The $75 billion program pays lenders to modify the mortgages of troubled borrowers, typically lowering their payments by about $500 a month.

But so far, fewer than 200,000 borrowers have received a permanent change to their loans, according to Treasury Department data released Wednesday, a small fraction of the 3 to 4 million borrowers who government regulators initially said the program could help before it expires in 2012. That may not bode well for efforts to stabilize the housing market. Credit Suisse has estimated that 3.2 million foreclosures would have to be prevented this year for home prices to rise modestly.

“Clearly the numbers that were discussed by the administration set up an expectation that just don’t deal with the reality we’re in,” said John Courson, president of the Mortgage Bankers Association.

Administration officials have acknowledged that the program, known as Making Home Affordable, got off to a slow start and has yet to reach its full potential. Many lenders didn’t begin enrolling borrowers until last summer, months after the program was launched. By then, the primary cause of foreclosures had shifted from the risky mortgages that helped spur the financial crisis to rising unemployment. The latter is tougher to address because jobless borrowers often have little money with which to pay any type of home loan.

Through January, nearly a million borrowers had gotten at least some reduction in their mortgage payments as part of the program, but more than three-quarters have yet to win a permanent modification and must still prove they qualify, according to Treasury data. The program “is doing the job it was designed to do, Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office, said in a statement. “Struggling families are receiving payment relief and the housing market is showing signs of stabilization.”

The unemployment factor

But the administration is facing demands to expand the program to help more unemployed borrowers, or to lower the loan balance of underwater borrowers — those who owe more than their home is worth. Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, has launched an investigation into the program. “While I applaud Treasury’s efforts, numerous concerns have been brought to my attention regarding the effectiveness and efficiency of the MHA program and the extent to which it has assisted struggling homeowners,” he wrote to Treasury Secretary Timothy F. Geithner earlier this month.

More than half of those who have received mortgage relief so far have said they needed it because they’ve lost their jobs or had their income drop for some other reason. But many unemployed borrowers can’t qualify for help because they don’t have enough income. Housing advocates argue that some of the billions of dollars set aside for the loan modification program should be diverted into short-term loans for these borrowers.

And underwater borrowers who have little chance of recouping the lost value of their homes need a more generous program, housing advocates say.

Changes to the program are possible, administration officials have said, but it is unclear how extensive they will be.

No appeals process

Another challenge for borrowers is that the program lacks a formal appeals process for those denied relief, leaving homeowners largely to work out problems on their own.

That has been the challenge for Alice Valentine, a Southeast Washington homeowner who had a decrease in income after a work-related injury. When she first sought a loan modification from Bank of America, she was told she qualified, Valentine said. But the promised forms she needed to fill out never arrived, she said.

“I never received anything in writing from them except for threatening letters,” Valentine said. “I have been getting nothing but the runaround.”

So she wrote to the White House instead. President Obama responded, offering encouragement. “The road ahead is difficult, but if we move forward resolutely, then I am confident we will overcome this crisis,” Obama wrote.

A Bank of America spokeswoman said the bank is following the program’s guidelines. “We apologize if there was any miscommunication. We would like to reevaluate her eligibility once her financial situation improves,” said spokeswoman Jumana Bauwens.

The program encourages lenders to modify mortgages by offering them a series of incentive payments. But these payments may not be enough to shift the financial calculations made by lenders before offering mortgage relief. “It is clear the incentives being paid are nowhere close to reimbursing the servicers for the cost and expenses that they are devoting to modifications,” said Courson of the Mortgage Bankers Association.

‘Set up to fail’

Some lenders have sold the loans they made to investors under contracts that restrict modifications. In addition, about 600,000 delinquent borrowers potentially eligible for the program can’t apply because their servicers have not signed up, according to Treasury data.

When Yvonne Gipson, 69, applied for relief on the loan for her Annapolis home last year, she was told by her mortgage servicer, PNC, that her loan had been bundled into a security with other loans by Goldman Sachs, she recounted. PNC informed her that the rules governing that security did not allow the loans to be modified, she said.

Instead, wanting to see her catch up, PNC suggested it could raise her monthly payments. The new payments would consume 66 percent of her income, more than double what would be offered under the federal program. “I was being set up to fail,” she said. “I am trying to do the right thing. I find the whole thing devastating.”

PNC declined to comment and Goldman Sachs said the loan can be modified.

Despite its slow start, the federal program has established industry standards for the types of loan modifications borrowers should receive. So far, borrowers who receive loan modifications under the program are less likely to re-default than those who get help under other mortgage relief programs. About 25 percent of borrowers in the program were delinquent on their new lower payments, according to the Treasury Department, while about half of borrowers in other mortgage relief efforts fall behind again.

But more borrowers in the federal program could re-default later. More than 60,000 of the borrowers who initially enrolled in the program have already failed out.

Part of the problem is that the financial burden on many borrowers extends beyond their primary mortgage to other types of debt. The federal program focuses only on lowering the payments on a primary mortgage to affordable levels, or about 31 percent of income. But even after a modification, many borrowers still have high levels of debt, and federal regulators also want to bring down the payments for second loans, such as home-equity lines. Since announcing the expansion of the program to second liens last April, just one lender, Bank of America, has signed up.

Article Source: Washington Post

Under the proposal, loan servicers would reduce eligible borrowers’ monthly payments to no more than 31% of their household income for up to nine months. Unlike a modification, however, the arrears would be tacked onto the end of the mortgage.

As part of the proposal, the association has asked the Treasury Department to provide loans to some servicers to cover payments to the mortgages’ investors. Treasury officials, who met with the group last week, have not made yet a determination, a spokeswoman said.

The trade group’s goal is to address the growing number of people who are falling behind on their mortgages because they’ve lost their jobs.

“Borrowers with such a precipitous drop in income can’t qualify for most loan modification programs, so we are looking for ways to allow those borrowers to keep their homes while they look for another job,” said John Courson, the association’s chief executive.

Once borrowers find new employment, they will be considered for a long-term modification under the Obama administration’s foreclosure prevention program.

Most consumer advocates, however, do not think forbearance plans are an answer to the foreclosure crisis. Most delinquent borrowers need more help than just a temporary reduction of their payments.

Also, it’s unlikely that borrowers will find new jobs in nine months in this tough economy, said Kathleen Engel, a law professor at Suffolk University in Boston who specializes in foreclosures. She said the program would need to last at least two to three years to be effective.

The association unveiled its proposal the same day that Federal Reserve Chairman Ben Bernanke told Congress that he’s concerned about the weak state of the job market. And the White House’s top economic adviser has said she expects unemployment to remain around 10% for the rest of this year and remain high in coming years.

Engel suggests the government provide loans directly to the distressed borrowers to help them meet their obligations while unemployed.

“So far, we haven’t seen a lot of help going to the borrowers,” she said.

The Obama administration last week announced a $1.5 billion initiative to help borrowers who are unemployed or owe more than their homes are worth. The program funnels the funds to five state housing finance agencies and charges them with coming up with programs to help these homeowners

Article Source: CNN Money

Full Disclosure:
When either just describing or encouraging loan modification, the servicer shall give the debtor information that will aid them in understanding the terms of the modification and the process of modification, and debtors should also be given written information about the costs, terms, and risks of modification that is clear and concise. This should be given in a timely manner as to allow debtors to make an informed decision.

Fair Lending:
Modifications under the plan must abide by the Equal Credit Opportunity Act and the Fair Housing Act, both of which do not allow discrimination on a prohibited basis connecting to mortgage transactions. Loan modification plans are subject to fair lending laws, and both servicers and lenders should make sure debtors are being treated equally when it comes to mortgage modification.

Consumer Complaints and Questions:
Servicers should have a system to answer complaints and questions regarding loan modification timely and appropriately, and that every question and complaint is taken seriously and answered appropriately.
This protection will ensure that you and your family are not treated unfairly and can receive the full benefits a mortgage modification.

Article Source: Loan Store

However, despite homeowners who are walking away from their underwater mortgage, many are just looking for help in their monthly mortgage payment. Homeowners feel that the value of their home is bound to rise again, so if they could just make their home mortgage payment more affordable at the present time the underwater status of their home wouldn’t be so bad.

The trouble with having an underwater mortgage is there are few refinancing options as banks are unwilling to refinance a home whose value is less than what is owed in the original mortgage. Refinancing may be an option for a select few homeowners with an underwater mortgage in certain circumstances, but most homeowners will need to look into a home loan modification.

The Making Home Affordable Program is about the only way to lower a mortgage payment on an underwater mortgage. Many of the nation’s top lenders are working with the program so if you are a homeowner with an underwater mortgage you may want to look into a home loan modification to help lower your monthly mortgage payments.

Article Source: Red, White, and Blue Press

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.”

The types of loans Mrs. Bagnarol received were popular at the time. Sold under names like Option/ARM and “Pick-a-Payment,” borrowers could make minimum payments that did not cover the entire amount due. The balance was then added back into the loan, increasing the overall debt.

Eventually that debt would come due, creating huge monthly payments that many homeowners could not afford. Critics blame these loans for helping to cause the housing market crash. Lawmakers agree — as of Jan. 1, it is illegal to write this type of loan in California.

Mrs. Bagnarol first bought the property in 1994 for $535,000, her family said, and for most of the intervening 15 years had a conventional 30-year fixed-rate mortgage. As the property’s value skyrocketed in the boom years, she refinanced to take out money for a family business and to build a new main structure.

This eventually led to a $1,365,000 negative amortization loan in 2005. Its low interest rate soon expired, and she refinanced with another $1.5 million loan on Dec. 29, 2006; under its terms, her monthly payments eventually spiked to $14,541.32 from $5,176.81. When Mrs. Bagnarol fell behind, the debt spiraled to $1,640,000 by December 2008.

Family members say that when they tried to pay on behalf of their mother, the bank was uncooperative. Events snowballed into foreclosure, followed by eviction notices. Eight people live at the compound, including Ms. Bagnarol and her three children.

The situation has torn the family apart. It was Mrs. Bagnarol’s son-in-law, Michael Polizzi of Residential Pacific Mortgage in Alamo, who promoted the loans. He bristled at the notion that he had taken advantage of her.

“If Miss Bagnarol is alleging any improper conduct by RPM or by me, those allegations are false,” Mr. Polizzi said, reading a prepared statement after conferring with his lawyer.

Efforts to save the family homestead have been further complicated by changes in bank ownership. The loan started with World Savings, an institution acquired by Wachovia, which itself was bought by Wells Fargo, a bank that had a policy against negative amortization loans, but now finds itself dealing with the debris.

Giuseppa Bagnarol, 82, was in her final hours in August, dying at home surrounded by the large family she presided over as matriarch.

Wells Fargo is paying attention to the Bagnarol case. On Tuesday afternoon it offered a reprieve. Teri Schrettenbrunner, a spokeswoman for Wells Fargo Home Mortgage, said the bank had halted the eviction process “while we work with her mother’s estate to bring the mortgage payments current.”

Carolina Bagnarol, a former business manager for the rock group Journey who is no stranger to vicissitude, is skeptical. But she is grateful that her mother never knew that her homestead was in jeopardy.

Carolina’s brother, Franco, agreed. “It would have killed her sooner,” he said, “and she would have died unhappy.”

Article Source: New York Times
Scott James is an Emmy-winning television journalist and novelist who lives in San Francisco.

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.”

CityNorth’s first phase, called High Street, includes 175,000 square feet of shops, 330,000 square feet of offices and 99 apartments.

The second phase was to include stores of Nordstrom Inc. and Macy’s Inc.’s Bloomingdale’s, but those retailers pulled out when Klutznick failed to attract enough financing. That phase has yet to start construction.

—Kris Hudson
Negative About Networks
One of the big trends in the commercial real-estate brokerage world over the years has been for independent firms in different cities to form client-referral networks. But one of the biggest networks, Colliers International, has now moved in a different direction.

The holders of the 58 real-estate licenses around the world that made up the Colliers network have voted essentially to give control of the 480 offices in the network to FirstService Real Estate Advisors, a unit of FirstService Corp. FirstService owns a controlling stake of many of the firms in the network.

Douglas Frye, Colliers chief executive, says that the network model doesn’t work because members are undercapitalized and not accountable enough to clients. “They’ve not done real well,” he says. “That’s part of what’s driving this.”

Mr. Frye also agrees that these are tough times for brokerage firms because deal activity has declined sharply. “The clients want more services, better integration, higher accountability, better market information and they want all of that for lower fees than they’ve ever paid before,” he says.

—Peter Grant
Suspense Builds
On Builders’ Results
The surprisingly disappointing 16% plunge in the index for pending sales of previously owned homes announced Tuesday has left investors crossing their fingers about the coming release of quarterly earnings by home builders.

There is some reason for optimism. Buyers, long frozen on the sidelines, have been tempted by low interest rates, reduced prices and a tax credit. But unemployment and a limping economy continue to pose threats.

The first report of the new year comes Thursday with Lennar Corp. Credit Suisse analyst Dan Oppenheim is projecting a 12% decrease in orders from the fourth quarter of 2008.

Still the company has been successful in cutting costs, he notes. “We would not be surprised to see Lennar reach operating profitability (ex-charges),” he said in a research report.

—Dawn Wotapka

Article Source: Wall Street Journal

A group of billionaires, hedge-fund managers and ex-Goldman Sachs executives are building a banking empire in California—with assistance from Uncle Sam.

Exactly a year ago these investors acquired the assets of collapsed mortgage lender IndyMac Bank from the federal government for about $1.5 billion and renamed it OneWest Bank. Earlier this month, OneWest purchased First Federal Bank of California, a failed Los Angeles-based lender.

With the purchase, Pasadena, Calif.-based OneWest more than doubled its branches to 72 and increased its total assets by a third to $24 billion, making it the largest bank based in Southern California.

The OneWest ownership roster reads like an excerpt of the Forbes 400. It includes J.C. Flowers & Co., an investment firm run by former Goldman Sachs Group Inc. banker J. Christopher Flowers; Paulson & Co., the large hedge fund; MSD Capital, which invests the fortune of computer mogul Michael Dell; and a fund controlled by famed speculator George Soros.

How successful OneWest’s owners are with the venture—both financially and in the public eye—will influence whether the government welcomes more private capital into the banking system.

Federal regulators, struggling with a rash of failures, can save money by lining up a ready buyer when a bank fails. But the Federal Deposit Insurance Corp. has been wary of private-equity investors, given their reputation for loading companies with debt and selling businesses quickly.

Of the 140 banks closed by the government this year, private investors have acquired only two outright—IndyMac and Florida’s BankUnited. Private equity investors argue that they should play a bigger role, as their funds’ billions in unspent capital could bolster the banking system.

Part of the test will be how well OneWest works with financially troubled homeowners, especially under the Obama administration’s loan-modification programs.

OneWest is already generating hefty profits. For the six months ended Sept. 30th, it posted net operating income of about $700 million, according to filings with the FDIC. In 2007 IndyMac, saddled by troubled mortgages, posted a $614 million loss.

During the FDIC’s roughly eight-month control of IndyMac before selling it, the agency cleansed the bank of some of its bad loans through asset sales and write-downs, shrinking it by about 27%, according to filings. It also reduced the bank’s headcount by about 45%.

The FDIC also agreed to share in losses with the ownership group in both the IndyMac and First Federal deals.

OneWest’s improved performance allowed it to bid aggressively for First Federal. The owners didn’t invest additional money to acquire the bank’s assets; rather, the money came from cash on OneWest’s balance sheet.

OneWest paid $401 million, or a 6.6% premium, for First Federal’s assets, according to FDIC documents. That makes it among the first FDIC-arranged deals in which a premium was paid for a failed bank’s assets—many are sold at a discount to their assets.

An FDIC spokesman says the agency doesn’t comment on open and operating institutions.

Mr. Mnuchin, 47 years old, says the bank wants to grow to between 100 to 150 branches. He says the owners enjoy owning the bank privately because they don’t have to focus on short-term quarterly results, but acknowledges that cashing out through a sale or initial public offering is possible down the road.

One area of focus is loan modifications. When the FDIC sold IndyMac to OneWest, the new owners pledged to continue the agency’s loan-modification program for which IndyMac had served as a testing ground.

Since it took over the IndyMac portfolio, OneWest has reworked nearly 13,000 troubled loans under the FDIC program. Through November, it had also begun trial modifications, the first step toward reworking loans under an Obama administration program, for 19,623 borrowers, or 18% of its borrowers estimated by the government to be eligible for the program.

FDIC Chairwoman Sheila Bair has taken a personal interest in OneWest. In July the FDIC hosted a number of private-equity investors to discuss bank investing. During the meeting, Ms. Bair approached Mr. Mnuchin and asked him how the modifications were progressing, according to people familiar with the exchange.

The bank has come under criticism for its loan modification practices. In a decision issued Nov. 19, a New York state court judge barred a foreclosure action and ordered the cancellation of a borrower’s loan because of OneWest’s conduct in the case.

Judge Jeffrey Spinner called OneWest’s actions “harsh, repugnant, shocking and repulsive” and said that it was “made clear to the Court that plaintiff had no good faith intention whatsoever of resolving this matter in any manner other than [foreclosure].” In addition, Judge Skinner questioned the bank’s estimate of the amount owed by the borrower.

Mr. Mnuchin says OneWest disagrees with the judge’s ruling and is appealing. “In the case of that loan, we do not own it but service it on behalf of a third-party investor.”

“We’re in a difficult economic environment and very sympathetic to the problems many homeowners face, but under the government’s program there’s not a solution in every case,” said Mr. Mnuchin, a 17-year Goldman Sachs veteran. As a large servicer of loans held by other investors, OneWest can be bound by underlying servicing agreements that sometimes prohibit loan modifications.

Mr. Mnuchin has real estate issues of a different sort. He’s moved to California, and a broker is showing his Manhattan duplex apartment at 740 Park Avenue, one of New York’s most prestigious addresses. It’s listed at $37.5 million.

Out in Los Angeles, Mr. Mnuchin has initiated the creation of the not-yet-announced OneWest Foundation, which will be seeded with $10 million to support neighborhood activities. And on Dec. 18, just as First Federal branches reopened as OneWest locations, Mr. Mnuchin attended a Christmas toy drive at a youth center with Governor Arnold Schwarzenegger.

His new home also allows Mr. Mnuchin to enjoy the fruits of another investment: Dune Entertainment, an affiliate of his New York-based investment fund, Dune Capital Management, which he still co-heads. Dune has a film financing deal with Fox Filmed Entertainment, a unit of News Corp., which owns this newspaper.

He recently attended the Hollywood premiere of “Avatar,” the science-fiction thriller in which Dune has a stake.

“I do not normally go to movie premieres,” said Mr. Mnuchin. “But given our investment, I went to ‘Avatar.’ It was spectacular.”

Write to Peter Lattman at peter.lattman@wsj.com and Ruth Simon at ruth.simon@wsj.com

Cuyahoga County Treasurer Jim Rokakis says he’s seeing a growing number of people either abandoning or being put out of their homes because they don’t have money to pay property taxes.

To slow the increase, Rokakis’ office is initiating a six-month foreclosures stop on single-family, owner-occupied structures whose owners’ tax bills are past due.

JIM ROKAKIS: “We’re now past the stage where it’s just the sub-prime folks who are in trouble. We’re seeing a lot of prime rate borrowers struggle and we’re seeing a lot of people who’ve paid their property taxes struggle.”

It is NOT amnesty – taxes are still owed, and penalties and interest will continue to accrue. But it’s hoped that that keeping people in their homes longer will give them time to get back on their feet, and stop the slide in neighborhoods property values that occurs when homes are empty.

An effort to take the moratorium statewide has been launched by Cleveland’s State Representative, Mike Foley.

REP MIKE FOLEY(D) CLEVELAND: “It’s to give people breathing room to get back on their feet, make payments, get back in the good sted of the treasurer and their lenders.”

More than 13,000 foreclosure cases were filed in Cuyahoga County this year.
LAST year, foreclosed properties in Cuyahoga County sold for an average 27 percent of appraised value; and even lower in some parts of Cleveland.

Rick Jackson, 90.3.

Article Source: WCPN

If you are finding it very difficult to make ends meet financially and you can not make your monthly mortgage payment that a home loan modification might be right for you. Make sure to access the making home affordable website to find out much more information. There is quite a bit of information on this website so make sure to devote a significant amount of time.

There are several mortgage lenders that are having great difficulty getting home loans into modification. You will have to be very persistent with your lender and make sure you have all your documentation available and ready. One of the reasons the borrowers are finding it difficult to get mortgages modified is that they are not providing the proper documentation at the proper time.
Make sure to understand that this process is not easy. You’re going to have to submit several documents and you’re going to have to dig up some things that you have likely never done in the past. It is well worth in the long run as it is going to help you save lots of money and possibly even help you avoid foreclosure.

As stated earlier, you must be very persistent with this process and make sure that your lender knows just how badly you want this mortgage modified. If you just submit some documents and do not follow through there’s a good chance that your home loan modification will not go through. You need to take action and make sure that your modification gets completed.
If the current economy and your financial struggles have gotten you down make sure to check out the inspirational blog My Life After Retail. The blog is an account of the journey to find peace of mind and happiness in today’s society.

Author: Mike Garner Source: Subprime Blogger