Mortgage relief quiz

iVillage Member
Registered: 02-19-2008
Mortgage relief quiz
11
Wed, 03-04-2009 - 8:35pm

The Washington Post has put up an online quiz to find out if you can qualify for mortgage relief under the new administration program.

I can't paste it here as it's a java-script program, but it can be found here - http://www.washingtonpost.com/wp-srv/business/foreclosureprevention/?hpid=topnews

It looks like if you owe under $730,000, and pay more than 31% of your income as mortgage that relief is available.

Many who overbought will be delighted.

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iVillage Member
Registered: 03-03-2009
Wed, 03-04-2009 - 9:00pm

Partially true. But there are quite a few more restrictions than "owe under $730,000, and pay more than 31% of your income".

Eligibility and Verification

Loans originated on or before January 1, 2009.

First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.

All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.

Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.

Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.

Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

Loan Modification Terms and Procedures

Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.

Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive
– meaning that the net present value of expected cash flow is greater in the modification scenario – the servicer must modify absent fraud or a contract prohibition.

Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions.

Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).

The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income.

Servicers must enter into the program agreements with Treasury's financial agent on or before December 31, 2009.
Payments to Servicers, Lenders, and Responsible Borrowers

The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.

Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year.

Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.

The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.

The program will include incentives for extinguishing second liens on loans modified under this program.

No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent.

Similar incentives will be paid for Hope for Homeowner refinances.
Transparency and Accountability

Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program.

Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation.

Freddie Mac will audit compliance.

http://www.treas.gov/press/releases/reports/guidelines_summary.pdf

The program is not meant to bail out just everybody who overbought. It's intended to put a floor in the plummeting housing market. And if it succeeds, most homeowners will benefit, not just those whose loans are modified. Could even benefit you!

Jabberwocka

iVillage Member
Registered: 02-19-2008
Wed, 03-04-2009 - 9:57pm
Lets see ... massive document fraud got many of these people the mortgages they want to modify ... I wonder ... is there any chance massive document fraud will get them their modifications?
iVillage Member
Registered: 03-03-2009
Wed, 03-04-2009 - 10:20pm

"Massive document fraud" by borrowers is NOT what got most people in trouble. Sure, there were some loans made on the basis of overstated earnings but many of the problems arose from the resetting of interest rates from teaser rates. And there were also loans made to people who bought in overheated markets (Florida, California, etc) which have since "cooled" drastically. Certain areas have seen such precipitate drops that many who bought at the peak or near it are to the point that they owe more money on their house than it's worth--"underwater". Couple that with a job loss or health crisis and you have more responsible owners in danger of losing their homes. Get enough houses in foreclosure and you imperil a neighborhood. Enough neighborhoods in jeopardy, you start seeing local economies being adversely affected--which continues the downward spiral.

It's become national and if you're a homeowner yourself, the value of your abode has probably dropped markedly off what it was two, three years ago.

Since there is finger pointing, what of the less-than-scrupulous lenders who didn't bother to verify incomes? What of the investors who securitized SUBprime paper then turned around and sold it for a killing to others? Did they fear the loss of their homes? Just wondering!

Jabberwocka

Avatar for claddagh49
iVillage Member
Registered: 07-20-2004
Thu, 03-05-2009 - 9:33am
This is what I don't understand why the lenders didn't verify incomes! My son's friend and his wife have a 1,600 a month mortgage payment. If he would loose his job, they could still make it, if she would, they'd really be kinda strapped. He is an auto mechanic, she is a teacher. Her parents could probably help them out, possibly, but still, I think many bought over their heads counting on 2 salaries. that was their biggest mistakes.
iVillage Member
Registered: 03-18-2000
Thu, 03-05-2009 - 10:16am

"I don't understand why the lenders didn't verify incomes"


Doesn't make sense does it except those taking applications were paid per applicant approved. I've read of these individuals changing incomes so that the applicant can 'qualify'. Some buyers would have qualified for a 30 yr. fixed but instead

 


Photobucket&nbs

iVillage Member
Registered: 03-18-2000
Thu, 03-05-2009 - 10:20am
Thanks for the info.

 


Photobucket&nbs

iVillage Member
Registered: 03-18-2000
Thu, 03-05-2009 - 10:22am

"Get enough houses in foreclosure and you imperil a neighborhood. Enough neighborhoods in jeopardy, you start seeing local economies being adversely affected--which continues the downward spiral."


Exactly!

 


Photobucket&nbs

iVillage Member
Registered: 02-19-2008
Thu, 03-05-2009 - 3:42pm

Mortgage fraud is at the heart of the housing bubble. As prices skyrocketed it became necessary for many to get the bad loans they're now saddled with.

My suggestion is fraud will get them out via the new program, just as it got many people in.

See - http://www.bloggernews.net/119858

Mortgage Fraud Modification For Dummies

During the housing bubble years mortgage fraud became the white collar crime of our time. The FBI issued report after report about its epidemic growth as did other entities, both public and private, that track financial crime trends. Yet mainstream news coverage was spotty. Some strong stories did appear but overall the topic was buried by odes to climbing the property ladder, flipping rehabs, and reaping home equity via refi. Real estate touts were quoted as impartial economic sages and depending on the journalistic slant, ideological support was culled from Ownership Society boosters (Bush was big dog) or the affordable housing holy rollers whose real estate deals get called “non-profit”. Hallelujah! There was a wack mortgage out there for everyone. Free market or taxpayer-backed. No deadbeat left behind.

Thanks to identity theft by mortgage fraudsters, actual stiffs were eligible too.

Before subprime ruled the world of riskier mortgages, fraudsters partied with loans backed by the U.S. Department of Housing and Urban Development (HUD) through its sub-agency the Federal Housing Administration (FHA). (The FHA doesn’t make mortgage loans; it guarantees ones made by approved lenders.) In early 2001, former HUD Inspector General Susan Gaffney told a congressional committee that fraudulent flips of FHA mortgage properties were a growing problem in inner city neighborhoods. Later that year Senator Susan M. Collins, Chair of the United State Senate Permanent Subcommittee on Investigations, said the federal government had “essentially subsidized” much of the mortgage fraud in the nation’s cities. Senator Collin’s comments appear in the report “Property Flipping: HUD’s Failure to Curb Mortgage Fraud” issued by the Committee on Governmental Affairs in September 2001.

Out in the free market fields, subprime was coming on strong. Subprime demanded less borrower skin than FHA mortgages. The FHA also set a ceiling on loan size. As subprime surged the FHA attempted to compete by lowering standards and lifting its ceiling. But subprime standards limboed down to the ground. As for loan size, the sky was the limit. Deluxe condos in hot urban areas and suburban McMansions could be flipped like inner city slums for a whole lot more profit. And subprime made inner city slums look (on fraudulent paper) like deluxe condos and suburban McMansions. The grandest illusion of all was the air loan– a mortgage for nonexistent property.

By early 2002 the FBI was mulling intelligence about pervasive fraud in the subprime mortgage industry. But their eyes were on mid level mortgage brokers; they missed the nexus of lenders who packaged “redacted”* and the investment banks that peddled it as mortgage-backed securities. Apparently, the relevant/irrelevant regulatory and oversight agencies weren’t whistle blowing to the feds and manpower for financial crime investigations was stretched thin by Enron et al and attention to terrorist financing.

In 2004 former FBI Assistant Director Chris Swecker turned psychic in testimony to the House Financial Services Subcommittee. He predicted that if “mortgage fraud is allowed to become unrestrained, it will ultimately place financial institutions at risk and have adverse effects on the stock market”. The FBI continued to issue a string of warnings and reports. They also launched takedowns; including Operation Continued Action, Operation Quick Flip, and in 2008, Operation Malicious Mortgage. The latter involved 46 FBI field offices and rounded up some 400 perps. Primarily mid level real estate professionals operating in organized rings.

On February 11th 2009, FBI Deputy Director John S. Pistole testified before a panel of the U.S. Senate Judiciary Committee headed by Senator Patrick Leahy (D-Vt.). The hearing’s topic was “The Need for Increased Fraud Enforcement in the Wake of the Economic Downturn.” According to Pistole, the case load of mortgage and corporate fraud is “straining the FBI’s limited white-collar crime resources”**. Neil Barofsky, special inspector of the Troubled Assets Relief Program (TARP) also testified. Barofsky sees fraud clouds looming over not just TARP, but the Holy Stimulus. Saying “history teaches us that an outlay of so much money in such a short period of time will inevitably draw those seeking to profit criminally.”

The original version of the stimulus package included a $75 million allotment for FBI job creation; 165 new agents would have been trained to focus on mortgage fraud. When the stimulus emerged in its final form the FBI beef-up was gone. According to the Kansas City Star (FBI’s anti-fraud efforts get no boost from stimulus package, 02/13/09) Republicans pushed the removal. If only Democrats had gone to the wall. As Senator Leahy, a former prosecutor, said at the Judiciary Committee hearing “you can have all the laws of the world in the books but if you don’t have the resources to enforce the laws, and actually go out there after the people who have broken the laws, they are meaningless.”

Senator Patrick Leahy, along with Senator Chuck Grassely (R-Iowa) recently introduced the Fraud Enforcement and Recovery Act of 2009. The bill contains a number of provisions aimed at plugging the holes in which mortgage fraud and other financial crimes flourish.

Before subprime imploded many people, both in and out of government, pooh poohed mortgage fraud. The social bennies of home ownership for everyone, as enabled by EZ lending, outweighed the danger of EZ mortgage fraud. The threat of foreclosure fallout was overstated. Banks don’t want to be in the real estate business; they’d never foreclose on a large number of properties. The few homes that bounced back could easily be recycled back into the boom. And if property values were inflated by phony appraisals, insider flips, and oversize loans so what? When it came to inner cities, fraud was doing the Lord’s work by boosting values. As it was in feeding an equity-dependent consumer economy and local governments hungry for property taxes. Besides, real estate always goes up. False values would soon become real. Why shouldn’t people benefit sooner rather than later?

The danger of encouraging a widespread wink-wink re financial fraud didn’t register either.

There was (and is) disagreement over the nature of mortgage fraudsters as well. Some perish the thought of the little guy as willful cheat. If Lil’ Guy lied on bank docs about income and employment, took downpayments from interested parties and kick-backs from inflated loans, and dumped the home he “bought” when big payments came due, he was manipulated into doing so by predatory lenders and their cohorts. The story of how Lil’ Guy had his American Dream of Home Ownership stolen has been in the news every day for the past two years. Gung-ho proponents of the Lil’ Guy theory even give out-and-out strawbuyers (low level mortgage fraud players who serve as fronts for flippers) a pass.

Then there’s the theory of limited engagement. Sure, crap underwriting caused much of the mortgage mess and fed the immensely profitable secondary market in crap securities. But the crap crop which caused the crash was erroneous not felonious. No lenders and investment entities colluded in massive organized mortgage frauds. The real fraudsters were few in number and their impact was small. They were/are mid-level bad apples. Mainly mortgage brokers and appraisers. Maybe a rogue loan officer or two. Bad apples should be rooted out. More regulation is in order. But please– no criminal probes above the knees.

Amazingly, the two theories about mortgage fraud perps sometimes coexist in one brain.

When subprime first hit the fan, mortgage fraud and its perpetrators, lil’ and big, got some hard looks. For about 15 minutes. Now it’s mortgage modification time in the United States of Real Estate. We all have skin in the game. Cue the violins and roll out the taxpayer subsidized cram-downs for Lil’ Guy. (Rest assured, only the deserving will be rescued.) Put a taxpayer cushion under financial institutions that at Pollyana-best turned a blind eye to mortgage fraud and then flung the dung at investors. Away with all free-market real estate fraud. Back to the kind backed by taxpayers from the get-go, not after the fact. The Holy Stimulus won’t be packing FBI heat but it will pump billions into HUD.

The mortgage mess has given HUD a shot in the arm. As well as being the parent agency of the FHA, HUD is uber the Federal Housing Finance Agency (FHFA). The latter morphed out of OFHEO, the notoriously ineffective oversight organ for the taxpayer-backed mortgage financiers Fannie Mae and Freddie Mac. Once upon a time their mission was to help moderate income homebuyers by providing a secondary market for mortgages. Eventually Fan and Fred’s mission shifted to housing bubble support. Good news from the FHFA on that front: thanks to the American Recovery and Reinvestment Act (ARRA) Fan and Fred will be allowed to buy mortgages from lenders at a new top rate of $729,750 for single unit properties. The top dollar is particularly needed in areas where property values were hyper inflated and voluntary investors in the secondary mortgage market are scarcer than hen’s teeth.

Any anxiety re HUD’s ability to cram down fraud in Fan and Fred’s mortgage aquisitions should be assuaged by the attitude of new HUD head Shaun Donovan. According to the New York Times (A Homecoming for HUD’s New Secretary, 02/13/09) Donovan frankly acknowledges that HUD has long had an “inability to accurately report what we are spending, how we are spending it.” Donovan is determined to change HUD’s dysfunctional ways. He should be able to get right to it, sans learning curve. Donovan piloted the FHA during its transition from Clinton to Bush. Right around the time when the two Susans (Gaffney and Collins) were pinning the inner city mortgage fraud tail on HUD and the FHA in congressional hearings.

iVillage Member
Registered: 03-03-2009
Thu, 03-05-2009 - 6:58pm

Mortgage fraud may have been a contributing factor in the housing bubble but it sure isn't the only one. See: http://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble

I see no basis for the claim that "As prices skyrocketed it became necessary for many to get the bad loans they're now saddled with." "Necessary"? How do you figure?

The blogger whose link you quoted doesn't seem to be much more than just that, a blogger with strong opinions but not necessarily a person with training or experience in the financial sector.

Mot answered in your response--why did conventional lenders become so lax in their lending practices and standards? It's weird as all getout to see no mention whatsoever of that. Also no response about the greed of lenders, the issue of "moral hazard", and the role played by big corporations like CountryWide, AIG, CitiGroup, etc.

You have to decide whether the people who lead these institutions are major contributors to our economic woes and were willing to accept sky-high levels of risk for the sake of greater returns (greed); or so breathtakingly stupid that non-English speaking, low income wannabe homeowners were able to hornswoggle them. Not a pleasant choice but there it is.

And with many banks and lenders under the microscope, only those who ARE either colossally stupid and arrogant, or who think they can run a verrrry good and difficult-to-detect scam are going to be likely to attempt further fraud.

Last but not least, if the subprime mortgage was a function of risky inner city, low-income, and blighted area lending, do explain why foreclosures are far more widespread both geographically and demographically.

Jabberwocka

iVillage Member
Registered: 08-30-2002
Thu, 03-05-2009 - 7:28pm

I used to be in banking and the joke was that "banks are only willing to lend to people that don't need money." That is people with gold credit, high incomes



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