Firm commentary:  In a report to the U.S. Congress last week, the Inspector General of the Troubled Asset Relief Program (TARP) that distressed California Homeowners are re-defaulting in droves on HAMP loan modifications, costing tax payers billions of dollars and raising questions about the Treasury Department’s oversight of mortgage servicers.  The increase of the HAMP default rate to 46% is causing a SURGE of SHORT SALE REFERRALS and an increase in our LAW FIRM’s need to expand our network of affiliated SHORT SALE professionals. 

 

This LAW FIRM provides AGENTS and SELLERS with the legal tool with which to leverage to CLOSE of ESCROW on difficult SHORT SALES. As a California licensed Real Estate Professional in good standing, you and your SELLER are entitled to a FREE CONSULTATION with the LAW FIRM to discuss the debt and title issues surrounding your deal.  The keys to closing more SHORT SALES are steady referrals and LEGAL PLANNING. 

 

The wise agent demands that every potential Short Seller consults with an Attorney on all debt, tax, title and foreclosure issues PRIOR to entering the Listing Agreement.  Loan servicers are shortening the foreclosure timelines; second loan modifications are rare.  As Seller’s re-default on loan modifications, the need to get the SHORT SALE completed without last minute surprises is often crucial to avoiding foreclosure.

 

According to the report of Christy Romero, the special inspector general for the Troubled Asset Relief Program, viewable at
<http://www.sigTARP.gov/4hEH5Kep/SIGTARP_Quarterly_Report_July_2013.pdf

the U.S. Treasury has failed to analyze its own data to determine which borrowers
were most at risk of losing their homes to foreclosure after receiving
government HAMP support.  Homeowners are more likely to re-default if they received a less than 5% reduction on their housing expenses; if they are still underwater on their mortgages, owing more than the value of the property; and if they have subprime credit scores and high overall debt.
 
“This is a real problem,” says Romero. “We want homeowners to get the same
help they were promised that was given to banks.”  However, loan servicers are rushing to foreclosure after re-default.  HAMP has been the centerpiece of Treasury’s efforts as outlined by Congress through the TARP legislation to “[protect] the interests of taxpayers” and
“help families keep their homes.”  Apparently, after a default of a HAMP loan mod, servicers are not waiting around the second time around.
 
When the Obama Administration first unveiled HAMP in 2009, it made lofty
claims that lowering mortgage payments would help up to 4 million
homeowners avoid foreclosure. But almost immediately doubts were raised
about the program’s effectiveness<http://www.americanbanker.com/issues/177_19/obama-crisis-foreclosure-modifications-1046156-1.html>, in part because borrowers were routinely denied HAMP modifications and were instead put into servicers’ own proprietary programs.
 
More re-defaults are coming:  In all, just 865,100 homeowners were active in the HAMP program as of April. Of those, 10% have missed one or two payments but have not yet
re-defaulted.   Romero says that the Treasury, which oversees HAMP, needs to do more to
help struggling borrowers, especially since the program was extended in May
for another two years, through Dec. 31, 2015. She maintains that the
Treasury failed to properly structure incentives and penalties to mortgage
servicers.
 
“No servicer has ever paid a penalty for HAMP despite all the misconduct
out there,” Romero says. “It cannot just be about the carrot, the incentive
payments, but must also be about penalties and it’s been an ongoing problem
that Treasury is really not coming down on servicers for misconduct. They
have not taken a hard-line approach.”
 
But don’t expect the financial services industry to suffer any punishment because they refuse to modify loans a second time.  A senior Treasury official said the agency does not have the authority impose penalties.  “We didn’t have the power to fine the way a regulatory or law enforcement agency does,” said the official on a conference call Tuesday with
reporters, on the condition that he not be identified by name.
 
He added that Treasury’s focus has been less on punishment and more on
getting servicers to implement the systems needed to process loan
modifications.  “The industry clearly was a mess at the beginning. The entire industry was
ill-equipped to deal with this crisis,” he said. “They didn’t know how to
modify loans, there were no standards on how to do a successful mod and how
to outreach to borrowers.”
 
Taxpayers have lost roughly $815 million in incentive payments
made through April 30 on more than 163,000 HAMP modifications that
ultimately re-defaulted, according to the Treasury. Though the Treasury has
paid $4.4 billion to mortgage servicers and investors to cover more than
600,000 permanent modifications, about 18% of those funds were paid for
incentives on modifications that later re-defaulted.
 
Three servicers received more than half of the funds spent on homeowners
who re-defaulted: Ocwen Loan Servicing, JPMorgan Chase (JPM) and Bank of
America (BAC). And 91% of all TARP funds spent on HAMP permanent
modifications that re-defaulted were paid to the top 10 servicers.
 
“Homeowners who receive a HAMP permanent modification but end up losing
their how to foreclosure or fall out of the TARP program are not being
helped to keep their homes as TARP intended, and taxpayers lose the
positive impact these funds were to provide for the individual family and
community at large,” the report states.
 
As the HAMP loan modifications begin to adjust upwards after the 5 year mark, more defaults are expected.  The need for qualified SORT SALE AGENTS to accept our referrals will likely grow over time.  Call the LAW FIRM for details on how to become an approved agent.

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