Posts Tagged ‘HAMP’

Principal Reductions: A Cure to the Crisis?

April 12, 2012 Leave a comment

After much debate, Fannie Mae and Freddie Mac will decide by the end of this month whether they will allow principal reductions on mortgages they back.

Fannie and Freddie have resisted calls to write down the balances on the loans in their portfolio, saying it would be too costly for taxpayers as the mortgage giants are government-controlled companies, regulated by The Federal Housing Finance Agency.

At the core of the debate is Ed DeMarco, acting director for the agency, who has said principal reductions would amount to an expensive taxpayer bailout of troubled homeowners. According to, the agency had originally decided against allowing principal reductions after internal studies showed that alternatives such as adjusting monthly payments or forbearing principal were more cost effective.

The Obama administration, however, has tripled the incentives it will pay to Fannie and Freddie for reducing principal under the Home Affordable Mortgage Program, or HAMP and has forced the agency to reconsider.

As reported on, Fannie and Freddie have about 3 million loans that are seriously underwater, according to company filings. But three-quarters of these homeowners are current on their payments and may not qualify.

The number of eligible underwater Fannie and Freddie loans could range from a few hundred thousand up to 750,000, according to estimates – a fraction of the total 11 million underwater borrowers in the U.S.

However, there is still debate on if this will fix the housing crisis.

While some economists state that this could be helpful in aiding the crisis, some experts still fear that allowing principal reduction will open a new wave of strategic defaults, where homeowners decide to stop paying their mortgages in order to benefit from modification programs.

Plus, at the end of the day, taxpayers will still be paying for principal reductions – whether taxpayer money comes from HAMP or from the open line of bailouts Treasury provides to Fannie and Freddie.


Homeowners fight and win against the banks to avoid foreclosure

March 20, 2012 Leave a comment

Fed up with bank procedures, more homeowners are turning to legal action in court to get the mortgage debt relief they need.

In 2008, Jewel Miser and her husband Jack began trying to get Bank of America to modify their mortgage. Jack had lost his job and the couple was a month behind in their mortgage payments. Fed up with getting the run around by the bank and running into dead ends, the couple sought legal aid to help them in their quest to get a loan modification and avoid foreclosure.

As MSNBC reports, more and more homeowners are finding success taking their case to court to get new loan terms as the Misers did. Their lawyer successfully challenged the shaky paper trail on which the lender relied on to prove it owned the Miser’s note. In the resulting settlement, the bank agreed to new loan terms that cut the Miser’s monthly payments by roughly 15 percent, paid their legal fees and stopped the foreclosure.

According to MSNBC:

“When these homeowners get to court, they find a laundry list of shoddy practices that undercut lenders’ legal claim to foreclose, say consumer attorneys who have pursued these cases. Many cases are tainted by “robo-signers” who failed to properly review files, despite swearing under oath they had done so. Other title claims are undone by improper accounting, including unwarranted fees, and payments that were not credited.

Consumer attorneys also are attacking lenders’ effort to paper over missing links in the chain of documents required to prove that a bank owns a loan and has the right to foreclose. Some of those defective paper trails date to the sloppy underwriting that accompanied the frenzy of mortgage lending in the 2000s, when hundreds of now-defunct lenders churned out a blizzard of notes that were instantly offloaded to investors.

Lenders’ disregard for the law is still rampant, according to consumer advocates and regulators. Last month, a survey of 260 consumer attorneys in 45 states by the NCLC found that thousands of homeowners were improperly foreclosed on in just the past year. In more than 80 percent of the cases, the lender scheduled a foreclosure sale while processing a loan modification. In four out of five cases, the attorneys reported, lenders failed to properly credit payments or wrongly claimed homeowners owed bogus fees.”

While it’s not a new practice for borrowers to take their disputes with lenders to court, rising frustration with other means of trying to get a loan modified is a major deciding factor in the current housing crisis. Banks encourage homeowners to work directly with lenders through government-sponsored programs, aimed at providing mortgage relief to millions of borrowers which have fallen far short of promises.

One program that has severely underperformed expectations is the government’s Home Affordable Modification Program (HAMP) which leaves the final decision to modify a loan entirely with the lender. Because the government does not enforce HAMP on lenders, homeowners are being denied modifications that should have been made under government guidelines, forcing homeowners to take legal action.

MSNBC reports:

“That often means a trip to bankruptcy court for a Chapter 13 proceeding, which allows people with a regular income to adjust their debt. Once in court, a foreclosure is typically halted automatically, placing the burden on the lender to have the process re-instated. That forces the lender to prove it owns the mortgage and to account fully for any disputed back payments. When the lender is unable to do so, consumer lawyers say, it is more likely to agree to settle by modifying the loan terms, often by simply lowering the interest charged to current market rates.

Lenders rarely forgive principal, even on homes that are deep underwater, say consumer attorneys. But while bankruptcy law prevents a judge from writing down the primary mortgage on residential property, other loans don’t enjoy that protection.”

Friday Foreclosure Story: San Bernardino Homeowner Wins Back Her Home

February 3, 2012 Leave a comment

San Bernardino homeowner Karen Mena is proof that foreclosure doesn’t have to mean the end.

Mena was foreclosed on but was able to stop eviction proceedings and cancel the foreclosure by fighting Bank of America for a loan modification that would make her home more affordable.

Los Angeles Times reports that consumer attorneys say foreclosure reversals like Mena’s could become more common as they learn to better exploit foreclosure errors.

Karen and her husband, a self-employed contractor, bought their house in 1996 and rode the upward wave of her home investment for nearly 12 years. In 2008, her husband lost his business as many contractors did during the housing bust and their two-income household was forced to survive on one income. She fell behind on payments and applied for a loan modification through her mortgage servicer, Bank of America and was granted a trial modification. She faced some unexpected expenses in February 2009 and missed a mortgage payment, breaching the terms of her agreement with Bank of America, voiding the trial modification.

Unable to make full payments on her mortgage, the Los Angeles Times reports a familiar story:

“Mena submitted her first application through the Home Affordable Modification Program in June 2009 and then again in July after she was told her paperwork was never received. A frustrating process ensued: She would fax financial documents to the bank and wait for weeks or months for word back, only to be told to send the information again because the papers were incomplete, missing or outdated. Mena kept some of her correspondence with Bank of America, a journal of letdowns and false hopes.

In August 2010, the bank began formal foreclosure proceedings against Mena. She reapplied for a loan modification. Her home was scheduled for sale at auction Dec. 6, 2010. The bank asked her for more documents.

She was caught in the gears of the bank’s dual-track process, where a lender continues to foreclose on a home even as it works with a borrower on modifying the home’s mortgage — akin to lining up the mortician as the patient checks into the hospital.”

Karen was soon informed by Fannie Mae – the investor behind Bank of America’s loan – that she no longer owned her home and was given the option to rent her home or accept a “cash for keys” agreement. Unsatisfied with either option, Karen remained in her home and weeks later she was informed by Bank of America that her trial loan modification had been approved.

“She faced a choice: Start making the trial payments or save her money in case she was evicted. Mena decided to begin making the payments, telling herself, “Let’s see what happens. This validates everything I have been trying to do.”

Still, Fannie Mae pressed on, taking Mena to court to get her out of the house. Mena replied with her own lawsuit, written with the help of a paralegal because she did not have enough money for an attorney.

The lawsuit makes a series of arguments accusing Bank of America and Fannie Mae of deception as well as questioning their authority to foreclose. A key contention is that she was accepted into a trial loan modification program even after she was foreclosed on.

But before that lawsuit could be resolved, Fannie Mae won the eviction case. She appealed and lost.”

The next day, an attorney with Bank of America informed Karen that the eviction never happened and BofA repurchased the loan from Fannie Mae and the foreclosure was eventually retracted

Karen is still working with Bank of America on an affordable mortgage modification through HAMP but as of now remains in her home.

Check out the Los Angeles Times for the full story.



Changes to HAMP Can Help You Avoid Foreclosure

February 1, 2012 Leave a comment

The Obama administration is taking another swing at improving its main foreclosure prevention program, expanding eligibility for its Home Affordable Modification Program (HAMP) to borrowers with higher debt loads. It will also triple the incentives it pays banks that reduce principals on loans.

The program, which was initially set to expire at the end of this year, has also been extended to December 2013. Additionally, the administration will also offer incentives to Fannie Mae and Freddie Mac to reduce principal on loans which previously was only offered to private lenders and banks.

According to CNN Money, the changes to HAMP which were announced last week at a press conference, include:

  • Expansion of eligibility: HAMP was designed to bring the debt ratio of mortgage borrowers down to 31% of their incomes. Those whose mortgage payments were already below that level had been ineligible for a modification. They may qualify now. The new guidelines will allow for a more flexible approach that takes other debt into account when calculating debt-to-income ratios.
  • Extension of eligibility to owners of rentals properties: The old HAMP rules applied solely to owner-occupied homes but now those who own rental properties may also qualify for a HAMP modification.
  • Triple balance-reduction incentives: The new HAMP will pay between 18 cents and 63 cents for every dollar that lenders take off the mortgage principal, up from between 6 cents and 21 cents.
  • Pay Fannie and Freddie the same incentives: Currently, Fannie Mae and Freddie Mac do not offer principal reduction plans as part of their HAMP modifications. To encourage this assistance, Treasury said it will pay the same principal reduction incentives to Fannie Mae or Freddie Mac if they allow servicers to forgive principal in conjunction with a HAMP modification.

The changes to HAMP do not take effect until the end of April, but the Treasury recommends any struggling homeowners to seek foreclosure prevention counseling immediately to learn their options and determine their best course of action.

White House signals more aggressive stance to protect homeowners

January 18, 2012 Leave a comment

Many experts see the biggest obstacle to the economic recovery is the mired housing market, which is bound to become a significant issue in the 2012 campaign season. As such, President Obama has signaled that it will take a more aggressive role this year in protecting homeowners from foreclosure, an intention that to-date has fallen short.

Rep. Barney Frank (Mass.), ranking Democrat on the Financial Services Committee, which has jurisdiction over the mortgage giants Fannie Mae and Freddie Mac, want the administration to put more pressure on banks to do more to help troubled homeowners refinance mortgages.

According to, putting more pressure on the banks to help troubled homeowners refinance has emerged as the most likely option, given the extreme difficulty of persuading the GOP-controlled House to set aside more money to avert foreclosures.

In July, the President acknowledged the administration’s efforts have fallen short of expectations to-date but made asserted that they will continue to search for additional ways to pressure the banks.

“We’re going back to the drawing board, talking to banks, try to put some pressure on them to work with people who have mortgages to see if we can make further adjustments, modify loans more quickly, and also see if there may be circumstances where reducing principal is appropriate,” he stated.

White House spokeswoman Amy Brundage further states:

“The President will continue to expand on these efforts and look at new ways to help homeowners, just as he has over the past few months with new programs to help underwater homeowners and expanding forbearance so more unemployed homeowners can stay in their homes,” she said.

Homes lost to foreclosure top 4 million

January 16, 2012 Leave a comment

While foreclosure filings and repossessions fell to their lowest level since 2007 last year, more than 4 million homes have been lost to foreclosure over the past five years, according to RealtyTrac, the online marketer of foreclosed properties.

One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed, as reported by CNN Money.

The Los Angeles Times is reporting that in California, 3.2% of homes logged at least one foreclosure filing last year, down from 4.1% a year earlier. Specifically, 2.7% received notices in Los Angeles County and 2.5% in Orange County, compared with nearly 5% in San Bernardino County and 5.3% in Riverside County.

Last year’s declines are due, in large, to processing delays caused by fall-out from the “robo-signing” scandal that broke in late 2010. Banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. However, California and other states are likely to see an enormous wave of long-delayed foreclosure action in the coming year as banks deal more aggressively with 3.5 million seriously delinquent mortgages.

While several factors worked against homeowners last year, including the continued erosion in home prices, government foreclosure prevention programs, like HAMP and HARP, helped ease the crises although neither have lived up to their expectations.

Scam Alert: Feds target HAMP scammers bilking owners

December 28, 2011 Leave a comment

Earlier this month, a multi-agency task force was announced designed specifically to deter scam artists preying on homeowners looking for help under the Home Affordable Modification Program (HAMP).

The task force will operate under the Department of the Treasury, the new Consumer Financial Protection Bureau (CFBP) and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP.)

According to the New York Post, the latest scams tied to the Home Affordable Modification Program, were lead by mortgage servicers, which manage loans day to day. They have collected a total of $666 million from the government for participating in HAMP.

From the New York Post article:

The typical fraud works like this. A scam artist advertises online, pretending to be affiliated with the government. The scammers charge an average of $4,500 upfront, do no work, then skip out with the cash. Some borrowers are even losing their homes as a result of scammers’ advice to ignore foreclosure notices.

We at Avid Law Center think it’s vital for homeowners to know how these scams work and make sure they do their research when hiring assistance with the loan modification process.