Tens of thousands of homeowners who were hoping for lower payments are discovering that lenders roll late fees, back taxes or other costs into the principal, sometimes turning a difficult payment into an impossible one. That’s one reason many reworked mortgages are sliding back into default.Monthly payments, on loans modified from Jan. 1, 2008, through March 31, 2009, increased on 27% and were left unchanged on an additional 27.5% according to a recent report by banking regulators. Many modified mortgages fall delinquent (25% to 40%), depending on the type of mortgage.
It's too early to know if this pattern will continue under the Obama administration's $75 billion initiative to get lenders to reduce monthly payments for homeowners struggling to make their mortgages.
A total of 360,165 mortgage modifications are now in a three-month trial period under the government's plan announced in March. But the initiative focuses on reducing interest rates rather than cutting principal. "Payments have [either] gone up [or] the payment relief can last for the first few years and then go up (again)," says Alan White, assistant professor of law at the Valparaiso University School of Law in Valparaiso, Ind.
FDIC details mortgage payment reductions
Yesterday I mentioned an “urging” by the Federal Deposit Insurance Corporation (FDIC) directed at its loss-share partner institutions to consider temporary mortgage payment reductions for unemployed borrowers. A spokesman for the FDIC offered further clarification: “Servicers may provide the borrower with at least six months of payment relief…The term [of] forbearance may vary based on the borrower’s circumstance.” The program reaches out to both the unemployed and the underemployed, and applies to borrowers who suffer a reduction in household income due to decreased hours, loss of job, or a qualifying pay cut. Acquirers of failed insured institutions who agree to a loss-share arrangement must abide by the FDIC Mortgage Loan Modification program for any assets purchased from the failed bank.
The program provides loan modifications by reducing the borrower’s monthly housing debt to income ration (DTI ratio) to no more than 31%. “The FDIC has a loss share monitoring program responsible for surveillance and compliance monitoring of the assets covered in the shared-loss agreement,” the spokesperson said. “In this oversight capacity the FDIC will review loss share servicers forbearance policies and ensure compliance with the shared-loss agreement.”
GAO looks at alternatives to Fannie Mae and Freddie Mac
The Government Accountability Office (GAO) is scrutinizing some of the proposed alternatives to Fannie Mae and Freddie Mac, now both in conservatorship. The alternatives include reconstituting the GSEs as for-profit corporations with government sponsorship and additional restrictions. According to the GAO, this option would effectively add controls to minimize risk in the system; eliminate or reduce the GSEs’ mortgage portfolios; establish executive compensation limits; and completely convert the GSEs from shareholder-owned corporations to lender-owned firms.
This model is not entirely without risk, however, as investors might be unwilling to invest capital in reconstituted enterprises unless the Treasury Department assumed responsibility for losses incurred during their conservatorship, GAO said. “Continuing the enterprises as GSEs could present significant safety and soundness concerns as well as systemic risks to the financial system,” GAO said in the report. “In particular, the potential that the enterprises would enjoy explicit federal guarantees of their financial obligations, rather than the implied guarantees of the past, might serve as incentives for them to engage in risky business practices to meet profitability objectives.”
For Those of You That Can Afford Your House, Here Is How I will Help.
Everything Handled By Attorney’s
New Federal Program Guidelines for
Home owners are allowed to modify their home loans only once.
With Federal Subsidies the mortgage payment may not exceed 31% of household income.
Interest rates maybe as low as 5%.
Length of loan term may be extended to 40 years.
Loan must have been made before January 2, 2007.
New Federal Program will end December 2012.
Federal Government will provide an incentive for making your mortgage payments on time.
** Information obtained from the Untied States Treasury Department.
Take a few minutes. Give us a call. We will analyze your case and pre-qualify you for a loan modification free of charge.
As low as $ 2500
Modified mortgages still defaulting
" No one changes Anything, without risking Everything"