| With the foreclosure rate averaging approximately | | | | to cover their risk, so we'll be watching this one |
| 7,200 properties per day and steadily rising, | | | | very closely. |
| another week has passed and lenders in general | | | | HUD is considering a proposal for 30% principal |
| are still sitting on their hands waiting on direction | | | | balance reduction on FHA loans that are grossly |
| to implement the Obama housing plan. | | | | upside down. The proposal is designed to provide |
| Bank Efforts to Deal with Loan Crisis: A Study In | | | | incentive for owners to stay put and stabilize |
| Incompetence | | | | neighborhoods. |
| | | | FHA would pay a partial claim to the lender for |
| Some lenders have experimented with online data | | | | the loss. In return, the borrower will probably be |
| forms to input homeowner financials for | | | | on the hook for the forgiveness. If Hope 4 |
| modification and here are the results of that | | | | Homeowners is any indication (hint: it was abysmal |
| test: several of the files submitted by our | | | | failure) this proposal probably won't go anywhere. |
| underwriters and by homeowners resulted in | | | | Wells Fargo indicated in Feb that it would start |
| lenders never receiving the financial package. | | | | including principal balance reductions to stabilize |
| Beside the time delay to find out the package | | | | mortgages but the reality is that only around 5% |
| was never received, the entire package had to be | | | | of loans are in this group. |
| submitted again by fax, which further delayed the | | | | Principal Balance Reducations: The Key Indicator |
| process. | | | | |
| This experience is still unfortunately the daily | | | | Principal balance reductions are one of the best |
| reality of mortgage modifications with most | | | | indicators to watch with lenders because |
| lenders. With no clear direction from Washington, | | | | homeowners are getting wiser every day. |
| lenders are still doing modifications under a | | | | They're asking "..why should I stay in my home |
| system that is severely backlogged, inefficient | | | | worth $300,000 when I owe $450,000 ? It could |
| and bursting at the seams. | | | | take years to just get even again after the years |
| At Surefire Loan Modifications, our experience has | | | | it takes for the market to recover...." |
| been that lenders are still taking up to 60 days | | | | That's a smart question, and in the wake of more |
| just to assign a negotiator, once a full modification | | | | financial scandals, government corruption scandals |
| package has been received. | | | | (follow money trail to Chris Dodd) and lost jobs, |
| The general consensus is that Freddie and Fannie | | | | homeowners are collectively asking that question |
| loans will potentially be the beneficiaries of the | | | | more frequently. |
| government plan (this covers approximently 58% | | | | Two final events that we will watch that may |
| of all home loans). This leaves out the other | | | | give an indication of where lenders are going with |
| 42%. And of those in foreclosur the government | | | | regard to modifications. |
| refinance plan won't help. | | | | The sale of IndyMac to One West is the first sale |
| Upside Down On Your Mortgage? No Help For | | | | of a government owned entity sold to a private |
| You Under Obama Plan | | | | investor. Watch them closely because it could give |
| | | | an indication of how other private investors |
| The Obama plan won't help those who are upside | | | | approach the current market reality and how |
| down more than 105% of their property value. In | | | | they deal with capital issues, toxic assets, |
| other words, if your home is worth $100,000 and | | | | foreclosure and modification policies. |
| you owe $106,000 you don't qualify. | | | | The second lender to watch is Countrywide. Just |
| The Geithner "toxic asset" plan still has no clear | | | | yesterday they approved a principal balance |
| indication of what will actually be bought (paper, | | | | reduction on a file at our underwriters from |
| loans, REO's) by the public/private "partnership". | | | | $425k to approximently $220k. |
| And there is no clear indication of what will be | | | | Keep an eye on these two lenders as movement |
| done with whatever they buy. Will they be | | | | from the private sector is the best indicator of |
| modified, principal balances reduced, foreclosed | | | | how the coming chapters in the housing crisis will |
| and sold in wholesale lots (like the Resolution Trust | | | | unfold. |
| Corporation of the early 90's) ? | | | | Only time will tell how effective the Obama plan is |
| One thing is for sure. With the government (i.e. | | | | in helping homeowners keep their homes. In the |
| taxpayers) providing 94% of funding and private | | | | interim a house goes into foreclosure every 12 |
| investors the other 6%, there will huge upside and | | | | seconds. |
| little downside for the private sector. The | | | | Until next week.... |
| prediction is that lenders and investors will collude | | | | |
