity towards the banks for screwing most of these homeowners with their wacky loans, homeowners get at least a chance to keep their homes and the investors are getting returns on performing loans again.
I don’t pretend to know if this will work. But if you think that giving no one a shot is better, then
shame on you Frank and Brian.
Shame on you for siding with the fraudulent activities of the corporations involved so that we can take the easy train out of this mess. Yes, that is what you advocate.
AMEN, Cynthia! You should be running for President. Or at least Congress…why can’t politicians figure this stuff out? Oh, wait….nevermind…
I agree that the loan modification program is not effective, but how about the short sale program? The national statistics show that less than 10% of houses listed for sale in a short sale ever close. Even if that number were 6 or 7 times that, it still puts people at risk.
If 70% of short sales closed, that means that 30% of the people counting on a short sale are going to foreclosure. Those people are not getting any help at all on how to plan for that very distinct possibility.
If you are going to bet everything on a short sale, you have to make sure that people learn how to get the most out of the situation if the house does go to foreclosure.
Agents can’t do that, attorneys don’t eeither. WE CAN! We help people understand all of their options and help them plan for how to get the most out of it so they can start over and be homeowners again. Yes we charge for our service and our clients end up tens of thousands of dollars ahead and they will be homeowners again.
http://www.myownbailout.com
http://www.myfinancialrevival.com
As a legal assistant for a real estate attorney, I assist people in”trying” to obtain modifications. There are many people that are happy to obtain just a modification without principal reduction and certainly qualify to make their new payments but getting a modification thru the process is fraught with much difficulties that most cannot navigate and it is designed to be that way.It was never meant to really work.People are angry and frustrated. I suggest reading the new book called “Bailout” by the Former Special Inspector General Neil Barofsky in charge of Oversight of the TARP funds for a true understanding.
Most all HAMP mods were obtained because they fit the HAMP NPV model and were significantly underwater. They are failing because putting money down a black hole without ever seeing equalization of equity could be 15-20 years away and somewhat ludicrous and not in the homeowners financial best interest to continue. Until we see aggressive principal reductions with realistic modifications particularly in Fannie Mae/Freddie MAC loans this will continue and I highly suspect short sales processes will not improve in a timely manner either. The banks are unwilling and for the most part incapable of implementing models that are effective.
Though I see your logic, I still think the modifications are good for the consumer as many of those seeking modifications are in that position due to no fault of their own (i.e. job loss, health problems). This would also result in a further decline in real estate values that would place more homeowners under water than the current 25%. If anything, the modifications should become more streamlined as most of my clients that have sought them get frustrated with the lengthy, unprofessional service they get that may be attributing to the higher modification default rate. The other thing to consider is that a successful modification gives the banks the ability to recover their losses over time where as the immediate foreclosures are losses that give them no hopes of economic recovery!
Thank you,
Tim
I do not agree because I helped some people who employment hours were cut by no fault of theirs or got seriously illed who received loan modifications that they could afford comfortably.One went from $1,237 to $411.20 for 25 years and 26 year has ballon payment of $7,000.Home is paid for.Who could believe the statistics of agencies that have no control along with Congress over any lending institutions? No one has been jailed but everyday people person like you or I would have!!! Give me a break !!!! More people would be able to keep their homes if the banks would do the right thing as a whole and have not!!You should be careful what you speak !!!!
I dont agree with your post. Doing the right thing would be for the homeowner to sell the home they cant afford or loose it. Everyone homeowner in the beginning of this whole thing lost their home or sold. They didnt get the opportunity to live rent free for years and keep playing the modification game. If your homeowners would have lent someone several hundred thousand dollars they would expect it back regardless of that person situation. More people keeping their homes, they can keep it if they can pay. I bet those homeowners you helped got plasma tvs and expensive cars sitting in the driveway as well. Give me a break with all this help the homeowner. If they were renting a place they would have been evicted regardless of their hardships. This is the same thing. You should be very careful of what you say!!!
No, they didn’t get plasma TV’s or new cars. Their credit was ruined and the little cash they had left after paying their mortgage every month barely fed their family and kept the lights on. Not all homeowners stop paying. Not ALL folks seeking modifications are the low-life degenerates you would suggest in your reply.90% of my clients came from a $200k+ annual income bracket.People with degrees and extraordinary resumes. Hard working people with hearts and grit.People like you, your sister, brother, father, mother, grandmother your neighbor. People who lost everything in their IRA or 401k. Who sold everything they could so they could make the mortage payment.
The investors that purchased these securities loved it until the bottom fell out and all of the lies were revealed. Countries and major corporations have filed bankrupty over these fraudulent securites. This one is on Wall Street and greedy risky investment bankers who didn’t give a crap about anything but lining their pockets. NOT on the homeowner who bought a home that they “could” once afford. Some have their life savings invested in the down payment.Now they have nothing but the hope of saving their home and you just want to toss them to the curb because, why? It didn’t happen to you?
Get informed and don’t judge. You have no clue what 99% of these people have been through. Are there bad apples that will take advantage of the system? Always… But it is a small number compared to the number who need help with a modified loan.
KB
Please KB, I have been there and lost everything. I started over and made things work. No special help, just a butt kicking.
I am informed about the real estate market. I see people all day long in the same situations you describe. No one wants to take the hit.
You say I am kicking them to the curb, I am bringing reality to bear on this situation. Everyone is greedy. There is no hope of saving a home without any money.
So dont sit there and tell me that they cant turn things around.
And on another note, whats your advice to the homeowners that never got a chance, I dont see you in an uproar over the ones that lost everything in the early parts of 2007 and 2008.
And you mistake hard work with success, there is no guarantee on anything. There are thousands of people that did everything right and still lost it all. Except there was one thing they didnt do, and that was to know when to get out while they were ahead. When investing in anything, homes, stocks, or businesses the exit strategy is the first thing that must be decided on.
However in this instance, especially with the clients you state have been hardworking and still lost everything, they didnt know when to move on and stop the crap before they lost all their savings paying for a home that wasnt worth it.
It sounds like you need to get informed and inform your clients about how money works.
Sometimes you guys get things right and somethings you don’t. Terminating loan mods is Wrong and Bad for America. The default rates being reported are inaccurate and in most cases due to circustances the banks do not want to disclose. Once again its call telling the truth, something the banks have a difficult time doing. I have closed over 300 modifications in the past 4 years with zero default. Mind you it is the hardest work I have ever done but when you can save someone’s home from foreclosure it’s worth it.
The way banks treat the homeowner looking to modify is typically shameful. I have had some take 3 years and others 2 months. The banks will lie and create fraud all day long to fudge the numbers to suit what works for them. The banks made this mess because they got greedy. They made billions defrauding and fleecing America and barely got their hands slapped. Make them stop doing modifications and they Win and America Loses Again!
Don’t beleive everything you hear and read guys. That’s what got us in the mess to begin with. Mods are necessary, successful and hopefully here to stay.
Homeowners need to know their options. If they cannot sell, or will not for a variety of reasons, there should be no reason not to speak with a HUD certified, non profit organization / hud certified housing counselor found on HUD.GOV. I agree, don’t pay for a MOD. Some non-profit organizations have a contract with each major lender. I used NACA.com, but you have to be persistant and not give up.
I know what you mean because those that were helped had been denied so many times but God saw favor on them. I know that God created me to be an advocate for all can not defend themselves.Regardless of politics and all injustices in all arena of life is reason why some people like myself were created!! It’s amazing how people who are not affected can and always KICK others to the curve.The lenders will never use the money wisely anyway !!!!!
Dave,
I agree that homeowners should know their options but they are not going to get them from a HUD certified counselor. We have lots of clients who tried this route and not one of them got a full spectrum of options that included walking away and keeping the money.
Most were told that they are underwater because they bought too much house and that they have to cut back in other areas in order to make thier payments. That is no help for people that are looking for a way to restart their lives.
We work with these people every day and tell them the truth that others don’t want them to know. http://www.myownbailout.com
Very understandable. However, I am not quite clear on the tax consequenses if one allowed the loss of their home due to a short sale or foreclosure. Getting a 1099 for the the Lender’s total losses could be much more devastating (IRS liens never go away). If a 1099 is waived as part of the government benefit, will it still be waived in 2013 when the Making Home affordable offer ends?
Also, can a Second mortgage holder 1099 you when getting totally wipe out either by a short sale or foreclosure action done by the 1st lender, now or in the year 2013 or on??
Does anyone have an accurate, or reliable, answer on this 1099 issue???
Mel,
You are right there are tax consequences in a foreclosure and in settling a 2nd mortgage. The mortgage debt foregiveness act was initiated in the Bush administration and exented through Dodd/Frank until the end of 2012. That means that anyone who has a house foreclosed, deed in lieu or short sale in 2012 is eligible.
They will not have to pay taxes on the 1099 if it is their principle residence and the money was used for purchase. This includes a 2nd used to purchase the property. Any money forgiven that was taken out in cash out refinance is taxable.
We do believe the law will be extended but we have an election year and a disfuntional federal government. There are two bills in congress now to extend it. One extends through 2014 and another through 2015.
It is critical that underwater homeowners get all of their options. That is what we do at the Financial Revival Group. http://www.myfinancialrevival.com. Check us out and call call me if you have any more questions about the options and the consequences that your underwater clients face.
Let the Feds give the money to the States to administer. Real estate laws and conditions vary too much from state to state to be effectively administered from DC. For those in an area where there is much more inventory than qualified buyers, getting rid of modifications would substantially increase the losses to lenders and taxpayers and increase the vacancy rate. We need a better economy and better jobs and more accountability for the NEA and a better work ethic in our home grown students to prepare for economic improvement. But until that happens under a new administration, modifications are still a necessary evil. They often buy time for the completion of short sales!
If the modification programs aren’t working, than get rid of them. You have been saying for a long time that most of them fail the second time around so why keep trying. Get those people out of the homes they can’t afford and let us get some in them that can. Would be a great opportunity for investors to get those people in to rentals which is probably where they should have been to begin with.
I could not agree with you more! The loan mod process does not make sense anyhow: make huge payments for the 90-day trial period and then then maybe we’ll make a mod, but then we might string you out for a year or more and then we also might foreclose anyway, then you might have to go to court to get your loan reversed, yadda, yadda, yadda…..What a bunch of hot air! Either short sale or foreclose and be done with it, let’s get this party started!
I agree with you totally and so does Ocwen Loan Servicing. I’ve been assisting homeowner’s with these modifications for over 2 years and Ocwen seems to be the only bank that gets it! Good modifications are helping the distressed homeowner and not one of my clients have defaulted on these modifications.
Here is a case of a bad modification..My client was given a 2 year modification where the bank tacked on $200,000 then gave a 2% rate for only 2 years then after the 2 years, the loan was gonna revert back to the original rate of 7.5% with a new principal balance of $973,000 and a market value of $500,000. The payment went from $ 3767.99 to $7,069.79 after the two years were up…Of course the client is gonna default because it is totally unaffordable. This is just one example of a re-default modification. Bank should realize that for a modification to work we need a long term solution and not a temporary one that some of these lender’s are giving. I must say that the government HAMP modification has helped many homeowner’s and should continue…
I am in RE sales, my husband is retired at 79, and I agree with what you are saying in general, but my husband and I received a loan mod 3 years ago, and it was a Godsend for us. Unfortunately, it ends in 2 years at which time we may have to short sale our home (we are currently almost upside down) that we have owned for 14 years, but we have been and will continue to stay current on our payments. We live in an area where home prices on higher end homes have depreciated by 48% which wiped out approximately $500,000 in equity which we had planned to retire on. So, I don’t know what the answer is, but I for one am grateful that our lender granted us one.
Take the remaining 46 Billion and create a loss share agreement with the banks and homeowners.Get 2 HVCC compliant appraisals and split the difference on value. Write down to 90% LTV.
Compensate the banks for a % of their write down, say 25-50% from the 46 Billion remaining mod funds.
All mortgage delinquency references are eliminated from borrowers credit reports on loans that are written down. Use QE Infinity MBS purchases to buy up these newly modified loans. Go hard core on foresclosing these newly modified loans if they go into default and allow short sale’s which shouldn’t be for large losses if already written down to 90%.
I RECEIVED A LOAN MOD AND THEY THRU $80,000 ON THE BACK END ALL DUE AND PAYABLE IN 30 YEARS. I AM 67 AND DON’T PLAN ON BEING IN THE HOUSE, SO WHAT DID I CARE. IT IS AFFORDABLE NOW. IF I WAS 30 YEARS OLD, I WOULD NOT CONTINUE THROWING GOOD MONEY AFTER BAD,I WOULD TAKE THE LOAN MOD TERMS (LOW PAYMENTS THAT WOULD GO UP IN THREE YEARS) TO KEEP ME IN THE HOUSE UNTIL I WAS IN A POSITION TO MOVE ON AND LET THE HOUSE GO BACK. WHAT THE HECK, IN THREE YEARS I CAN GET THE SAME HOUSE FOR 1/2 THE PRICE.
All you LIBERAL Cry Babies amaze me. You keep spouting the same old line…. give me, give me, but don’t make me responsible for my stupid decisions. Life happens people. Prices go up and down, the stock market goes up and down, home values go up and down,… but just because your investment went down doesn’t give you the right to demand that the bank you borrowed the money form (AND AGREED TO REPAY)forgive that debt, or modify it! There are consequences for the decisions that you make in life. An yeah…people lose their jobs, a spouse dies, illness devistates, … there are no guarantees in life. Crap happens and it has happened to all of us. Quite crying and grow up! You made a business agreement, you have a moral and ethical obligation to keep it. Until our LIBERAL society grows up and becomes responsible, this country will continue to implode.
The only people that deserve mods are people that took Neg Am loans.. Those are too sophisticated for your average borrower. Other than that I agree with everything you said. Well stated..
Nice thought, IF the playing field was even. But it isn’t. 1. the loan process is not transparent. 2. the loan service proces is not transparent, 3. The banktuptcy process is not fair for all parties.
Yes ‘Life does happen’ but we cannot use BK to reset mortgage debt, but every business, municipality and heck even ‘Non-Profits’ get to reset the tables if they make a bad decision or the market goes bad.
What I think works is the elimination of Tax Deduction for everyone who is approved for a ‘real life’ loan mod, and not the crap they put out now. And that tax deduction for home interest is lost for the life of the taxpayer, regardless of weather they get remarried or whatever. No free ride. BUT a more level playing field.
Please describe specifically what is not transparent. What more should be added to consumer loan disclosures? Why should mortgage debt be ‘reset’?
All you CONSERVATIVE/TEABAGGER idiot savants amaze me!
When something goes well for you, you made that happen. When something goes wrong for you, the government held you back. When you get entitlements, you deserve it. When others get entitlements, they are free-loaders.
As much as you talk about personal responsibility, you have no concept of what that actually means.
Well, I am out in the trenches every day dealing with homeowners who were given a modification and then get foreclosed on, so, by my estimate at least 10-15% of these are the left hand and right hand not knowing what is going on. I would like to know when these loan mods were put into the pool? Personally, I did a loan mod myself and it wasn’t easy, double payments for 6 months, everyhting tacked unto the back and only the interest reduced to 5% from 6.5%. My loan was a refinance so I would have been in an IRS debt situation, so, choice was to pay the bank, keep the house or let it go and owe Uncle Sam and no house plus have a judgement. Although my house is upside down, I don’t care, I originally took the refi to pay off other high interest loans on investment properties which saved me beaucoup bucks every month. Normally I think you guys are spot on but I think you’re way off base on this one.
Many loan mods I’ve spoken to don’t end up any better than they were so they give up. That’s the real problem, $100 a month difference and more upside down is a formula for a 50% failure rate.
When an individual buys a piece of property, they are essentially investing in a speculative real-estate market. It’s just like an individual who buys shares of stock or invests in mutual funds is essentially investing in the spectulative stock market. The person who invests in the stock market receives a prospectus and that document has pertinent information in it. One piece of infomation is the disclosure that reads, “The future performance of an investment cannot be deduced from previous market value, i.e. the value of an investment may fall as well as rise. An investment may also lose value due to changes in interest rates and foreign exchange rates. Any capital invested cannot be guaranteed that it will maintain or increase in value” Capital in the real-estate market is any down payment and any future mortgage payments made. This verbiage should be included in all purchase contracts.
Because of the real-estate boom from 2002 to 2007, Americans and most politicians ASSUMED that real-estate would always appreciate in value. When the bottom dropped out, those who purchaed in the peak years of the boom were left upside down. Terms like “Predatory Lending” were invented to make these homeowner’s feel better about their knee jerk decision to buy a 650k house with no money down, a 563 mid credit score, making 95k a year on a negative amortized loan with a 1700.00 monthly payment. Playing the victim is getting old!! I’d like to see one homeowner stand up and say, “I effed up and made a bad financial decision for me and my family”!! I REALLY THINK WE SHOULD TAKE A LOOK AT USING THE TERM “PREDATORY BORROWING”!! If anything, the mortgage products made available during the real-estate boom were used and exploited not only by mortgage professionals but even moreso by the people who used those same products to purchase real-estate!! Just becuase an underwriter puts thier stamp of approval on a loan and says you can purchase that 650k house doesn’t actually mean you purchase it!! Time for people to man up and take some personal responsibility for thier decisions!!!
Pull your heads out… banks are forbidden by federal law from lending their own credit, their depositors credit and their stock holder’s credit. So where does the credit (money) come from? It originates from your signature as new funds into the economy. There is no money, only credits and debits – electrons, hasn’t been real money since 1933. Look up HJR 192…
Oh there you guys go bringing logic, facts and homebuyers into the discussion.
Dont you know that saving the homeowner is not what all these programs are about?
What you are not taking into account are the so called “modifications” the banks give homeowners that are temporary, and the payments go right back up even if they have made everyone on time as agreed. Secondly, you have not accounted for the banks that foreclose while people are in modification. Third did you know that once there is a modification on your credit, YOU CANNOT DO ANOTHER LOAN????.
I believe if the banks were forced to use the money to help the people that need it, instead of this game – you have to stop making payments to qualify, then, we will reduce your payments, then opps your payments are going back up then OH MY GOSH, YOUR HOUSE WAS SOLD FOR FORCLOSURE?
The Politicians need to be taken out of the BANKS pockets – Good people that need help, and have no other way to save their homes should be helped, and the people making “business” decisions to walk away, should be hung.
I learned last week why your stats on foreclosed mods are what they are. I sat across the desk from my lender to start the process (yes I am one of the upside down delinquents due to leaving the industry 2.5 years ago cause it was killing me)and would you believe that they basically do no doc/stated income in order to qualify you? Admittedly they agree that this is how we got here. That was the second disturbing thing after receiving what I thought would be the NOD by fedex, a package encouraging me to modify in a custom run color folder with glossy cards and brochures, nicer than I used to pass out to my clients as a mortgage broker!
Yes, your idea makes a lot of sense, but the flaw that will likely not make it fly is that there is a whole economy/industry/employment now built around it. They should not have bailed out Wall Street either. These things have natural courses of ups and downs and they are self-correcting if we leave them alone. All of the low rates are also a false situation and will become problematic in the future.
All that said, I am thankful to still be in my house, thankful to be returning to the industry part-time that I worked in for 25 years so I can keep building my new company and have enough income to hopefully swing a deal on my home and preserve our way of life. Hypocritical? Maybe…opportunity is opportunity and while I may not agree with how they are doing things, I will be honest and negotiate a payment that I can afford, though I find it just as appalling as I did when no doc/stated loans came out in the first place.
You sound like a good person and I hope things work out for you. What you were offered is all ‘most’ of my clients are seeking, A way to get relatively close to a payment/debt load that allows them to move forward.
I appreciate your comment!
Are you speaking of the re default mod’s of the home owner being given a $20.00 reduction modification?
And what do you suppose these sob’s do with the money they have all ready received for these programs? ha like they would give it back! Guy’s your principle is stinks !! its all a bull shit bureaucracy, and your loosing steam.
I think everyone needs a history lesson. When the upside down loan was made before the housing bubble burst the investors were make those investment based on the value of the property not the credit score of the to be owner.
The investor market was driven by the premise that real property would never lose value. It was a sure win for the investor.
We jump forward to today and we now know that the investor made a bad assumption and their collateral for the loan is not worth the debt it secured which was the premise of the original deal.
So the investor now wants to change the premise that the loan was originally based on i.e. the value of the collateral securing the loan to one where the owners credit score with a third party is the security.
This is where the disconnect with the investor, a unemotional business, and a home owner, a emotional human, drives the discussion of foreclosure.
The home owner has seen the terms of the loan transaction change with any control or input from him or her. They feel cheated without recourse. The truth is they have been cheated by the investor.
Now the question is how does this wrong be corrected so the housing market and the home ownership return to normal?
I propose that the investor be barred from reporting to credit agencies a default or foreclosure on a collateralized debt. In reality once the property is returned to the investor the contract is complete and satisfied in whole, just like with a pawn dealer.
“In reality once the property is returned to the investor the contract is complete and satisfied in whole, just like with a pawn dealer.”
I can’t believe I never looked at it that way, but that is the way it is! Deal is done, get on with your business.
I love it, get rid of modifications!
My solution now is the same as my solution then, when this whole thing started. Make existing loans assumable. This is a win for everybody. The banks don’t lose money. The credit worthy consumer gets in for nothing down (as long as Fannie Mae and the banks are reasonable about \credit worthy\.) Real estate brokers and mortgage companies don’t make money directly, but it keeps values (appraisals) up thus making higher home values, thus making more in commissions.
It would probably be important to make loans assumable on a one time basis so they don’t get moved around like trading cards.
My bank was actually open to this idea, but when we first mentioned it they looked at us as if we had two heads.
I do have a related question, what percentage of short sales and foreclosures came from sub-prime mortgages? Also, what percentage of foreclosures and short sales are strategic?
Your talk makes sense, but what you are not adressing is what caused this problem in the first place. When you solve a problem then it won’t happen again. First problem the Banks loaned $$$ to everyone even those with hardly any income, second when people loose thier jobs they have a hard time either finding another job that paid anything or a job at all. Then add rising taxes, food, energy, etc. people are having a hard time making it, right now most people are kicking the can down the road, so without the modification programs it would be even worse. As, for putting it oon the national debt, I don’t see that happening, because the government has not done any of that in the past.
keep up the good work, ideas are good..keep em coming!
I couldn’t agree more and to those who say it will hurt their credit forever: you are wrong. People who are foreclosed on can qualify for an FHA loan three years after the foreclosure sale date and it does come of the credit, typically in 7 years. Additionally, depending on state law, the debt may or may not follow them for a period of time, but it’s not forever. BK at the same time of a foreclosure will wipe out that debt and they can qualify for FHA in 3 years!! Short sell if you can but let it go to foreclosure if you must. BTW, this is exactly the route that Romney suggested for a quicker recovery. Had we done it, think of how much money we would have saved on all those homes that defaulted after the modification. Furthermore, since most mods don’t include principal reduction, homeowners that modified and are paying on time would have probably been better off to short sell and then buy a new home three years later; this way they wouldn’t be upside down for nearly as long.
The problem with Brian and Frank’s math is that they didn’t realize that with the 50% failure rate, there is also a 50% success rate. Following their suggestion would be a 100% failure rate on the properties in question.
Wow, you guys must feel like a dentist poking around for the tooth that needs to be pulled. Guess what? You found it!
Everyone has a different perspective on this one. I think this far into the crisis it is hard to justify adding new programs or even jiggering with old ones. People do need to move on.
Losing your house is not fatal–I should know, I lost mine 2 years ago. But it is extraordinarily painful and difficult. And I don’t care if you took on a loan or a 2nd that you should never have been given. It hurts families–crushes many of them. Hurts communities. Hurts the economy.
And yet I would vote to end the mods–with a twist! Spend some of the money you save to help families move on, encourage banks to rent out empty houses to families losing theirs (preferably in the same neighborhood, for at least 2 years).
And above all, give former owners a clear path to buying again. Right now it is a total nightmare. Banks and credit agencies can do whatever they want and there is no recourse.
For example, we did a dil because we were told we could buy again in 2 years. But the servicer reported the dil as a foreclosure, so we’re barred at least 4 years. We painstakingly repaired our credit scores, saved money, and got our income back up, and no bank would give us a loan.
The system is completely broken, and yes, some people are taking advantage of that, while others are being taken advantage of. Clear rules, a path back to ownership, and a less punitive system would go a long way to repairing the market and healing our nation.
My 2 cents. Peace out.
PS. I love these videos!
Your comments are absolutely correct period, done, end of conversation.
Unfortunately we have the current administration that has the philosophy of control and entitlement for dependency.
I suggest the bleeding hearts that disagree with you read up on some great attempts and theories, in the past, by authors such as Karl, Vladimir, Hobbs, and a few others.
Survey Money Sucks! It did not show the chart as before….
Your idea is basically wrong because foreclosures then follow the foreclosed homeowner for life in the form of damaged credit rating and the obligation to still pay off a home they no longer live in.
Plus, the home securitization scam that got the country in this mess and led to the banks getting bailed out is no longer the focus, now it’s the evil homeowner who bought too much or was encouraged by a banker to flip a home.
Chase Bank actually paid out bonuses seven times as great to their executives who closed lower income homeowners in sub prime mortgages, even when the homeowner actually qualified for a fix loan, all this because of the home securitization fraud.
The elephant in the room is credit card debt. The reason the foreclosure rate is as high as 50% is credit card debt brought on by the 2% monthly minimum payment AND a fraudulent, way overpriced debt suspension insurance program when customer qualifies for coverage.
Nothing will be fixed until credit card debt and student debt is lowered by at least 50 to 60% of where it is now.
What planet is Debt Neutrality from? Complete nonsense! Where did you get your information from? A group therapy session at the halfway house?
How about some specifics?
There is approximately 2 to 3 trillion in credit card and student loan debt that is actually more of a drag than the 15 trillion in mortgages because mortgages are paid off in 30 years time and offer income tax interest rate deductions whereas credit card debt and student loan debt just erodes a consumer’s buying power without the consumer being able to make new purchases because of the existing debt.
The government says the student loan and credit card debt is around 2 trillion, but the government does not count all the debt that is written off every quarter, but does not disappear, but rather goes to collection companies and eventually the courts as default verdicts.
3 trillion dollars on student loan and credit card debt is a huge boat anchor. I am not advocating credit card and student loan forgiveness, I an advocating interest free pay downs of those debts.
Now give us specifics or your cryptic critique was just mindless blather.
He with the Gold makes the rules, always has been always will be…our country is in serious trouble I think the gold folks have pressed too hard and the masses are failing to keep those folks happy… what then?
I got a mod. I saved 1800.00 mo. I also got a principle reduction and they forgave the 95k I was behind. What stress! I came within one day of a sale! I am thankful for the help. However I am still upside down, but I am not homeless. My payments come out of my checking acct. I have been on time for over two years!I am thankful for the help.
This is how it is supposed to work. Good Job!! We need more banks to grant the modifications and give the people that are in trouble a chance. You guys are working;a lot of people are not and still having to buy groceries & GAS and with what?
I haven’t read all the comments below so there is surely some redundancy, but the reason so many fail is that there is negative equity. The fact that 50% succeed is somewhat remarkable. Those 50% represent homeowners who sincerely want to stay in their homes and often will pay despite some being upside down or they have an equity stake. These are families with real flesh and blood people who want to stay in their home. There are others. If the banks and government are well served by taking huge losses to hand these homes over to other buyers at dramatically lower prices at considerable additional expense to rehab and market the homes, why not reduce principal by some proportion of that to increase the probability of success of the modification. In many cases there would be a higher profitability or smaller loss to the bank in doing so and the failure rate would drop significantly. As a Realtor I would benefit by ending these modifications at least in the short run, but I think that some sensible compassion in this process is the best route for the banks and the borrowers who have been caught in this horrendous downturn.
Hi Gregg,
I think you are right on. A foreclosure accomplishes the same thing as well but of course has a huge negative impact on our society.
Give them a 30 year fixed rate at 100% loan to current market value (LTCMV). If they still cannot afford it then they’ll have to move on. Remove any arrears/2nds unless the value supports. Same end result but with much less collateral damage.
But only if they can show that they have stable income and will be able to make the new payment. Make them sign a \deed in lieu\ that is held in escrow in case of default. This would I believe require changes in both Federal and State law so no games could be played. Pay to stay but based on fair and reasonable terms and conditions. Everyone with stable income and ability to pay gets a second chance. Problem solved.
Wow, where to start… first, it does suck that your neighbor may get a modification of any sort and some are still paying theur obligation BUT under the alternitive plan we would either forclose or short sale millions of homes….hum wonder what that would do to values in the neighborhood? So there is going to be lots to complain about getting out of this mess.
Remeber also JOBS and income, you could give people loans at zero interest, if they don’t have the income they can’t pay back.
Also
after you boot all these folkes to the street, where do they live? Rentals are going up, so now you have a housing crises of another type.
I diagree with your premise, modifications are taking place only because these homes would be foreclosed on anyhow, this results in a 100% failire rate. I would toss your numbers back at you and say loan modifictions have prevented 50-655 of these homes from going back on the market and not only that provided an opportunity for the current homeowners to keep their homes! 50% fail-rate is better than 100% no matter how you cut it.
Lots of comments so far. Here’s my $.02:
This is a bad idea because we already have a large inventory of homes in poor quality on the market, and then there is the “Shadow Inventory”.
Following this idea, would increase the homes on the market and those in the shadow inventory very quickly, probably quicker than the market can absorb. And then we will have the impact on the rental market, because all those people loosing their homes need to live somewhere, and they are just not going to buy anything for a few years.
Keeping the modifications in place will save 50% of those families from losing their homes. The glass is half full approach. And for those who fail, well then they can enter the market more gradually so we can better absorb them, as opposed to all at once.
The reality is, we need to do more short sales and less foreclosures. This will preserve more of the value than a foreclosure and help everyone recover faster.
Thanks for the discussion, but every market is different and so everyone’s thoughts will naturally be centered around their specif market as opposed to the national market.
5 Years ago this should have been the deal…the boo boo would have been gone and honest people still making their payments would not feel so cheated by all the blundering of modifications and delay of foreclosure procedures that are still a very gray area…there have been way too many people living for free for years without consequences.
agreed!
The HARP funds should have been used for principal reduction. The real problem was that MANY appraisalers and MANY underwriters and those who controlled them were guilty of fraud. Oridinary homeowners believed the values were there but they never were.Only the banks made money. Why did the banks also get the HARP funds? What we need are more lawsuits exposing the fraud and the perps who committed the fraud.
WTF….Methinks you are not an appraiser or an underwriter as you sure are quick to point the blame finger without including your occupational portion of this debacle in the mix….as an honest appraiser I thank you for bringing the maverick appraisers and underwriters to our attention…….NO ONE in the Real Estate/mortgage business is free of guilt, this is OUR fault as WE let this happen…..so until WE all start looking at how WE do business WE are all to blame…including me, as my glass house also has some broken panes..BUT I am sick of getting bricks thrown at my vocation by blame mongers looking for easy scapegoat targets…..remember when you point the finger there are more pointing back at you than pointing away.
What about the 12% or so that, in your little “scenario”
make up half the 25%, that do NOT fail. In other words, what about us guys who are out here MAKING OUR PYMTS ON TIME…..EVERY F@#$%G MONTH ??? Don’t you think we should be eligible for an interest modification? At least down to PAR? We didn’t cause the “crash”, but we keep on PAYING and PAYING and PAYING for a house that WAS worth $600,000 but is now down to $275K. I’m stupid enough to think I’m HELPING the economy by making my pymts. But, in reality, I should buy another home, move in, and then let them have my original home BACK……so they could sell it for $275K. Yeah, for sure, that should REALLY *HELP* the economy! I’ll buy a second home “for cheap” and let the bank EAT $200K on my present home. Yeah…..
Fucking BRILLIANT !!!
I’m with you for the reason that a lot of people are making payments on thier homes that may or may not be “under water”. There are tons of people like me, that that have equity in their homes and would like to refinance to get a better interest rate. However, lenders are not willing to lend because they have no motivation to reduce the payments based on interest rates alone. Go to another lender, try again, get the same answer, which is usually red tape and ultimately no answer….WTF. The loan mods can go away far as I’m concerned. Lets give back to the people that are shouldering this economy and making it work.
Yeah, Dude, you should do that. That would probably make sense for your scenario.
All those out there who scream bloody murder because their neighbor gets something they don’t are absolutely ridiculous. You neighbor got a loan mod and you didn’t? Your neighbor got principal forgiveness and you didn’t?? BOO-FRICKIN-HOO!
Guess what genius? Your neighbor also lost their job, and you didn’t. Your neighbor also had a spouse go through $200k of treatment for breast cancer that was not covered by insurance and wiped out their savings, AND YOU DIDN’T.
Are you really that stupid? In this world people get welfare, food stamps, financial aid for college, UI, and they get it based on hardship and need. Not because they want it, or because their neighbor got it.
GROW UP.
You have a job, probably savings in the bank, a roof over your head, food on your table, and CAN STILL MAKE YOUR HOUSE PAYMENTS. There are lots who can’t say that. So be happy for what you have, and quit bitching.
WOW-WOW-WOW GUYS!
Apple to oranges?
The reason why loan modifications have a 50% chance of survival is because they are not given principal reductions. .
Would you buy a $10,000 Honda for $20,000? . .even if you get it at 1% . . 50 days later, 50% of them wake up and say WTF?
We don’t own a home. .we own a MORTGAGE!
The same person could possible qualify for a loan.. .to buy a fair actual valued home right now and pay for it with a smile.
Instead of throwing these poor people into the bus. .
why not advocate to use that money in principal reductions!
Yes, a lot of people may say that once a neighbor get a principal reduction. .the one next door also wants one. .and the next . .and the next
As a forced into short sales with over 180 short sales listed, I presented a plan how to stop this to my congressman..
A 1-2-3 plan that would solve this crisis. .
Mortgage underwater? you raise you hand..
After acceptance the lender performs a FULL appraisal.
If the value of the property is 25% off from what they owe. .then the mortgage is reduced by 25% and refinanced.
Upon the borrowers selling his or her property anytime in the future . .. after this principal reduction. .they agree to SHARE 25% of the equity gain back with the lender.
If they do this. .everything will go back to normal
Then again. .no one is listening to me
I like your option.
I have siad that before, Give them a principal reduaction, and if they sell at a profit, they would have to share that prfit with the lender who wrote down the loan. Everyones comes out ahead, the lender gets some money back vvs a shortsael, and the homeowner gats motivation tokeep paying because there is a chance for some reward.
Thats the problem right now, no motivation to keep paying. If you are upside dwon, and you pay for 20 years you still will hav no equity, so there is no incentive to get though the hard times.
Wow…a lot of emotion out there. Sitting in my chair I don’t see the invesotrs really making that many modifications, and Jason is probably right they only make them to benefit the bank and not the homeowner, and the mods I do see don’t seem to work either. The reality is that I have stepped in to help a number of homeowners work through the modification process (as a service, free of charge) and in reality, the loans should probably not have been made in the first place. I’ve felt the pain presonally myself and the reality is that bad things do happen to good people. You have to pick up the pieces and move on.
We need to get past this whole mess. Postponing the inevitable is not going to benefit us in any way. Yes, if we cease the modifications it can lower prices in the short run and that has a downside, but the upside is we will REALLY hit the bottom and once that happens there’s no way but up.
Many homeowners that I’ve seen have already moved on since they either could not get a mod, or a job, or realized their current pay cut is no longer enough to cover the mortgage or just didn’t want to cover a 40% price drop. However; the banks still haven’t foreclosed as many of these homes have been setting empty for 2 years or more, no for sale sign and no sign of life. Counties can’t force the banks to maintain them since they don’t own them yet. The mods are only the tip of the ice-berg.
Dang it! Zoomerang sold out to Survey Monkey and they stink as far as I can tell. I can’t get it to show you guys the results. I’ll work on it. At any rate, as of right now it’s 65% in favor of losing mod’s vs. 35% in favor of keeping them.
And to make the point, we did this as a conversational topic for your discussion and opinion, so thanks for your feedback.
I’m glad I went to your website. I have never responded to your video’s before and was dying to respond to this video. Not only did I appreciate all the opinions but now I can make mine. What’s with Survey Monkey. It’s not my survey, we just want to respond. and I will…just need to get my thoughts on paper and I’m coming! I don’t think there is much input here from realtors. I think it would be very interesting to get a group together in my office and discuss
Instead of a loan modification, what about prinicipal reduction lowering the balance of the mortgage to the value of the home today with the interest rates of today? Isn’t that what’s being done anyway with a short sale?
Sorry, guys, but your assertion that these modifications are \new\ loans, is factually incorrect. Modifications are classified as TDR’s (Troubled Debt Restructurings) and, as such, it would never be assumed that they would perform the same as a \new\ loan. Furthermore, banks assess the modify/don’t modify question based on the numbers, i.e. \Are we going to lose our shirts MORE or LESS if we foreclose/short sale vs. modify this borrower?\ When the math says \modify\, they modify. Thus, most modifications are being granted on severely underwater homes. Remember, Fannie and Freddie do not allow principal write downs on these mods, so the new HAMP mods that may only perform at a 65% clip are a totally different, and more mathematically attractive option, than a short sale or foreclosure that may result in a 50% or more write down to sell. Ultimately, the servicer does what is in the best interest of the investor, NOT the homeowner, (which is arguably the way it should be done). When modifications are a better outcome for the investor, they are done. You seem to think that the modification programs were created to help the homeowners, that is not the case. Helping homeowners is just an ancillary benefit and gives the banks and the Federal government a feel good story to wrap themselves in. Modifications are another way to bailout and shore up the banking sector under the guise of \doing the right thing\. Having said that, I have personally helped hundreds of Michigan residents modify their mortgages and they are still in their homes today, paying their payments. The modification programs may not be perfect, but to throw them out because they are performing as good as you would like is akin to throwing the baby out with the bath water.
As Jason said, the modifications were created to benefit the investors, not the homeowners.
Often a borrower will qualify for a HAMP mod, then they still get denied because of the Net Present Value test or NPV test. That test is “does the proposed modification yield a higher Net Present Value to the investor vs foreclosure”.
Unfortunately, many people believed the rhetoric from our president that this program was created to help homeowners, when it was not.
It seems to me that people are attempting to gauge the success of the program based on how it was sold as a tool to help homeowners vs. on what it is as a tool to calm investors.
Jason, you are the one person that understands how the system works.
For the investor foreclosure, short sale or modification is just a question of the numbers and what works out best for the investor.
For the home owner it is a emotional discussion.
The house is nothing more than collateral at a pawn shop. Walk away and let the pawn dealer have the collateral, that was the deal struck at the loan origination.
People who are upside down on there houses only stay because of the credit hit they will take. Here is where the problem lies is the banking system has created this artificial disincentive of a credit score which does not really reflect the true nature of the business deal struck in the house loan.
The business deal was the house owner gets the title to the property so long as they make the agreed payment. The investor gets the title if the property owner does not make the payment, just like the pawn shop described above, end of deal.
The reporting by the investor to the credit rating agency is the part of this business transaction that is not fair and should be outlawed. Once this inequity is corrected the everyone in the property transaction would be on a level playing field and the housing industry could be fair and free to recover.
Rip the band aid off. There will be a lot of people whining about their personal situations, but isn’t that about the only time when people tend to care? When it affects their own personal situation?
Buffoons. Going to \stabilize\ the market by forcing massive numbers of immediate foreclosures? Because they like the idea of it. Only 50% successful? Only half the people who are about to lose their home are rescued? If the Titanic is sinking, and their aren’t enough life boats, just leave em up their. No point in making an effort if only half the people will be saved… Buffoons.
Buffoons? Hmmm…. we’re just posing a valid question. Not sure we deserve to be call buffoons on THIS one.
Isn’t that the question you posed at the end of your video? You asked if we agreed or if you were buffoons?
How many of these folks in your stats made the payments but the bank just needed a signature on a new loan so they could clear up title and then after 3 months of payments foreclosed anyway.
This was my idea 4 years ago…..if we had done this originally, we would be through this mess by now. It’s like musical chairs.
Terminate all modifications? Easy for you guys to say when you’re not the ones who are facing a foreclosure. I paid for my home with no late payments for ’12 straight years’ before I lost my job thanks to this wonderful economy. I was out of work for 4 months and we depleted our savings within 1 1/2 months before we started missing payments on the house. I found a job shortly thereafter and I’m fully able to start making payments again on the house, but I can’t afford to make up the back missed payments without some assistance, so the modfication is my only solution. I can tell you with 100% certainty that I will be paying this loan on time every month going forward. I have a large family that would be out on the street from our HOME (not just a house, its our home) if it were not for the modification program. So I say, until the economy vastly improves, I do not agree with your idea of killing it.
This is a complicated question that just can not be answers with a YES or a NO.
We hear all the time that loans were made to people that could not afford the home that they purchased. But I believe loans were made to others that should not have beenable to afford thier home (based on accepted ratios, etc.) BUT SOME HOW THEY DO? Why is that? All to often it is a result of personal choice.
I see far too many people whose priorities are up-side-down and for that reason they are underwater!
Beer and cigarettes seem to come first, then , FANCY cell phones, big screen TVs, fancy cars, dining out and even vacations come first, then comes housing and insurance if there is anything left. When we bail out those who are irresponcible we are breeding irresponcibility. Help those who will help themselves and let the others figure it out for themselves.
This sounds like a perfect example of why Modfication work.
In theory the idea of moving through the cycle of owners who are having difficulty making their payments, foreclosing those owners, then reselling the homes to new owners who will make the payments makes sense. Additionally, if a foreclosed home was:
1. In the same condition as an “arms length sale”
and
2. The lender was looking at a lengthy time to sell to get market value instead of liquidation value
the impact on a new round of foreclosed resales might have minimal effect with an absorption rate nationally of close to 20%.
However, neither of those statements are true. This then brings into question the underlying premise that the increase in inventory would be “easily absorbed.”
Studies in markets where recovery is already occurring and where both short sales and foreclosed resales comprise less than 5% of what is for sale and less than 10% of what is selling clearly indicate lenders continue to “dump” homes on the market. These studies also show the homes
1. Are being under-priced and selling for more than asking (in general)
and
2. Selling in less than 45 days (in general) while “arms length sales” are taking over 90 days to sell.
Additionally, current market forces are such that despite the decrease in inventory of distressed homes and the fact they are selling for over asking, the average sale price of such homes continues to decline.
This would offer that an increase in foreclosed resales, below market value, in less than average market condition would drag “arms length sales” values down, where they have recovered nicely in the last two years. The direct and most significantly negative result from such a consequence would be renewed erosion in the consumer’s confidence in homeownership. This would decrease demand for all except those feeding at the bottom (not the first time home buyer which studies show is the engine of home sales).
Consequently, while the idea of moving through the process quickly by eliminating all the “government efforts to keep homeowners afloat” makes sense when all other factors remain unchanged, unchanged they would not remain. This would produce the unintended consequences of decreased:
1. Consumer confidence (which is still 37.2% below where is was in mid-year 2007)
2. Mortgage activity,
3. Home values
4. Absorption rate as inventories repopulate
5. Job mobility
Whose statistics are these? The same people who got us into this in the first place? The modifications I have seen in many cases actually RAISED PAYMENTS for borrowers! Sure it was a fixed rate payment but more than they paid before. Guess what? Those modifications did not work. Actually lowering payments works and people stay out of foreclosure and it helps stabalize markets keeping other people from going into foreclosure whether strategic or otherwise.
In markets that I work in, home prices have dipped 20% to 30% in the last 7 years. This means that even if you had significant skin in the game, you have been flayed and have no skin left! Why not help out folks who have done their best and just need a hand up, not a hand out? When we can fight two wars and pay for $6000 wrenches for the military, we can afford to take care of the homefront!
I’m not sure I follow. I’m assuming Fannie, Freddie andFHA own a majority of these homes. Is the suggestion that they take 100% of the loss all at once instead of helping 50% of the current owners stay in them? Isn’t 50% better than 100% default? It seems taxpayers would still be on the hook….one way or the other.
I don’t recall hearing a statistic that the current demand would be able to soak up the supply if that happened. The average marketing time of a home is healthy, but not at an all-time low. Would putting this number of homes drive housing prices back down and cause significant damage to consumenr confidence.
The economy seems to be pretty fragile right now. Would this push it back over the edge and into recession? And if we drive housing prices and confidence any lower at this point would that cause even more foreclosures.
If that kind of news were actually on the news, would there be as many new homebuyers be as we are seeing today back in the market…..or would they wait for things to settle back down?
I don’t know….stopping the modification process seems a little risky at this point in time. I don’t think we’re out of the woods, but at least we’re seeing some positive signs. The healthy pool of buyers is stablizing home prices in most markets and pushing it up in quite a few.
Is that worth risking?
I’ve never believed in artificially propping up businesses or mortgages. Attrition is the reality. Just because someone told people they qualified for a mortgage didn’t not make it true. As for throwing money at lost causes, this is how Democrats buy votes when everything else they have attempted has failed.
The economic stimulus has been a complete failure! I also urged our representatives 3 years ago to NOT put a stimulus incentive for new buyers on a home purchase. We need to work our way out of this with responsible behavior. You pay you stay you don’t you won’t .. I do think it would be wise to release so many foreclosures each month instead of flooding the market all at one time. Do you think maybe someone is holding these up since this is an election year? I’m just saying….. Mmmmm?
Problem is flood of homes would put downward pressure on prices and the create an imploding cycle. Like it or not values are stabizing in many markets, values are increasing in others and the economy is stable enough to support more buyers then there are homes to buy. The reality is the stimulus works for short period of time so it is pain now or pain later. Most do not have the stomach for more depression and stabiltiy out weighs calamity. When rates increase it is all going to implode again anyway so make your money now and take night courses so you can go to work for FEMA or the National Guard once the civil unrest begins…
Doug.. Your comments were in opposition to your belief. Stable markets will bring in more of the investors. I also buy as an investor (14 in 12 months) When I try to buy I’m in a pool of 8 other buyers, at least. The timed ‘flood’ of housing units will stir competition, increase prices are an outcome. Foreclose on them all, bring them to the market and start all over. The inventory would be miniscule in a year!
I buy those houses in the very low price range; I am surprised that the loan mod success rate is as high as it is. My experience has been that these people still can’t pay attention on time, much less the loan..