Many Here Can Relate

[Cat Damiano]

Modification blunders bedevil U.S. housing recovery

(Reuters) - Shirley Burnell, a community activist from Oakland, California, has been trying to get her subprime loan restructured since 2007.


She never missed a payment, but the adjustable rate mortgage she got in 2004 shot up to a monthly payment she could no longer afford.


First she provided documents without getting any response, then she was denied in April by her servicer, Bank of America (BAC.N), for not providing documents it never actually asked for.


As one part of the bank appealed that decision and approved her for a trial modification, another part denied her again - twice - providing two new reasons in part based on inaccurate calculations, according to documents reviewed by Reuters.

When asked about Burnell's case, a bank spokesman said she was unable to qualify under "imminent default provisions," a third reason that Burnell said she had never been given.


At one point, Burnell even received notice the bank would accelerate foreclosure proceedings, despite her perfect payment record and the letter itself saying the bank owed her $281.01.


Modification blunders bedevil U.S. housing recovery | Reuters

[LoanModHelpCenter.com]

Top Challenges We See at loanmodhelpcenter.com when it comes to reasons for delay or incorrect decisions:
* documentation transmission errors and issues and re-submissions
* income and expense issues such as over reporting or under reporting income
* other properties and liens on credit that are not accounted for on budget
* home valuations that are above market value (making it better for the servicer to recommend foreclosure)
* hardship is not cured by loan modification
* hard to see where the hardship started and ended
* too much or too little income used for a modification

[Cat Damiano]

That makes sense. I do see alot of homeowners trying to skew their budget, financials, and hardship to try to fit into a modification that they just do not need, clogging the system, while the ones that truly are in need are falling further behind waiting on their approvals.

[interesting...]

I have no doubt that anyone who applies needs... the people that don't need, don't bother with that. They'll do a buy and bail or something similarly strategic.

[Cat Damiano]

interesting,


That is hardly the case that anyone who applies needs the modification and those that don't need it don't try to apply. Especially based on some of the challenges listed above and also what I have personally seen in helping. There are many who apply even when their payment is well below the 31 percent simply because they want a principal reduction on a property that is underwater, or an interest rate reduction and they are not struggling. The modification isn't intended for those homeowners, and the only refi programs currently dealing with that scenario is HARP where you would need to be backed by either Fannie Mae or Freddie Mac and an FHA short refi which is near impossible to get the lender to participate. I was stating a point that because of the homeowners that are doing this, the ones that are truly in need are having to wait longer than they should be for their modification to get processed.

[interesting...]

I suppose there's some truth in both views... but from what I can tell, most people are better off walking away. The people I see trying to modify their loans are people who want to pay, but are struggling to do so... even when it's in their best interests to just stop paying.

[LoanModHelpCenter.com]

if you are upside down on the property right now in time and you have more than one property, it may completely seem rationale and sane and financially sound to walk away and this reasoning gets stronger as the equity gets more negative on a property and shows little hope of recovery to the positive equity position. most people seeking a mod should have a documented and acceptable hardship (and that includes attempting to work with their servicer in well documented cases, in my book the process of trying to get a modification is a severe hardship itself) and motivation to keep the property despite the negative equity and then take a moment and do scenario analysis, the "what ifs" and outcomes on whether to walk away or get a mod because they want to keep the home. i see not wanting to rent a major reason to not want to walk away especially when a homeowner has put down money on the property or its their only residence. each locale has a different future price appreciation forecast from at least several analysts all over the globe so it is best to do some research to see it makes sense to stay and hold or walk away or get it rented out since in 5 years or longer, chances are, home prices will not be much lower than they are now in the hardest hit foreclosure states in my opinion.

[Jeffrey L. Shurtliff]

It says she did not qualify because she could not meet the imminent default requirements. Immenent Default if it is Freddie Mac or Fannie mae that is the investor; is stated within their guidelines the you are in imminent default is you have cash reserves that total below $25,000. If she can show this with her finicials then she should qualify.

[Cat Damiano]

Is this the case still? We have no cash reserves and were told we were not in imminent default.

You do not have to have cash reserves in order to be considered to be able to continue to pay your payment. They also look at the income as well. Imminent Default is very hard to prove if you are continuing to make payments as agreed. Unfortunately we very rarely see a modification approval for a loan that is current.

When making an imminent default determination, the servicer must evaluate the borrower’s
hardship as well as the condition of and circumstances affecting the property securing the
mortgage loan. The servicer must consider the borrower’s financial condition, liquid assets,
liabilities, combined monthly income from wages and all other identified sources of income,
monthly obligations (including personal debts, revolving accounts, and installment loans), and a
reasonable allowance for living expenses such as food, utilities, etc. The hardship and financial
condition of the borrower must be verified through documentation. A servicer must document in its
servicing system and/or mortgage file the basis for its determination that a payment default is imminent
and retain all documentation used to reach this
conclusion.

[kellyaw]

Hi Cat,
Just wondering if you can tell me the best way to get a copy of my PSA. Original mortgage was with New Day Financial and was transferred to HSBC. Thanks so much.

[Cat Damiano]

Hi Cat,
Just wondering if you can tell me the best way to get a copy of my PSA. Original mortgage was with New Day Financial and was transferred to HSBC. Thanks so much.

You can use the steps that are outlined here;

http://www.supremecourt.ohio.gov/JCS...losure/PSA.pdf