Very few of us could predict just how the current housing situation would be shaped by Nationwide Loss Mitigation efforts, and today, it seems that things are just as unpredictable.  Reviewing an old posting by Sheila Blair, it is interesting to see the goals and good intentions of most towards homeowners facing foreclosure and financial hardship, and almost impossible not to come to the conclusion that we continue to miss the mark.

Residential mortgage credit quality continues to weaken, with both delinquencies and charge-offs on the rise at FDIC-insured institutions. This trend, in tandem with upward pricing of hybrid adjustable-rate mortgage (ARM) loans, falling home prices, and fewer refinancing options, underscores the urgency of finding a workable solution to current problems in the subprime mortgage market. Legislators, regulators, bankers, mortgage servicers, and consumer groups have been debating the merits of strategies that may help preserve home ownership, minimize foreclosures, and restore some stability to local housing markets.

On December 6, 2007, an industry-led plan was announced that will help avert foreclosure for certain subprime homeowners who face unaffordable payments when their interest rates reset. This plan provides for a streamlined process to extend the starter rates on subprime ARMs for at least five years in cases where borrowers remain current on their loans but cannot refinance or afford the higher payments after reset. An important component of the industry-led plan is detailed reporting of loan modification activity. Working with the Treasury Department and other bank regulators, the FDIC will monitor loan modification levels and seek adjustments to the protocols if warranted.

I have long advocated a systematic and streamlined approach to loan modification that puts borrowers into long-term, sustainable mortgages. I support the industry plan as a means to allow borrowers to remain in their homes, provide investors with higher returns than can be obtained under foreclosure, and strengthen local neighborhoods where foreclosures are already driving down property values. It is my hope that this plan will be implemented in a way that delivers real progress on these important policy goals.

Sheila C. Bair, Chairman
Federal Deposit Insurance Corporation

It seems that the goal of helping homeowners universally modify their loans through a streamlined process is still unavailable.  Granted, there are streamlined refinance programs available for FHA and Fannie and Freddie backed mortgages, however, we are at a state of crisis in which most homeowners simply do not have the equity to qualify for these programs; even programs that allow (such as the Making Home Affordable Refinance Program) up to 105% financing.

On the Loan Modification / Loss Mitigation side, MHA (Making Home Affordable), Obama’s Foreclosure Prevention and Assistance Plan, has not been the universal equalizer we have hoped for.  To date, it has fallen far short of meeting the goal of helping 8-9 million needy homeowners, and, though many homeowners do qualify under it’s lenient guidelines and many servicers which to help these qualifying and deserving homeowners, many of the investors simply are not on board.

Last week a homeowner contacted me, her loan is held by Countrywide, which participates in MHA.  After the usual hour / hour and a half on the phone with her lender and being bounced from department to department, we were told that the primary investor on her loan was Goldman Sachs, and that they do not / will not allow loans to be modified under Making Home Affordable, and that because she had a current positive cashflow of $50, there simply was not enough hardship to justify performing a modification.

Having just lost her husband in Iraq, and facing an almost inevitable foreclosure, this is not the response we were looking for.  Thankfully after a detailed and complete forensic audit, we did find a significant RESPA violation in her original ARM disclosures that (fingers crossed) will hopefully help us leverage Countrywide into being more amenable to modifiying her loan.  She needs help; she hasn’t been able to buy her son school supplies this year, has had to shop at goodwill for clothing, and can barely afford to put food on the table.

Countless homeowners are still in desperate need of assistance.  And while I salute the banks and the Obama administration for ths strides that they have made in helping homeowners avoid foreclosure, there is so much more that still has to be done to help the deserving borrowers that can’t afford their mortgages.

The first step is communication.  ANSWER THE PHONE, LENDERS!!!  Case in point: When Congresswoman Maxine Waters spent two hours on the phone with Bank of America, only to have no satisfactory resolution or help for the the homeowner (constituent) that she was attempting to assist.  I will post more on this frightening conversation later, as well as the video of Congresswoman Waters’ conversation with B of A.

This truly begs the question, we’re we correct in bailing out the banks, rather than the homeowner’s themselves?

Much more has to be done to help homeowners.  If you are a homeowner who is facing foreclosure, give us a call, at the very least for free advice that can help you in your battle to achieve financial stability at (866) 760-9099.  If you need representation, we are more than happy to represent you for a fee, or possibly pro-bono (free) depending on the extent of your hardship.  We are here to help!