Tag Archives: Loan Modification

Obama's FY2013 budget proposal includes an extension of the Mortgage Forgiveness Debt Relief Act of 2007. The Act ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven. The administration is proposing an extension that would apply to any amounts forgiven before January 1, 2015. Otherwise, short sales and even modifications that reduce the debt qualify as income to the borrower.

Four federal regulatory agencies issued guidance for junior lien holders regarding loan loss allowances. Junior liens include second mortgages and home equity lines of credit. The Federal Reserve, FDIC, National Credit Union Administration, and Office of the Comptroller of the Currency issued the guidance not to enact new rules, but rather ""to reiterate policy and to remind regulated financial institutions to monitor all credit quality indicators relevant to credit portfolios, including junior liens,"" according to a joint release from the agencies.

An estimated 1.05 million homeowners received permanent loan modifications from mortgage servicers in 2011, according to year-end data released Tuesday by HOPE NOW. That tally includes both proprietary and government-program mods, and represents a 40 percent decline from the 1.76 million modifications granted in 2010. At the same time, HOPE NOW reports loan modifications outpaced foreclosure sales for the fourth consecutive year. In 2011, there were approximately 843,000 foreclosure sales completed, down from 1.07 million in 2010.

More than 930,000 homeowners have received a permanent modification through the government's Home Affordable Modification Program (HAMP), saving an estimated $10.5 billion in monthly mortgage payments, according to Treasury. While this tally - nearly three years after the program's launch - falls well short of the results initially promised by President Obama of helping 3 to 4 million homeowners restructure their loans, federal officials continue to tout a key success of HAMP as improving standards and processes within the industry.

A New York housing counselor has been sentenced to 72 months in jail and three years supervision by a U.S. District Court judge after defrauding 136 homeowners who reached out for help as they attempted to avoid foreclosure. The judge also ordered Lori J. Macakanja to pay $298,639 in restitution to the homeowners affected. Macakanja reportedly required upfront fees from homeowners and promised in return to help them achieve mortgage modifications in order to stave off foreclosure.

The mortgage servicing system is badly broken and would benefit from a single set of federal standards, according to White House officials. President Obama on Wednesday introduced what he's termed the Homeowner Bill of Rights - principles that he says will ensure borrowers and lenders are playing by the same common-sense rules. These rules address disclosures, conflicts of interest posed by investors and junior lien holders, assistance for at-risk homeowners, and safeguards to prevent wrongful foreclosures.

The default servicing industry is in a state of transition, according to Larry B. Litton Jr., CEO of Selene Finance, and it's the smaller, more nimble servicing operations that will have the advantage in reacting quickly to the new rules and the changes that are in store. Litton says many of the bigger servicing shops are still set up to do what he considers commoditized types of processes and aren't able to adapt quickly to the regulatory changes coming down the line, while smaller special servicers are already built for single point of contact and to be highly responsive to consumers.

Changes announced Friday to the Home Affordable Modification Program (HAMP) are expected to extend relief to a larger share of struggling homeowners as well as renters. One of the key adjustments centers around principal reductions. To encourage investors to agree to the principal reducing modification currently available through HAMP, Treasury is tripling incentives for such restructurings, paying from 18 to 63 cents on the dollar, and extending this same incentive to Fannie Mae and Freddie Mac, who have previously opted not to participate in HAMP's principal writedown option.

The ratings agency DBRS says mortgage servicers are going to continue to see ""much needed reform"" in 2012 as the industry moves to standardize the servicing business. The first go at such standardization will center around implementing the directives of regulators' consent orders, according to DBRS. The agency does expect the U.S. government to institute some of the REO programs currently being vetted, but doesn't foresee any tangible benefits in terms of loss recoveries until 2013.

As robo-signing reviews reach completion, servicers are beginning to work through some of their foreclosure backlogs, according to a third-quarter report from Moody's Investors Service. At the same time, the ratings agency found that loan modifications are on the decline. Servicers are now turning to loss mitigation alternatives such as short sales and deeds in lieu, Moody's says. The agency is also forecasting longer timelines this year to move properties from foreclosure sale to REO liquidation.