Tag Archives: Loan Modification

A California appeals court ruling could have far reaching effects for the mortgage servicing community. The three judges hearing the case of Aceves v. U.S. Bank found that the bank had promised to negotiate a loan modification for a customer while intending to proceed with the foreclosure on the customer's house. The bank claimed an oral promise to postpone foreclosure is unenforceable. But the court ruled against the bank because the homeowner had opted against other actions to keep her home based on the bank's word it would offer a modification.

With loan modifications on a steady decline, the analysts at Fitch Ratings say the common thread running through the industry has become when will the servicer foreclose as opposed to how can a distressed borrower stay in their home. Fitch's analysis of loan mod trends shows little improvement in success rates. While alternatives like short sales are modestly improving loss severities, the agency says servicers report borrowers are electing to remain in their property longer by staying on through the extended foreclosure process.

Bank of America has set up a new operational division to service all defaulted residential loans. It will be led by Terry Laughlin, who will oversee the bank's mortgage modification and foreclosure programs, and is charged with resolving investors' mortgage repurchase claims. The decision to establish a new, separate division to handle the company's problem loans came out of the bank's ""self-assessment of default servicing"" following the robo-signing scandal.

Moody's Investors Service studied two million loans backing residential mortgage-backed securities (RMBS) pools and found that a loan that is modified and then reported as current is three times as likely to default over the ensuing twelve months as a current loan that has not been modified. The agency's also put the practices of eight major servicers under the microscope. It found that six-month re-default rates vary considerably, from 20 percent for Citi and Litton to 33 percent for Bank of America.

In more bad news for the Home Affordable Modification Program (HAMP), three congressmen, Reps. Jim Jordan, Patrick McHenry, and Darrell Issa have proposed a bill to end the program. Issa is chairman of the Oversight and Government Reform Committee and introduced the bill at the committee's first hearing last week. HAMP took a beating at the hearing from the lawmakers. They called the program a ""colossal failure"" and said it's just one more example of why government interference in the private sector doesn't work.

Though servicers seem to be having minimal success with the Home Affordable Modification Program (HAMP), final 2010 data released by HOPE NOW shows that its members completed 1.24 million proprietary loan modifications last year. That number is more than double the 512,712 HAMP modifications completed by servicers last year. HOPE NOW's data show that there were 1.06 million foreclosure sales in 2010, compared to 1.76 million total loan modifications.

Last week, the special inspector general for the Troubled Asset Relief Program, released a report to Congress saying servicers are not doing all they can to help facilitate the process of keeping borrowers in their homes. To date there have been 1,025,907 homeowners rejected for HAMP modifications by the eight largest servicers, and there have been 572,655 canceled trial modifications, which typically occurs because of insufficient documentation, program ineligibility, or because the borrower missed payments.

Treasury and HUD released a new report Monday on the state of the housing market, including new metrics that provide a more granular view of the Home Affordable Modification Program (HAMP). Most program participants are moderate and middle income distressed homeowners, with a median credit score of 570, who are underwater on their mortgages. Borrowers in active permanent modifications have seen their monthly mortgage payment cut by a median of 40 percent.

In his report to Congress this week, Neil Barofsky covered a number of controversial issues surrounding the Home Affordable Modification Program (HAMP) designed by Treasury as a foreclosure prevention effort. Barofsky says HAMP ""continues to fall dramatically short of any meaningful standard of success,"" and he faults servicers for compounding the program's problems with unnecessary delays and mishandling of paperwork. Barofsky is the special inspector general for the Troubled Asset Relief Program (TARP), which funds the HAMP initiative.

HomeAffordableGuide.com provides interactive software that guides borrowers through the application process for mortgage help programs, and the company now offers a 30-day satisfaction guarantee. If a homeowner is not happy with the site's abilities while applying for a loan modification or short sale, they may request a full refund within 30 days of purchase.