Interview: Shari Olefson

INTERVIEW with Shari Olefson, of Ft. Lauderdale, Florida real estate and foreclosure attorney, Florida Supreme Court Certified Circuit Civil Court Mediator, Author of Foreclosure Nation

1. For mediations, must banks come to the table?

A. Mediation is mandatory in Florida – banks must come to the table for homesteaded residential foreclosures.

2. Following are numbers listed in the HUD report card. Is it referring to permanent or temporary modifications?

Since April 2009, low rates have helped 7.1 million homeowners to refinance

3.15 million modification arrangements through June 2010 (1.3 mil HAMP; 472 FHA loss mitigation and early interventions; 1.4 million through HOPE Now)

A. These are the numbers for temporary modifications. There are only about 500,000 permanent modifications. The good news about HAMP is that it did succeed in laying down a foundation for banks to do their own modifications. To see how successful the main banks are in doing these modifications, check out the bank’s websites.

Here are a couple samples:

Sept. 21: Bank of America has provided mortgage modification assistance to more than 680,000 homeowners, including an industry-leading 79,859 completed modifications through the government’s Home Affordable Modification Program (HAMP) through August and more than 600,000 through the bank’s proprietary programs since January 2008.

August 20: Wells Fargo & Co. said today from January 2009 through July 31, 2010 the company had a total of 520,399 active trial and completed modifications. Of that total, 87 percent were completed through its own programs.

“This trend reflects our continued progress in working with customers on home payment relief, including those customers who ultimately will not qualify for a Home Affordable Modification,” said Mike Heid, co-president of Wells Fargo Home Mortgage. “About 58 percent of our customers not eligible for HAMP have been redirected into alternate modifications. That’s one of the highest conversion rates among the eight servicers for whom that HAMP data is reported, and well above the 45 percent average.”

Wells Fargo continues to use a combination of rate reductions, term extensions and principal adjustments to address the unique financial needs of each of its customers. Beginning in January 2009—several months before the creation of HAMP—Wells Fargo became one of the first servicers to use principal forgiveness as an element of its loan modification program for certain portfolio assets. Through June 30, 2010, the company has completed nearly 60,000 such modifications with a total reduction in principal of more than $3.1 billion.

3. I’ve heard that the government pays participating banks the difference between the short sale and the loan. Is that true?

A. That is not true. The government does pay a part of it, but not all and not a lot. There’s a sliding scale.

4. Who manages mediations in Palm Beach and Martin County?

A. Palm Beach County Bar Association manages mediation. Meredith Trim is the director. The Collins Center oversees mediation in the 19th Circuit Court, which includes Martin and St. Lucie Counties.

5. Who has the mediation statistics in Florida? National Center for State Courts?

A. Call the Collins Center

6. I did last spring. It did not give those statistics.

A. I don’t know who would. No one wants to say the program is not successful. A friend told me she’s had success. Last year, it was all about going for modifications. But now, more short sales and deed in lieu can be done.  There are still kinks in Palm Beach County – homeowners are required to be notified to go for their mediations, but they weren’t.

7. Early this year, 8 million homeowners were supposed to get help from Making Homes Affordable. 3 to 5 million where to be served through modifications and another 4 million through refinance. Have these statistics changed and how are we faring compared to them?

A. They keep lowering the numbers and adjusting the goals. 500,000 have received permanent modifications. The thing is, now they are seeing re-defaults.

There’s a HAMP report card. It’s a little misleading, and it doesn’t show re-default.

Concerning the Refi alternative, negative equity makes these deals impossible to do. It’s not about unaffordibility anymore. The problem is unemployment, and these programs are not going to help you if you are unemployed.  We shouldn’t be bailing people out beyond a certain level. It’s not realistic and what the lenders get paid isn’t enough.

What the government needs to do is give incentives for people to stay in their homes – not to not walk away.

Then there’s the Buy and Bail. An owner applies for a loan for a home priced at $450,000 next door to his home. Then, he walks away from his home that he bought for $600,000. You think the loan officer didn’t know that he was going to default? The guy’s house was just next door to the one he was buying! The banks aren’t working together to protect each other.

More reeducation is needed for homeowners, so that they understand that a home is a long-term investment. What is the cost to walk away? Let’s say that you are $24,000 underwater, but if you walk away and you rent a house for the next four years, how much will that cost? You have to compare those numbers.

If you really did the math for strategic default, the math doesn’t work out. Talk to a credit councilor. How your credit will be affected has to do with your particular case. How many payments you are late on, and so forth. The more you are screwed up, the more your credit will be affected.

Fanny Mae just issued a statement: if you do a short sale, you can buy a home in two years. Deed in lieu, 4 years. Strategic default, 8 years.

The government needs to get people to stay put and do what it can to keep home values to stop dropping.

There are 7 million homes in shadow inventory — no one knows exactly how many — and five banks control that REO. I think this would be good opportunity to thwart that inventory from being dumped. That’s a bigger threat than strategic default.

Government needs to coordinate those five banks that have the most in shadow inventory.

I represented a bank taking back a condo. Down the street, another bank was selling one like ours at a deep deep discount. We knew that we would immediately lose $3 million. So we were going to buy the other condo just to keep the value up.  Banks don’t work together.

The banks have to figure out how to subsidize the carrying costs because there are 2 to 3 years of housing inventory.

8. What is the number of households that under water?

A. 24 percent nationwide and 46 percent in Florida.

9. Since all this started, how many foreclosures have there been? How many in Florida? On Realty Track – I see 2 million nationwide and 250,000 in Florida.

A. This is the number of foreclosures right now. Check, though, to see what exactly Realty Track is referring to.

10. How many mortgages do Fannie and Freddie hold?

A. Fannie and Freddie are originating all the new mortgages. 90 percent of every new mortgage is somehow touched by Fannie, Freddie or FHA.

11. What are the requirements for HARP?

The New Program HARP: People must have the mortgage with Freddie or Fannie and the banks must agree to write off 10%. FHA claims that this program will help 500,000 to 1.5 million homeowners.

I think that, like HAMP, it’s not about the actual number of people it will help. Like HAMP, I think HARP will provide a model for banks to set up their own refinance programs.

12. Is there anything else coming down the pipeline?

Nothing new. Maybe assumable mortgages would help if  it can be figured out how to do it as a discount.  Remember way back when you could assume a mortgage? People paid more because they knew they would save money — no closing cost –that would be attractive.

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