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Posts Tagged ‘Feldman’

Feldman Law Center – News by Feldman Law Center
The whole reason a loan modification becomes necessary is because the borrower needs the loan to be more manageable, so that he or she can continue to pay for it. The purpose of a loan modification is for the borrower, or someone on the borrower’s behalf, to negotiate a more feasible mortgage with the lender. At first glance, this deal seems like a good one for the borrower. And oftentimes it is. But what about the lender?

Because of the current financial crisis, many people are seeing loan modifications as a good deal. The negotiations are usually initiated by the borrowers, and allow them to keep their property, postpone payments, reduce or stabilize interest rates, and sometimes even get a better deal on the house they already live in. Their credit scores are not harmed like they would be by a foreclosure or bankruptcy. Most of all, they do not have to move from their houses, forcing upheaval on their families, during a time of financial hardship and stress.

Society seems to take the side of families and the personal stories broadcast on the nightly news shows. Stories about 50-year old, recently-laid off, single moms who can’t afford their mortgages tend to pull on people’s heartstrings, winning the allegiance of many members of the public. And since so many people are being affected by the mortgage crisis, public outcry seems to be against banks and lenders, who are being blamed for offering such ludicrous loans in the first place.

The government, and specifically groups such as the FDIC, are also increasingly supportive of loan modification programs. The FDIC has even built a “Mod in a Box” loan modification program guide, in order to encourage more and more lenders to offer loan modifications. Obama has plans that involve modifying home loans to keep families in their homes, and countless nonprofits and support groups seem to be cropping up to help people with distressed finances.

So, borrowers, the government, and society at large are supporting the numerous loan modification programs available. One still has to wonder what banks think about home loan modifications.

Although much less loudly proclaimed, many lenders are in support of home loan modifications too. Lenders’ motivations for modifying a loan can vary. If a home is sold in a short sale, the bank agrees to write off the amount the borrower still owes, sells the property, and takes a loss. Foreclosures are much the same. When a bank forecloses on a home, they often make less profit on the property than they would have made through a mortgage, even a mortgage modified through a loan modification. Simply put, banks have a business motivation to modify your loan: they stand to make more profit if you stay in your house. Not to mention the fact that loan modifications make them look better in the eyes of the community and the government, and could potentially help the world’s economy in the long run.

If you need a home loan modification, contact the attorneys of the Feldman Law Center. Consultations are free, and they can help you benefit from staying in your home.

 

Feldman Law Center – News by Feldman Law Center — Unfortunately, California homeowners are being overwhelmed by foreclosures, and many people feel there is no end in sight to the situation.  Legislation from California and the federal government has helped some people, but it is not enough.  Loan modification attorneys are working with people everyday who either do not have access to the right information, or who feel left to deal with lenders all by themselves.  While the legislation can be helpful, President Obama and the California legislature are not there to help make phone calls and negotiate loan modifications.

Foreclosure sales in California rose about 32 percent in the month of May of 2009, and 35 percent in April of 2009.  Just the California foreclosures from the month of May represent more than $8 billion in total loan value.  That means $8 billion worth of homes were foreclosed upon.  However, the good news is that lenders continue to voluntarily postpone the majority of foreclosure sales.    Lenders, such as banks and mortgage companies, are doing everything possible to delay foreclosures, and that includes working with California loan modification attorneys and homeowners on loan modifications.

In fact, of the foreclosures scheduled, lenders postponed 40 percent at their own request and another 33 percent at the mutual request of the lender and the borrower.  This means that lenders are absolutely willing to renegotiate the terms of mortgages, and homeowners who are in danger of (or are in the midst of) foreclosure proceedings still have hope.  Foreclosures often seem like the end of the world, and even with the new legislation, they can be overwhelming.  However, as evidenced by these statistics, lenders are not interested in taking over your home.  The Feldman Law Center has seen lenders take unique steps to negotiate with borrowers and homeowners in an attempt to keep the homeowner in their home, making affordable payments.

Things are particularly tough for homeowners in southern California.  Researchers from Columbia Business School said that over 30 percent of borrowers in San Diego and San Bernardino counties owe more than the refinancing limit with Sallie Mae and Freddie Mac.  In Los Angeles county, there are 29 percent of borrowers who do not qualify for refinancing because of the less-than-5-percent restriction from those two major mortgage lenders.

However, loan modification attorneys can help homeowners and borrowers overcome these restrictions.  Foreclosures seem to run up on people quicker than they think, in part because they are focusing on their immediate crisis (such as paying a car loan) and not the looming one of foreclosure.  However, it is never too late to contact a California loan modification attorney to help you keep your home and avoid foreclosure.  A qualified California loan modification attorney will know the laws, know the lenders, know the mortgage companies and be able to offer quality advice on a variety of subjects.  Trying to fight a foreclosure without a qualified loan modification attorney is a bad idea.

Visit us at www.feldmanlawcenter.com or call 800-588-0425.

Feldman Law Center – News by Feldman Law Center — A little known aspect of the Obama Administration’s “Making Home Affordable” plan is the “Net Present Value” test which essentially determines whether a loan modification or a foreclosure and sale will provide a better return for the investors behind the mortgage in question. The calculation takes the proposed monthly payment in a home loan modification and multiplies it over the life of the loan (payment x 12 months x 30 years). If that total comes in above what a sale and foreclosure would yield, the calculation would favor a modification. If it falls short, the calculation would lean toward foreclosure and sale.

Foreclosures in many scenarios will favor the investors while a modification often works to the advantage of the servicer. For the investor, a foreclosure and subsequent sale may result in a loss of principle but money coming back to the investor can be re-invested in other vehicles which can provide yield and returns. The disadvantage for the servicers is that, without monthly payments from the property, they lose the fees they were able to charge the investor for handling the payments, billing, and communication with the homeowner. A loan modification, on the other hand, benefits the servicer by keeping the payment stream, and the fees they can charge on it, alive. The modification hurts the investor by forcing a mark to market valuation which reflects the loss on the mortgage (also known as a haircut) due to a lower interest rate and, if applicable, a reduction in principle.  

The third party in the game is the homeowner (Bob) applying for the loan modification. It’s likely that the homeowner has heard of “Making Home Affordable” and is very aware of the 2% interest rates that were part of the headlines generated by the plan. Naturally, that’s the rate he wants. Unfortunately, getting Bob a 2% interest rate is not in the interest of either the investor or the servicer of his mortgage. For the investor, the lower the interest rate goes the bigger the haircut. Memorializing it in a modification will turn a theoretical haircut into an actual loss on the books. For the servicer, an interest rate at that low level can push the NPV score to a point where the test favors foreclosure over modification. If Bob’s property isn’t considered a lost cause it’s extremely unlikely that he’s going to see anything close to that 2% rate.

One of the other variables is Bob’s commission based income. His payments are going to be capped at 31% of his average monthly income, which has dropped considerably. In fact, it’s dropped so much that even by maxing his payment out at 31% of his monthly pay he falls below the estimated foreclosure and sale score. Conditions dictate foreclosure according to the net present value test.

The investor, seeing a score that clearly calls for foreclosure takes a look at sales statistics for Bob’s town and his neighborhood. Nothing is moving and foreclosure backlogs are growing. Average bids at auctions are coming in at less than 60% of the loan amount. Less than 2% of foreclosed houses are selling at auction. The estimate on what the property can realize in a foreclosure and sale is way too high for current conditions. If the house sells, and it’s a big if, it won’t be for anything near the price used in the NPV calculation. The investor decides to pull back on the foreclosure due to the regular hits he’s already taking in his portfolio and his aversion to putting another property into the portfolio. The pullback on the foreclosure doesn’t mean he’s going to allow for a modification, however. There’s a haircut waiting with the modification as well. This property is going to sit in limbo while things work themselves out.

There won’t be any communication regarding this stalemate between Bob, the servicer, or the lender. From Bob’s point of view the servicer’s people aren’t responsive and aren’t calling him back. The truth of the matter is that the servicer’s processors know as much about Bob’s situation as Bob does; not much. The sides settle in to the day to day of nothing happening which stretches to months.

The commentary from homeowners that have tried to modify their mortgages under the guidelines of Making Home Affordable runs along a thread very similar to that of our theoretical Bob. While much of the delay can be attributed to overload, staffing, and training issues at the lenders and servicers, the stalemate between servicers and their investors is bogging things down as well. The Safe Harbor Bill, passed by Congress in May, was aimed directly at this standoff. Its main objective was to remove the threat of lawsuits filed by investors when they felt that the servicers were acting on their own best interests in approving loan modifications.

While there may be a conflict of interest currently, neither side wants to go to war over this issue. Despite the increased autonomy given the servicers, it’s likely that they will still want to be on the same page with investors to preserve long standing relationships that have worked well over time. It therefore looks like limbo, status quo, and homeowners waiting for a knock on the door will rule the day and the near term.

Those homeowners seeking to avoid this quagmire would be best served to hire legal representation familiar with the process to either navigate the Making Home Affordable guidelines or to modify their mortgages independently from the government program. With over 600 successful home loan modifications negotiated on behalf of their clients, The Feldman Law Center is well suited to guide you through your loan modification. Call them today at (949) 544 8224