Actively seeking some success stories about the loan modification, they are few and far between.  Instead we read about how one part of a mortgage company is uninformed about what the other is doing.  Take for example the Franklin family of Airville, Pennsylvania.  They applied for and faithfully adhered to the loan modification program guidelines.  However, the day after Christmas they received a letter stating that foreclosure proceedings had begun.  This after their credit was ruined and they ended up owing more than their original amount after months of paperwork and red tape.

The Red Tape Chronicles of MSNBC reveals that the company said a mistake had been made, but the Franklin family does not believe it,

On a single day in early January, she [Debbie Franklin] says, one Chase representative told her that the loan modification plan had been denied, another said it was approved and a third told her the foreclosure had been “suspended.”

“I check my county auctions every Monday to make sure my house isn’t on there,” she said. “I don’t believe anything they say anymore.”

My advice to the Obama Administration is to focus on real mortgage relief rather than just rescuing the housing market.  There are people able to pay for mortgages but unable to refinance because homes are not worth as much as their mortgages. With a simple loan modification like reducing the interest rate, that $200 or $300 could be the difference between someone keeping or losing their home.

After having a long discussion with an agent with whom I work, I thought it would be helpful this Friday to offer a couple of tips for home owners considering or in the process of applying for a home loan modification.

1. Be as accurate as possible on your financial worksheet, but make sure your expenditures don’t greatly exceed your revenue.  The numbers must be pretty close.  My friend said she spent $200 p/month on groceries and was questioned by the lender.  She explained that she has a garden and clips a lot of coupons to keep that expense down.
2. Hand write your distress or application letter.  The lender isn’t interested in seeing a fancy, error free typed request.  They are there to help real people and a handwritten letter honestly written will appeal more to that person you’ll never meet than the cold, typed letter.
3. If you can get in the HAMP program (or Making Home Affordable) by the government, you’ll be well on your way to being approved for the loan modification.  For more information, click here.
4. Do not fail to be in touch with the lender at least ONCE a week - call to check the status, etc.  Make sure when you do contact them, document who you talked with, along with the date and time.

Good luck getting that loan modification.  You’re going to need it.

The flip rule requiring sellers to own a property for 90-days before selling to buyers obtaining FHA loans remains suspended for another six months.  The Department of Housing and Urban Development is waiving the rule to combat the effects of vacant and abandoned homes.

According to the HUD web site,

To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

The relaxed rule may be having some impact, but the benefits are more likely being enjoyed on a case-by-case basis.

My husband and I have been trying to refinance our home loan for well over six months now - reaching for that elusive 4.44 percent mortgage rate.  So far no luck.

Why?  Like many Americans today our loan is greater than the home is actually worth thanks to the great housing recession of 2007, 2008, 2009.  Will it stretch into 2010?  So far, yes.  Our credit score is pretty fantastic, but because we added a sunroom for $26,000 four years ago and did a refinance in 2006, the two liens on the property are for a greater amount than what the real estate is now worth to a tune of about $20,000.

As a result, we’re sitting for a few more years at the 6.5 percent interest rate.  What a tragic waste.

For us and for most of the rest of the country, the 4.44 percent interest rate is wasted according to CNN Money.

The fall in rates ostensibly means homeowners can lower their monthly loan payments by refinancing their existing loans. They’re certainly trying — the Mortgage Bankers Association reported last week that 78.1% of all mortgage applications fell under the refinance category, up from 58.7% in April.

But many of them are filling out all that paperwork only to get a rejection letter in response. The mortgage association does not quantify how many of those who apply for refinance actually get approved, but mortgage brokers say many homeowners are ineligible.

Yes, that’s us.  Just another middle class American tragedy.

Rates remain historically low in the U.S., so if home owners can refinance this is a great time to do so.  From my state association,

Freddie Mac reports that long-term mortgage rates moved south again this past week. Interest on 30-year fixed loans hit a new low of 4.49 percent, compared to 4.54 percent the previous week and 5.22 percent a year ago; and the 15-year mortgage landed at 3.95 percent, down from 4 percent the prior week and 4.63 percent a year ago. Five-year adjustable-rate mortgages reached a new low of 3.63 percent, down from 3.76 percent last week and 4.73 percent a year ago; while one-year ARMs fell to 3.55 percent from 3.64 percent last week and 4.78 percent a year ago.

In other news, loan modifications are under fire by some companies.  BlackRock Inc. says the government program HAMP is encouraging home owners into strategic defaults rather than loan modifications.  Instead, the company wants to see Congress pass a temporary bankruptcy that would eliminate second mortgages before addressing the first mortgages - which remain unmanageable when the second one remains.  This should prove interesting if Congress listens.

Have a great, debt-free weekend!

Following the mortgage meltdown in 2007, lenders came under federal scrutiny for their loose financing standards which helped start the housing free-fall.  As a result, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (or SAFE Act) was passed by Congress.  On October 1st, the final rules will take effect, including a mandatory registration for mortgage brokers.

According to MSNBC, fingerprinting and background checks will be a part of the registration along with mandatory education,

Industry sources say that thousands of brokers have gone through mandatory education, credit checks and state and federal testing in order to retain the right to handle mortgage originations.

The process has thinned the ranks of brokers, who may be even fewer soon given talk of a 30 percent fail rate on testing, said Bob Moulton, president of Americana Mortgage Group in Manhasset, New York.

While it may be bad news for many brokers, overall the consumer will gain from a more informed and educated lender.  If everyone else in the housing industry is accountable for their work, so too should be lenders.

Loan rates are at historic lows, for those interesting in buying real estate today.  According to the Wall Street Journal through my own state real estate association,

The 30-year fixed mortgage rate fell to a new low of 4.54 percent this past week from 4.56 percent the prior week and an average of 5.25 percent a year ago. The 15-year fixed loan rate also hit a record low of 4 percent, down from 4.03 percent a week earlier and 4.69 percent last year. The five-year adjustable-rate mortgage averaged 3.76 percent, compared to 3.79 percent the previous week and 4.75 percent a year earlier; and one-year ARMs averaged 3.64 percent, down from 3.7 percent and 4.80 percent, respectively.

In addition to buying a home, these rates should be taken into account for people considering refinancing.  Refinancing may be a preferred option to trying for the faux loan modification programs, which seem to be stalling for millions of homeowners.

According to a letter to the editor published in the New York Times, the modification programs are not working.  From John C. Liu, New York City Comptroller:

The current loan modification process is plagued by bureaucratic runarounds. Homeowners are frustrated by the unanswered phone calls, lost paperwork and seemingly endless red tape. The status quo approach is clearly not working.

Have to agree with him from everyone I’ve spoken with regarding the modification program.  My verdict is the lenders are going through the motions to satisfy the administration, but are not sincere about actually helping.

An agent in my office told me today about her sister who is a Realtor in California.  She was excited because recently she’s receive at least two emails saying that to qualify for a home loan, you can opt in to a “No Income Documentation” loan.

My first instinct was to flinch because these are the loans that are now most at risk for foreclosure (if they haven’t already foreclosed).  However my friend was pretty excited about them because it means that the economy is starting to turn to the point that investors feel confident in releasing no-income loans.

The paperwork shows that a minimum FICO score of 620 is required and are 30-year fixed mortgages with no pre-payment penalties.  To verify that a buyer is able to make the payments, the lender will verify current employment but is not asking for pay check stubs, W-2’s, tax returns, 1099’s, or 4506 forms. One lender states the loan amount must be at least $220,000 but no greater than $729,750, while another offers a minimum loan amount of $100,00 with a maximum of $3 million.

The loans are available both for new purchases, home owners wishing to refinance, to purchase condos, or for non-owner occupied loans (at a higher interest rate, certainly).

This will be an interesting trend to follow - to see if it expands to the rest of the country.  If it does, it might just be the electric shock the heart of real estate needs to get going again.

It should have been predicted a year ago - and perhaps it was.  With more people in foreclosure or facing short-sales to get out from under their house mortgage, credit scores across the country are sinking.

According to a report by FICO, Inc., more than 25 percent of Americans today have a credit score of 599 or less.  There have been increases in people whose scores are above 800, but the middle-of-the-road borrowers are fewer and farther between.

MSNBC reports on the lower scores,

It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual’s score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.

How has your credit score been impacted in the last two years?

At the height of the new vampire craze in popular culture, why not talk about the fangs that Fannie Mae is growing when it comes to collecting deficiency judgments!

With Fannie Mae on board during the TARP bail-out and with their tacit approval of sub-prime mortgages via their purchase of the same, you’d think they would be more forgiving to home-owners who default on their mortgages.  Instead, Fannie Mae is getting ready to sink their teeth into former real estate owners who walk away from their homes in a strategic default.

For another article about Fannie Mae’s lead in showing banks how to go for deficiency judgments, click here.

Of course, the case can be made for personal responsibility - that the homeowners knew when the made the purchase that the future value of the property could not be guaranteed - so they need to stand by their fiduciary promise to pay the note.  However, it’s just not fair to ordinary folks when the fat cats get away with the same thing and all is forgiven, according to Virginia Broker Lenn Harley,

IF THE AMERICAN HOME OWNER IS IN A POSITION OF NEGATIVE EQUITY, WHY CANNOT THEY CLAIM A FINANCIAL LOSS FOR TAX PURPOSES AND “WRITE IT OFF” as a corporation can do when they lose money on investments or P&L???? Why is the American home owner the entity that many would FORCE to have to HOLD THE PROPERTY WITH NO MARKET VALUE, LIVE IN IT AND CONTINUE TO PAY FOR IT WHEN IT NO LONGER MAKES ANY FINANCIAL SENSE.

The corporation USES THE TAX LAWS TO MITIGATE THEIR LOSSES.

Only the American home owner is forced to live in and continue to pay for their financial loss even when they didn’t make the decisions that caused the loss.

While I disagree with her political finger-pointing because both sides of the aisle deserve equal blame, her points are valid.  Would you ever do a strategic default?