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Pick Up The Phone, You May Have Won A Modification
April 6th, 2010
When Bank of America
announced that they will begin cutting loan balances for troubled mortgage
borrowers, it marked a new milestone in the way banks cope with severe
delinquent loans.
Just recently, major banks
and servicers, such as Bank of America have only started providing principal reductions
to a tiny fraction of borrowers as a last resort.
Despite the great change,
they are way behind the race and have to keep up in speed with a new sort of
mortgage servicer called ‘speciality servicer’. These
servicers are experiencing success in averting more foreclosures. They deal
with the worst delinquent loans which are more than ninety days late and
popularly offer principal reductions.
Unfortunately, few mortgages
end up with these types of servicers. The odds for your loan to end up in their
custody would be comparable to striking a lottery. As more loans become 90 days
delinquent, the ‘specialty servicer’ industry should experience a boost in
their business.
For example in April of 2010,
‘specialty servicer’ RoundPoint
had reportedly paid $500 million for a 50% stake of mainly non-performing
mortgages in a portfolio belonging to the Federal
Deposit Insurance Corp (FDIC). David Barr, a spokesperson for the FDIC said
that they are looking forward to having RoundPoint
work the loans so as to maximize results. He also mentioned that this could be
the beginning of many more similar deals.
The Servicer Industry
What exactly is a servicer? Unlike
the banks or lenders who own your mortgage, servicers are responsible for the
daily administration of mortgages such as collecting payments, maintaining
escrow accounts, contacting borrowers about late payments and initiating the
foreclosure process whenever the borrower defaults.
These servicers were put in
place when the real estate industry was thriving well in a period where
foreclosures were rare and the majority of borrowers were paying their
mortgages. However, when the foreclosures became more rampant, these firms were
hit with a tremendous workload forcing them to desperately beef up their staff
in managing the non-performing loans.
According to the Mortgage
Bankers Association, the foreclosure crisis gave birth to dozens of servicers
specializing in handling mortgage loans that are 3 payments behind. This represents
about 5 percent of all mortgage loans.
How Do Servicers Have The Power To Reduce Loan
Principal?
Some investors including
hedge funds purchased a portfolio of bad loans betting to make a return when
the housing market recovers with people paying their mortgages again. These
investors or hedge funds do not service or maintain the loans themselves. They
have a vested interest for these loans to pay off or for borrowers to pay their
mortgages. As a result, they hire these specialty servicers and provide them a
lot of slack in order for these bad loans to perform well.
According to Shaun Ahmad, CEO
of Roundpoint Financial based in
Gagan Sharma, CEO of BSI
Financial mentioned that their clients consisting of investors or hedge
funds would rather offer a principal reduction rather than an interest
reduction work-out. These investors had already bought the troubled loans at a
discount and have enough room to afford principal reductions for the mortgage
borrowers.
The strategy promotes
homeowners to keep paying their mortgages instead of walking away from their
homes. In addition, should the home increase in value, the homeowner will
experience a profit gain when they decide to sell the home.
Traditional servicers have
not been eager to reduce principal as the investors who own the loans refuse to
accept immediate losses. Banks are also careful not to inspire more folks to
pressure them for reductions.
It is reported that less than
2% of trial modifications under the government’s Home Affordable Modification
Program were granted a principal reduction.
The Lucky Draw
23 years ago, Joaquin Guzzman purchased his
He confessed that he was
behind in his payments and when he attempted to lower his payments, nobody
would give him a shot.
He hit the jackpot when
specialty servicer Roundpoint
took custody of his loan. The servicer combined his first mortgage together
with his home equity loan and reduced the total balance by 44% to $28,000. In
addition, the servicer also lowered a point off his rate therefore lowering his
monthly payments to $1,570.
According to Vicki Lester, Roundpoint’s president of mortgage servicing, it was not
easy getting a hold of borrowers. Often they were reluctant to return phone
calls or respond to mail as they did not trust the servicer feeling that it’s a
scam. According to Vicki, many borrowers are still in denial and it has been
difficult getting them to respond.
As the foreclosure crisis
plagues the nation, it has given rise to many unscrupulous fraudsters to target
desperate and distressed homeowners. Often they are targeted by mail and phone.
But how do you weed out the scams from the actual real offers?
Roundpoint reaches their borrowers through a phone call campaign
in which they later send out letters and informational packets. According to
Lester, if they fail to reach their borrowers, they will send out people to
knock on their front doors. She wants to remind borrowers that if you are lucky
enough to win a modification lottery, please pick up your phone. This can
result in having your loan balanced reduced therefore avoiding foreclosure.
Roundpoint also offers a short-sale
program.
Roundpoint’s short sale program rewards its borrowers with a
percentage of the price they sell over the ‘quick sale’ price.
For example, if the market
values the home at $200,000, to sell it fast, the quick sale price will be 10%
off or offered at $180,000. The program allows the borrower a period of 3
months to sell the home for whatever they can get. Roundpoint
will share anything over the ‘quick sale’ price. Borrowers are granted
somewhere from 30% to 40% of the overage.
Casanova walked away with a
few hundred dollars which was more than he expected. He has since ended the
chaos of not being able to make mortgage payments for the home.
Comments
News Archive
New Rescue Plan To Embrace Loan Principal Reduction - March 26th 2010
Bank of America Reduces Mortgage Principal By Up To 30 Percent, Starting May 2010 - March 24th 2010
Foreclosure Rescue Firms Banned From Operating - March 22nd 2010
Private Loan Mods Performing Far Better Than Government Loan Mods - March 17th 2010
New Government Short-Sale Program, HAFA To Launch April 5th - February 24th 2010
1 In 4 U.S. Mortgages Are Underwater - February 24th 2010
Citi Allowing Struggling Homeowners To Remain In Homes For Additional 6 Months - February 11th 2010
How To Avoid A Deficiency Judgment After A Short-Sale? - February 3rd 2010
State Officials Demanding Banks To Reduce Loan Principle - January 20th 2010
Short-Sale Fraud Or Not? - January 15th 2010
Permanent Modifications Are Higher But Still Not Enough - January 15th 2010
Mark Zandi's Forecast of Housing Prices In 2010 - December 9th 2009
Stay Or Walk Away From Your Home? - November 24th 2009
Fannie Mae Launches New Program Converting Delinquent Homeowners Into Renters - November 11th 2009
Homeowner Gets To Keep Home After Lender Failed To Prove Ownership - October 27th 2009
Implications Of A Loan Modification - October 15th 2009
41 Suspects Arrested For Mortgage Fraud - October 15th 2009
Bridge Loans Coming Soon For Unemployed Homeowners - October 14th 2009
Government Modification Program Inadequate And Calls For An Upgrade - October 9th 2009
Freddie Mac Offers Door To Door Help On Your Modification - September 29th 2009
Federal Housing Administration (FHA) Running Out Of Money - September 18th 2009
Good Time To Refinance With Government Program - September 15th 2009
Selling Your Home And Tips For The First Time Homebuyer - September 14th 2009
How To Keep Your Home If You Lose Your Job - August 28th 2009
Citigroup Performing Well In Foreclosure Prevention - August 25th 2009
Foreclosure Rescue Scams Preying On Homeowners - August 17th 2009
Deutsche Bank Estimates 48% of U.S Homeowners Underwater By 2011 - August 11th 2009
Loan Modification Progress Report Card - August 5th 2009
How Bad Are Foreclosures In Your City? - July 30th 2009
Rep. Barney Frank Threatens Banks To Stop Foreclosure Or Else? - July 28th 2009
U.S Government Wants 500,000 Trial Modifications By Nov 1st - July 28th 2009
Subprime Brokers Involved In Loan Modification Scam - July 21st 2009
'Walk-Away' Survey Shows 26% of Defaults Are Intentional - July 21st 2009
'Own-To-Rent' The New Emerging Mortgage Plan - July 17th 2009
Tools To Help Homeowners Save Big In Property Taxes - July 16th 2009
Lawmakers Dissapointed With Foreclosure Help Programs - July 16th 2009
New Jersey Attorney General Goes After Mortgage Scams - July 15th 2009
Watch Out For Some Misleading Reverse Mortgage Advertisements - July 6th 2009
Chase And Bank of America To Experience 2nd Wave of Foreclosures - July 6th 2009
Obama Extends Mortgage Refinancing Program, Raising New Limit To 125% - July 1st 2009
Paper Avalanche, Lack of Trained Staff Add Obstacles To Loan Modification Program - June 29th 2009
Government Loan Modification And Refinance Program Shows Substantial Progress - June 18th 2009
Luring First Time Homebuyers, Tips To Beat The Competition And Sell Your Home - June 15th 2009
Bank Of America has modified 50,000 loans in Countrywide settlement - May 26th 2009
If you find the information on our site useful, bookmark us for future updates.
More Borrowers Falling Out Of Govt Modification Program
The number of borrowers dropping out of the government’s home modification program are equaling in numbers with those who received permanent modifications. Reports indicated that the number of borrowers who began the 3-month trial modification who failed to be converted into the permanent phase, spiked violently in April 2010. - READ MORE & PODCAST
'Right-To-Rent Act' Provides Relief For Foreclosed Borrowers
There is a new law on its way to the House of Representatives intended in providing post relief for homeowners who lose their homes to foreclosure. The Right-To-Rent Act 2010 is intended to allow ex-homeowners with foreclosed homes to remain in the property by paying fair market rent for up to 5 years. - READ MORE & PODCAST
Short-Sale, Deed In Lieu Or Foreclosure Will Hit Your Credit Score. But By How Much?
Credit Bureaus were previously uncooperative in revealing the fine details in reference to point losses on credit scores impacted by the various forms of mortgage delinquencies. We’re in better luck today as Fair Isaac Corporation, the inventor of the FICO score, shared some interesting and important facts. - READ MORE & PODCAST
New Rescue Plan To Embrace Loan Principal Reduction
The public outcry of government bail-outs of banks and the poor success of the loan modification program have urged the U.S. government to unveil yet another new plan to curb the foreclosure crisis. The new plan is designed to aid 2 groups of borrowers. - READ MORE & PODCAST
Bank of America Reduces Mortgage Principal By Up To 30%
Bank of America announced that it will reduce some borrowers' loan principal by up to 30% beginning May of 2010. To qualify, the homeowner must have missed at least 2 months of mortgage payments and owe at least 20% more than their home is currently worth. - PROGRAM DETAILS & PODCAST
Foreclosure Rescue Firms Banned From Operating
The FTC (Federal Trade Commission) together with the states of California and Missouri, banned the owners of U.S. Foreclosure Relief Corp. from offering relief services under a settlement complaint that was initiated in 2009. - FULL STORY & PODCAST
Private Loan Mods Performing Far Better Than Government Loan Mods
HOPE NOW, a private sector coalition of mortgage servicers, investors, insurers and nonprofit counselors wrapped up 99,499 proprietary loan modifications in January, twice the amount of 50,364 permanent modifications completed under the Home Affordable Modification Program (HAMP). - FULL STORY & PODCAST