Articles Posted in Modifications

Fannie Mae and Freddie Mac’s position is that they will not agree to a principal reduction in a mortgage modification. So our Florida foreclosure defense and bankruptcy clients are out of luck when their home is worth a lot less than the balance owed. This is their position even after a homeowner has filed bankrutpcy and is no longer personally liable for the underlying debt.

However, a new Director may be appointed to head the FHA soon. And if that happens, principal reductions may soon follow. The nominee, Mel Watts, is presently a member of the House of Representatives. While it is not certain that he would permit principal writedowns, it is something that at least is under consideration. HUD Secretary, Shaun Donovan is asking that bankers support Mr. Watts as FHA Director and to begin the process of winding down Fannie and Freddie. Fannie and Freddie have been responsible for more the 90% of the home mortgage market since the mortgage meltdown.

The current FHA director, Edward DeMarco, is against permitting principal writedowns for GSEs for any loan modifications.

Another tool to help Florida homeowners keep their home and avoid foreclosure will be available this summer.

Only Fannie and Freddie owned mortgages are eligible, but starting July 1, 2013, a new streamlined program is being rolled out to help modification efforts. This program will eliminate the strenuous income documentation and hardship rules that apply now. Avoid your home becoming “bank owned” by taking advantage of this new program. It will likely be of the most benefit to those who are dealing with large disorganized servicers, strategic defaulters with difficult to prove hardships or business owners who have a hard time proving income.

If you are unsure if your mortgage is owned by Fannie or Freddie, please check Freddie’s lookup site or Fannie’s lookup site. These two resources are also listed on our website’s Resources page.

We are still seeing significant principal reductions for some of our very lucky clients, mostly from Bank of America and Ocwen.

An article by Drew Harwell in the Tampa Bay Times and the Orlando Sentinel and the Tampa Bay Times indicates that since March, more than 1,000 Florida homeowners have learned their principal balances were dropping by an average of $114,000. This is due to the National Mortgage Settlement of $25 billion. Five of the nation’s largest banks – Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo.

I know to many this seems unfair. Those behind in their payments get huge windfalls, while those who have kept paying do not. Or someone with a different lender doesn’t qualify and no one has control over who buys their mortgages. Fannie and Freddie do not presently allow for any principal reductions.

Here in Florida, our foreclosure defense clients have seen two more excellent principal reduction offers in the past month – both from Ocwen. Both reductions were to the fair market value, maybe even below, and both were reduced over $100,000. Additionally, the interest rates were reduced to 4% for the remaining balance.

As I’ve reported in the past, Ocwen is buying the servicing rights for many mortgage loans, including Litton and Saxon, so when you open your mail and find your loan has been transferred once again, don’t fret if its Ocwen, as it may be a blessing in disguise.

Both of the above cases were involved in litigation with our law firm so that may also have been a relevant fact, but we really don’t know. All I can say on behalf of my clients is: Thank you Ocwen. Kudos.

The Home Affordable Modification Program (HAMP) is being extended and expanded to reach more borrowers- will it be enough to help or an example of “too little too late”?

On January 27, 2012, the Treasury department announced the revisions.

First, to encourage principal reduction, the Treasury is tripling incentives and paying 18 to 63 cents on the dollar depending upon the change in the loan-to-value ratio. In the past, the Federal Housing Finance Agency (FHFA) prohibited Freddie and Fannie from using HAMP to reduce principal. Treasury now allows the incentives for Freddie and Fannie if they allow servicers to forgive principal in a HAMP modification. So if your servicer previously denied your HAMP modification, check to see if your loans are owned by Freddie or Fannie because the rules may be different now. Here’s how to do that.

Nation Mortgage News reports today that Ocwen is on the verge of closing on two large MSR purchases: a $15 billion package of nonprime product from JPMorgan Chase, and a $26 billion deal from Saxon Mortgage.

Both could close this month. The $300 billion figure, the company says, excludes the JPM and Saxon transactions. Investment banking officials told National Mortgage News that Ocwen and JPM are discussing additional purchases. Once these two transactions are completed Ocwen will control roughly $140 billion of MSRs, most of it tied to nonprime loans.

The relevance is that we and other attorneys see Ocwen doing principal reductions. Sometimes outright and sometimes in an equity share participation arrangement. Some may only appear to be a principal reduction, but are actually a balloon. We also have been able to have a rapport with Ocwen unlike some other big players.