Banks must start reducing principal for underwater borrowers
It’s increasingly clear that one answer to the foreclosure crisis is the best: Banks must aggressively reduce loan balances for troubled borrowers. It will work not only for homeowners and for the economy but for lenders, who in many cases can recover more of their investment this way than they can in a foreclosure sale.
Moreover, it’s fair to ask the banks whose lending policies caused the Great Recession to do more to end it.
Smaller, temporary modifications, such as interest-rate reductions, do nothing to address the epidemic of borrowers who owe more than their homes now are worth — in part because the foreclosure wave has lowered their value. Without a reduction in principal, these homeowners have no incentive to keep making payments, even when they have an income.
Banks are reluctant to reduce principal, and the federal government has no authority to force them. But the Treasury Department could offer them financial incentives.
It’s hard to understand why more lenders don’t work with borrowers on the principal. Wouldn’t it make more sense to reduce a loan balance by, say, $100,000, avoiding the expense of foreclosing and reselling the home, than to lose twice that amount through such a sale?
The Treasury Department is working to make its programs more effective. It announced last week that California would get $700 million, much of it to aid unemployed borrowers. That will help, but not enough.
The American people were incredibly generous to the nation’s banks. Banks need to return the favor.
read more@http://www.mercurynews.com/opinion/ci_15381140?nclick_check=1
As always,
Shawn
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Program could give homeowners up to 18 month mortgage reprieve
Florida’s struggling homeowners could get an 18-month reprieve on mortgage payments under a state plan to spend $418 million in federal foreclosure prevention aid.
The money is part of $1.5 billion the Obama administration announced in February for five states hardest hit by the real estate crash and unemployment. Other states sharing the $1.5 billion are Nevada, California, Arizona and Michigan.
“I don’t think it will help everyone, but it will make a dent,” said Stan Fitterman, chief operating officer of the Florida Housing Coalition. “We’ve never encountered a housing situation like this before, so something like this has never been tried.”
The Florida Housing Finance Corporation created the proposal. Its three parts include:
$353 million to pay up to nine months of a struggling homeowners’ mortgage if the lender or bank agrees to forgive up to nine months of payments. This is meant to help an unemployed or underemployed homeowner.
$40 million in down payment assistance to eligible home buyers using Florida Housing’s First Time Homebuyers Program. $25 million to pay for legal counsel for homeowners who are in foreclosure but hope to keep their homes through mediation or loan modification or avoid foreclosure with a short sale.
The money will be distributed by housing counseling agencies, which the Florida Housing Finance Corporation will chose through a request for qualifications.
Eligible homeowners also must prove that they have suffered a hardship or unanticipated increases in mortgage payments. To receive money for a down payment on a house, eligible buyers cannot earn more than 120 percent of the area median income, which ranges from $39,240 to $91,080, depending on the county.
read more@ http://www.tcpalm.com/news/2010/jun/17/program-could-give-homeowners-up-to-18-month/
Shawn
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Chase being sued by homeowners
Three New York residents filed a federal lawsuit Tuesday against units of J.P. Morgan Chase & Co., alleging that the bank misled them about their chances of getting long-term reductions in mortgage payments.
The suit highlights one risk of the Obama administration’s effort to save millions of homeowners from foreclosure through loan modifications: The hope of receiving such relief may cause some borrowers to continue making payments, rather than accepting foreclosure and seeking more affordable housing. That could leave them in even worse financial condition after an eventual foreclosure.
The suit, filed in U.S. District Court for the eastern district of New York, says the three borrowers “relied on promises by [the bank] that they would be able to modify their loans so that they could avoid foreclosure” and so “invested their limited resources” in making payments.
The three borrowers—Shanaz Begum, Tamara Williams and Alex Lam—seek unspecified damages from J.P. Morgan and are represented by lawyers from the Urban Justice Center, a New York nonprofit group. All three sought help from units of J.P. Morgan, and were offered trial loan modifications under the administration’s Home Affordable Modification Program, or HAMP, which provides incentives to banks and mortgage investors to reduce payments for some borrowers.
Under HAMP, borrowers who make three trial payments and meet other criteria are supposed to receive “permanent” modifications that lower their payments for five years. The suit says Ms. Begum and Mr. Lam, after making trial payments, were told by the bank that they wouldn’t get permanent modifications because their incomes were too low. The bank and Ms. Begum ran into repeated snarls over how to document her husband’s cash earnings from driving a taxi, the suit says.
As always,
Shawn
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Bank of America wants to suspend mortgage payments for jobless
It will be interesting to see if Bank of America uses this option in the future. All I can say is beware because if you don’t find a job in the required time frame you will still have to hand over your home no questions asked! If you have a lot of equity in your property this may be a dead end situation for you. Read on for more information…
Bank of America wants to give struggling mortgage customers who are collecting unemployment benefits up to nine months with no mortgage payment. That’s right. Zero payment.
Customers would have to agree that, if they haven’t found a job within the nine months, they will sign over their house to the bank. The Charlotte bank would give them at least $2,000 to help with moving expenses. The proposal needs regulatory approval, and the bank doesn’t know when, or if, that will happen.
Some experts say the plan could become an industry model and is the most substantial, creative approach yet to addressing the fallout from stubbornly high unemployment, which is driving mortgage delinquencies and foreclosures. The plan also could provide families with faster relief, allow them to save money and provide a timetable for making decisions. The bank could avoid millions in collection and foreclosure expenses.
“It’s an innovative way for Bank of America to demonstrate it’s working with its customers,” said Mark Williams, a former Federal Reserve bank examiner. “Regulators should view this as a positive step as well.”
The $75 billion federal mortgage-aid program, announced in February 2009, has struggled to fulfill President Barack Obama’s estimate of helping millions. Through March, only 230,000 families had received final mortgage modifications under the Home Affordable Modification Program, called HAMP.
The program holds few options for the jobless, even as the U.S. unemployment rate hovers around 10 percent. The Charlotte area’s rate is near 13 percent. And more than 6.3 million people nationwide have been out of work longer than six months.
Read more: http://www.miamiherald.com/2010/04/22/1592244/bank-of-america-wants-to-suspend.html#ixzz0lwAC7wUH
Shawn
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