Loan Modification – Shadow Foreclosures May Slow Down Housing Recovery

Loan Modification – Shadow Foreclosures May Slow Down Housing Recovery

New hope over last month’s unexpected rise in home sales may be a bit premature, even with aggressive intervention from the government. Studies show that progress from new programs may be undermined by “shadow foreclosures”—foreclosed properties that remain unlisted and unsold, causing potential delays in market recovery.

RealtyTrac, an Irvine, CA-based foreclosure listing firm, reports that up to 700,000 foreclosed homes are not included in the multiple listing service (MLS). The housing inventory is currently pegged at 3.8 million properties, or close to 10 months of waiting at the present sales pace. With this shadow supply, however, selling is expected to take a lot longer, causing a further drop in prices.

Meanwhile, the number of delinquent mortgages has continued to rise in the past few months, although foreclosure rates have largely stabilized. Experts believe that most of these homes will eventually be foreclosed, and that lenders may be unaware of how shadow foreclosures can affect their balance sheets.

Richman & Associates, a Glendale mortgage restructuring firm, believes that lenders should be more proactive in mortgage assistance. According to Jim Richman, the company’s president and founder, lenders are simply waiting for government bailout rather than actively helping homeowners and organizing foreclosures.

A former banker and U.S. Department of Housing and Urban Development (HUD) commissioner, Richman adds that lenders may be violating current rules by not accurately recording these foreclosures. Regulators, on the other hand, hardly enforce these rules because more banks will fail and have to be bailed out.

Surveys with foreclosure attorneys also show that few, if any, of the firms in several states are doing formal appraisals. Thomas Barrack Jr. of Colony Capital, a private equity firm based in LA, believes that lenders have taken to waiting for new programs every week instead of taking action.

Moe Bedard, president of Loan Safe Solutions, believes that some of the shadow supply comes from a “gray market” of foreclosures sold through in-house divisions. Lenders may also be privately selling defaulted documents to investors. However, he says, these cannot make up the entire supply of unlisted properties.

Banks cannot let go of these properties in one go, as it could drastically reduce prices in the most hard-hit communities. Home prices have already dropped as much as 30% in some communities, and experts say they can fall even further. Some areas may need to drop another 30%, says, Barrack, just to get back to normal levels from 1998.

Investors Demand Changes in Obama’s Housing Plan

Several mortgage investors have urged the government to amend its $75-billion housing rescue plan. The investors, who collectively hold billions of dollars in securities backed by residential mortgages, said the legislation violates some of their rights and that they are considering legal action.

The investors have met repeatedly with Treasury officials but are still unsatisfied with the plan. According to them, certain measures in the bill prevent them from filing lawsuits against the servicers responsible for collecting payments and granting loan modification. Read more here

First Horizon Loan Modification

First Horizon Loan Modification

First Horizon is a leading financial services company operating in Texas and Tennessee. Established in 1864, it is one of the top 30 bank holding companies in the United States. Like most regional banks, its major products include sub-prime mortgages to less-than-ideal borrowers, and mortgage assistance to help these borrowers stay on track. Many First Horizon borrowers are particularly interested in loan modification. This process involves negotiating better terms with the bank to help them avoid foreclosure. A First Horizon mortgage modification also stops the foreclosure process, giving borrowers enough time to get back on track while working things out with the bank. To qualify for a First Horizon loan modification, one has to prove that he or she has a stable income and a valid reason for falling behind. The latter has to be stated in a hardship letter explaining their financial situation. Valid hardships include medical emergencies, job loss, demotion, military service, or a death in the family. Although it’s technically possible to get a loan modification on one’s own, it’s best to hire a loan modification attorney. A lawyer can ensure faster response from the bank and use lending laws to give the case more leverage. If the mortgage modification isn’t granted, they can also discuss alternatives such as a short sale, forbearance, or deed-in-lieu.

Countrywide to tighten up loan modifications

Homeowners hoping to get a loan modification with Countrywide may want to rethink their options. Countrywide Financial, best known for excessive lending practices that led to widespread defaults, now has so much bad debt on its books that it may have to tighten up its loan modification service.

Loan modification allows defaulting borrowers to work out new terms with Countrywide, so that they can avoid foreclosure and stay on track. Countrywide began offering the service through their Home Retention Department at the height of last year’s real estate bubble. However, due to the volume of requests coming in, many cases were delayed and resulted in foreclosure. The company hit an all-time low in 2008 and was recently bought out by the Bank of America.

In line with the change, the Loan Modification Department of the Law Offices of Marc R. Tow is also taking measures to protect its clients. The firm, one of the leading loan modification services in the country, will only negotiate modifications with Countrywide for clients with viable cases and those who are in serious financial trouble.

Changes are also expected in national loan modification policies. While loan modification is still open to borrowers not in default, new laws may soon limit the service only to those in bankruptcy or serious delinquency. This will allow lenders and loan modification companies to focus their attention to clients who are most in need.

The firm will continue to help clients with loans serviced by other companies. Besides loan modification, the Law Offices of Marc R. Tow also offers assistance with loss mitigation alternatives such as short sales.

Loan Modification Questions and Answers

California Foreclosure Laws

California lenders can foreclose on mortgages or deeds of trust using a judicial or non-judicial process. Foreclosures last an average of 120 days (four months).

Judicial foreclosure:
In a judicial foreclosure, the lender files a lawsuit in order to get a court ruling allowing them to foreclose. This process is followed when the mortgage or deed of sale does not contain a Power of Sale clause, which would authorize the lender to sell the home in case the borrower defaults.

After the home is sold in a judicial foreclosure, the borrower is given a one-year Right of Redemption. This means he or she has one year to regain possession of his home by paying the purchase price plus interest.

Judicial foreclosures also allow the lender to file a deficiency suit. This is a personal claim made against the borrower if the foreclosure sale is not enough to pay off the debt, or if the sale price is less than the home’s fair market value.

Non-judicial foreclosure:
A non-judicial foreclosure process is followed when there is a Power of Sale clause in the mortgage or deed of trust. If the clause sets the time, date, and place of sale, then these terms are followed during the foreclosure. If it does not specify the details, the foreclosure proceeds as follows:

First, the lender must file a Notice of Sale containing the scheduled time and date of the sale, the property address, the name and contact details of the trustee, and a statement saying the home will be auctioned off. This step consists of four parts:
1) The NOS is recorded in the county office where the home is located, at least 14 days before the sale date.
2) The lender sends a copy of the notice to the borrower by certified mail, with a return receipt included, at least 20 days before the sale date.

3) The notice is posted on the home at least 20 days before the sale date.

4) The notice is posted at any public place in the county where the sale date is scheduled.

The auction is held on a business day anytime from 9 am to 5 pm, at a public location specified in the NOS. Anyone can bid at the sale, although the trustee may require proof of financial capacity to make sure they can pay their bid amounts. The sale can also be postponed if necessary, provided the change is announced at the time and date originally specified.

The borrower can bring the account current and stop foreclosure up to five days before the sale date. However, non-judicial foreclosures do not give the borrower a Right of Redemption, and lenders cannot seek deficiency judgments.

The Do’s and Dont’s about Loan Modification you Must Know

One of the biggest mistakes you can make in a loan modification is to ignore the rules. Although your Loan Modification Firm does the negotiating, it helps a great deal if you do your homework and arm yourself with the right information. After all, you’re dealing with lenders—and at the end of the day, you still have to play by their rules. Here’s a list of loan modification do’s and don’ts to help you avoid common pitfalls.

Do know your rights.

More than 80% of mortgage contracts violate one or more lending laws—and most of them go unnoticed. But these violations can be your biggest weapon in the loan modification process. They can give you the leverage you need to negotiate with your lender and stop foreclosure. Your loan modification attorney can help you understand your rights and use them to get the results you want.

Don’t wait too long.

The foreclosure process is designed so that you have time to get back on your feet and save your home. But that doesn’t mean it’s safe to procrastinate. The longer you wait, the harder it gets to get you out of that fix. As soon as you decide you need mortgage help, call a loan modification attorney and get started.

Do work with your lawyer.

Your loan modification doesn’t rest in the hands of your lender, your broker, or your loan modification attorney. These people can help, but you have to do your part and cooperate with your lawyer. Make sure to submit your paperwork on time, answer questions honestly, and give them a clear picture of your financial situation.

Don’t file for bankruptcy, unless you really have to.

Many people think that filing for bankruptcy can help them stop foreclosure. But data from the American Bar Association shows that it doesn’t work that way. In fact, 96% of the people who file bankruptcy end up losing their homes anyway—so they’re left with a foreclosure AND a bankruptcy on their records. In some cases, bankruptcy is still a viable option, but don’t make any decisions without getting professional advice.

Do have a backup plan.

Not all people will qualify for a loan modification. Maybe you’ve fallen too far behind, your lender may be simply hard to work with, or maybe you don’t need it after all. In any case, it’s always good to have a Plan B. Your mortgage modification attorney can help you find the best solution.

If you can’t get your loan modified, talk to your lawyer about a short sale. This involves selling your home for less than its fair market value and giving the proceeds to your lender. Although you still lose your home, it’s not as damaging to your credit as foreclosure, so it’s easier to get back on your feet.

Modify home Loan or Mortgage rate to Avoid Foreclosure in this recessionary market

Choosing a loan modification isn’t a decision you make overnight. Sure, it can be your ticket to a better mortgage, but it’s not a surefire way to solve your money problems. Like any other transaction, it has its challenges, and it suits some people better than others. If you’re not the right candidate, even the best loan modification attorney can’t guarantee the results you want.

Remember, loan modification is as much a commitment as it is a solution. If you’re considering modify home loan, here are some things you should ask yourself before making any decisions.

Do I qualify?

Each lender has its own policies, but the general requirement is that you have a job and be able to prove your financial hardship. This tells your lender two things: first, that falling behind wasn’t entirely your fault, and second, that modifying your loan can really help you back on your feet. If you’re still unstable or have no reason to request mortgage assistance, your loan modification firm won’t be able to help much.

How far behind am I?

It’s important to build a strong case to persuade your lender, but there are limits to how far behind you can be. It’s one thing to miss a few payments because you lost your job, but it’s another to deliberately miss half a year because of bad spending habits. As your debt accumulates, your lender perceives you as a high-risk borrower and may be less willing to work with you.

Can I afford it?

Depending on your situation, a loan modification can cost you anywhere from $2,000 to $5,000. But it’s not just a matter of having that much money in the bank. If you’re in a really tight fix and it’s the last of your funds, you may want to wait a bit so you’re not left with nothing in case your bank rejects your application. Your loan modification attorney can help you figure out a budget so you can plan it out better.

How much equity do I have?

Your equity value is probably the biggest factor affecting your lender’s decision. If you have enough equity to cover foreclosure expenses and deferred interest, foreclosure may actually be cheaper for your bank. However, equity is determined by the value of your property, which your lender can easily overestimate. Do some research beforehand to see how much your home is really worth, so you can face your lender with hard facts.

Can I stay on track?

A loan modification won’t free you of all responsibilities; it only allows you to meet them more comfortably. Once it’s granted, it’s no longer your attorney’s job to keep you on track. Make sure you have enough money saved up to cover initial payments when the mortgage reinstates, as well as an emergency fund. If something comes up and you fall behind again, the whole loan modification process will have been useless.

To get in touch with a good loan modification attorney you may call 800.738.1170 or visit http://www.cdloanmod.com