home modifications revisited p2j unedited

37 smiley faces.  27 unhappy faces.  Five undecided.

That’s the official result of a random survey taken by Delray Beach realtor, Mary Lou Ciambriello, as she stood in line all day Tuesday, Nov. 16 with a thousand other homeowners at the 46th Making Home Affordable workshop. Held at the convention center, homeowners had the opportunity for face-to-face consultations with their loan servicers.

Her unofficial take on the mood of the crowd: “It’s a very scary situation. I had no idea of the magnitude.”

The workshop was put on by the Obama administration’s Making Home Affordable program, the HOPE NOW Alliance and NeighborWorks America.

Of the line of people waiting, Carol Lambert, spokesperson for the U.S. Department of Treasury on hand that day, said, “I am glad they are here, rather than being taken advantage of by the scam artists,” who, by the way, were actually lurking around or in the parking lot.

Said Ciambriello: “Someone solicited me while I was standing in line.”

Were there some bright spots this day, other than these homeowners will finally get to sit across the table from their servicers?

In the area of West Palm Beach to Miami, more than 21,000 homeowners have received permanent modifications, Lambert said, and while the nation’s median savings per month have been $520, in this area it’s closer to $600.

And, there’s the new program, the Principal Reduction Alternative, but that just started mid October so it’s too early to tell how effective it will be. (That alternative allows for those who qualify under the HAMP program to receive a principal reduction rather than a discounted interest rate.)

But there is something new about that program: although the program is voluntary for servicers, “we do ask them to look at the cost benefit, with and without a principle reduction. We are requiring them to do this evaluation,” Lambert said.

And, no. Ciambriello did not receive the interest reduction she was looking for. “I don’t qualify,” she said. “They told me, ‘Shop around. You pay. Someone will want you.’”

INTERVIEW with Shari Olefson, of Ft. Lauderdale, Florida real estate and foreclosure attorney and  Florida Supreme Court Certified Circuit Civil Court Mediator. She is the author of Foreclosure Nation: Mortgaging the American Dream; Florida Foreclosure Defense Strategies, Saving the American Dream; and What Lawyers Need to Know Now; The Commercial Real Estate Market Between a Rock and a Hard Place.

1. Concerning the Making Home Affordable program (MHA), following are numbers listed in the HUD scorecard. 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 million 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 MHA’s HAMP (Home Affordable Modification Program) 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 HAMP program through August and more than 600,000 through the bank’s proprietary programs since January 2008.

October 25: Wells Fargo & Co. said that of modifications started since the beginning of 2009, the company had 556,868 active trial and completed modifications in place as of Sept. 30, 2010. Included in that total were 495,026 of its own modifications and 61,842 modifications through the federal government’s Home Affordable Modification Program (HAMP).

In the second quarter of 2010, about 92 percent of Wells Fargo’s mortgage customers remained current on their loan payments, according to the Sept. 10 edition of Inside Mortgage Finance, and the company’s delinquency and foreclosure rates were less than three-fourths that of the industry. As a result, fewer than 2 percent of the loans secured by owner-occupied homes and serviced by Wells Fargo proceeded to a foreclosure sale in the last 12 months.

The government keeps lowering the numbers and adjusting MHA’s goals. 500,000 have received permanent modifications. The report card is a little misleading; it doesn’t show re-default and now they are seeing redefaults.

2. What about the Home Affordable Refinance Program (HARP)? For this program, people must have the mortgage with Freddie or Fannie and the banks must agree to write off 10 percent. FHA claims that this program will help 500,000 to 1.5 million homeowners. Will that be effective?

A. Concerning the refinance HARP alternative, negative equity makes these deals impossible to do. It’s not about unaffordability 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.

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.

3. How will the robo-signing problem, leading to a holdup on processing foreclosures, affect home values?

A. Here are my thoughts on the issue in general. Fannie Mae and the banks set deadlines that flat-rates foreclosure mills had to meet, which everyone knew would be impossible to meet, especially with the volume and securitization issues.  Pretty much everyone knew shortcuts were being taken (This does not make it right to file false affidavits, etc.). Every regulator either missed this or knew it was going on.

A quick, cheap residential-foreclosure process benefits everyone: Borrowers in recourse states, who will eventually have to pay the legal fees, etc.; neighbors, who look at abandoned homes for months; local governments, who pay to maintain them; banks and Fannie Mae (which translates to taxpayers), who take the bulk of the losses, etc.

The real problem is the foreclosure system has not kept up with mortgage industry practices and the volume.  Procedures vary by state and even circuit.

Now everyone’s got an agenda: Politicians to get votes, banks to keep shareholders happy and profits up, borrower defense counsel to get more business, judges to get caseloads off their desks.  Even the Attorney Generals with their ongoing investigation, they want to raise money for their states and save face with big settlements – particularly those who were not re-elected and have only another few months in office.

Example; Bank of America came out with a press release when it resumed foreclosures that read something like: “We’ve found no foreclosures were wrongly filed,” and  “We stopped for a while to show our customers we’re concerned about their concerns,” and “Our investors have given us permission to resume the foreclosures.”  Well, the issue was never whether foreclosures were wrongly filed – it was that ONCE they were filed, these false affidavits, etc. were used.

And what exactly have they done to show customers they’re concerned?  And of course their investors want the foreclosures to proceed.  How did that address the problem? And does this mean no authority told them it was OK to proceed…just their investors?

The impact on home values will be (1) causing more delays, and (2) causing more uncertainty. Both result in dragging the problem out when, in truth, we need to get through this inventory as quickly as we can.  And it will also result in reducing the prices folks will pay – the homes will deteriorate more and people may pay less because of their uncertainty – there’s more risk – of title issues.

4. Concerning solutions, is there anything coming down the pipeline?

A. If you read between the lines in many Federal Government press releases, you will see the mention of affordable rentals. That’s the direction I think we’re going.  But the Administration won’t come right out and say MHA failed. They’ll start setting other little goals – distracters from MHA if you will – and then come out and make a big deal about how they’re achieving those other goals. MHA will just disappear into the sunset.

In terms of the foreclosure process, here are a few ideas, also off the top of my head:

Require borrowers to escrow some sort of payment in contested foreclosure proceeding to avoid folks trying to live for free.

• Allow buyers in short sales to assume the mortgage at an attractive rate – keeping original homeowners on the hook at least for some amount of time – this will generate more sales and higher prices.

• Expand lease for deed program and include a right of first refusal to buy back to encourage more folks to use that program

• Tax break for underwater people who pay down their mortgage

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