FreeDIYkits Loan Modification Blog

Under new law banks compelled to work with homeowners in trouble and create California loan nodification Agreements. The California Foreclosure Prevention Act states that banks have to try and modifiy loan before foreclosure.

“Finally there is good news for California homeowners and help them avoid foreclosure. The new
The California Foreclosure Prevention Act, signed by Gov. Schwarzenegger in February, adds 90-days between the time a homeowner defaults on a loan and when banks can initiate foreclosure proceedings,” states Art Franklin, V.P. AboutCaliforniaLoanModification.com.

AboutCaliforniaLoanModification.com attorneys help homeowner obtain loan modification agreements. These agreements make monthly mortgage payments more affordable.

Assemblyman Ted Lieu, D-Torrance, who wrote the bill states “The goal is to compel banks to do systematic California loan modifications that will reduce the foreclosure rate. California has the highest foreclosure rate in the nation. Until we slow that down, the state’s economy cannot recover.”

Nearly a year ago, the Obama administration trumpeted a loan-modification program that was supposed to save millions of mortgage borrowers from foreclosure. That plan–involving monetary incentives for banks and an occasional poke in the eye when they don’t seem sufficiently motivated—isn’t proving a miracle cure. So look for lots of proposals in the months ahead on how to take loan mods to the next level, and the next one after that.

Here’s an idea being pushed by John Taylor, chief executive of the National Community Reinvestment Coalition, which represents local organizations that promote affordable housing and community development. Mr. Taylor wants the U.S. Treasury to buy large numbers of troubled mortgages at a discount to face value and then ease the terms to make them affordable for the borrowers, including in many cases by reducing the principal to something nearer the current value of the home. After it reworks the mortgages into “sustainable” form, the Treasury could then package and sell them to investors, Mr. Taylor says.

He figures the Treasury could start such a program with only a few hundred million dollars and that it should be profitable. Some private firms, such as PennyMac Mortgage Investment Trust, already have similar mortgage-purchase and modification programs, of course. Mr. Taylor says that’s fine but Uncle Sam should get a cut of this action, especially since the government is propping up the entire housing and mortgage market, making it possible for firms like PennyMac to operate.

They gathered to say goodbye at the bucolic Redwood City retreat Mrs. Bagnarol had created — a compound of three homes cascading down a steep hillside where she raised chickens. Some of her children and grandchildren live on the grounds.

But that night an unwanted visitor arrived: a process server delivered papers that ordered Mrs. Bagnarol and her family to get out. The bank had foreclosed on their property, and they were all being evicted.

Emotions exploded. Not now, the family cursed. A sheriff’s deputy was called to keep the peace. Mrs. Bagnarol died a day later.

But the unfortunate timing of the official visit was not the only source of the anger. More troubling were the financial deals that led to the visit — and the decision by lenders to sign Mrs. Bagnarol up for one exotic mortgage after another.

“It’s definitely elder abuse,” said Carolina Bagnarol, her daughter. “There’s predatory lending here.”

Ms. Bagnarol has filed a lawsuit against a lengthy list of lenders she said took advantage of her mother. The loans plunged her mother deeper into debt with each mortgage payment, to the point of financial ruin. The lawsuit contends that Mrs. Bagnarol was pursued and persuaded — twice over — to take out ultimately disastrous loans on the family’s property.

In recent years, 70 percent of the elderly have been solicited to take out new mortgages, according to a survey by AARP.

“Older people seem to be targeted in part because they own their houses and have owned them for a long time and have equity in their houses,” said Jean Constantine-Davis, senior lawyer for the AARP Foundation.

Mrs. Bagnarol was in her late 70s and suffered from the onset of dementia when she signed the loans, family members said.

“This is one of the most egregious cases I’ve ever seen,” said Michael Rooney, the San Francisco lawyer representing the family in the lawsuit. “The terms were so horrible — negative amortization and adjustable rate — no one would believe this loan was good for her.”

Do borrowers taking part in the Obama administration’s mortgage modification program deserve a black mark on their credit records?

Lenders use special codes to let credit bureaus know what customers are borrowing and whether they’re paying on time. When the loan modification program, which lowers mortgage payments for homeowners who are behind in their payments or in danger of imminent default, was announced in February, lenders used an existing code, called AC, to signal that borrowers were participating in the program.

The problem for those borrowers, however, was the fact that the AC code signals that a consumer has made only a partial payment. That often had a significant impact on the scores of borrowers with good credit who had made all of their payments on time. A Treasury Department spokeswoman estimated that their scores could fall from 30 to 100 points, depending on other information in their credit file .

Why use an old code? The AC code was the closest fit, so the Consumer Data Industry Association recommended using it until it could develop a new one.

One Bank of America executive, for instance, confirmed in this recent New York Times article, that it reported borrowers who made timely payments before and after agreeing to loan modifications as making only partial payments. Presumably, the bank used the AC code, which damaged the credit of many borrowers.

First Phase of Project In the Phoenix Suburbs Hits New Financing Snag
CityNorth, the ballyhooed retail project planned in northern Phoenix’s affluent suburbs by Related Cos. and Thomas J. Klutznick Co., is the target of a foreclosure filing by lender Capmark Financial Group Inc.

Capmark filed last week in Maricopa County Court to foreclose on the first phase of the CityNorth project due to default on a $290.5 million loan. Other lenders that provided the loan include Deutsche Hypothekenbank and CSE Mortgage LLC.

Related, Klutznick and a third partner, J.E. Robert Cos., couldn’t refinance the loan when it came due, according to the companies. Those companies will continue to manage the project.

“The foreclosure will result in a restructuring of equity interests … to enable fresh capital to be injected,” Klutznick principal John Klutznick said in a statement. “Day-to-day operations will continue as usual.”