Fannie Mae Announces Deed for Lease (D4L) Program
November 6, 2009
Yesterday Fannie Mae announced a program that lets homeowners lease back their former homes after they have returned the deed to the lender in a deed-in-lieu of foreclosure transaction. The program is called the “Deed for Lease” program or “D4L.”
It’s unclear how this would be better than mortgage modification or how this will work for the homeowners (who must pay market rents on former homes they may not have been able to afford in the first place), but it’s likely to improve the foreclosure statistics.
To read more about the program, see this link.
Chapter 7 Bankruptcy: Mortgage Reaffirmations and Modifications, Part II
October 16, 2009
Here is more information on reaffirmation of mortgages in bankruptcy, including implications for modifications. The linked article was written by Orlando, Florida bankruptcy attorney Jonathan Alper.
Mortgage Companies Refusing Loan Modifications to Some Chapter 7 Debtors
Effect of HAMP Mortgage Modifications on Credit Reports and Credit Scores
August 12, 2009
Recently our office has received many questions about the proper credit reporting of HAMP-modified mortgages.
This post discusses (1) how they are being reported, (2) how they should be reported, (3) what you can do to get your HAMP-modified mortgage reported correctly, and (4) possible effects even the “correct” reporting might have on your credit score.
How HAMP-modified loans are being reported now
Many servicers are reporting the modified mortgages to the credit bureaus as a “rolling 30-day late” while the modification is in its trial period.
(The “trial period” is generally a three month period during which the homeowner must make all payments on time under a proposed modification plan. If the homeowner does so, he or she will be offered a modification under HAMP.)
Homeowners are deemed “delinquent” during the trial period because the modified payment amount is less than the original mortgage payment amount, but the homeowner is not yet officially in the modification program.
So, the credit reporting system interprets this as the homeowner’s making a partial mortgage payment each month. Consequently, a new 30-day late is reported each month during the trial period.
Some servicers have told homeowners they are required by the Treasury Department to report the modified mortgages this way.  Other servicers have told homeowners Treasury instructed them to report the mortgages as “late” in order to weed out people who could afford to pay the original amount of their mortgage.
How HAMP-modified loans SHOULD be reported during the trial period
But, borrowers who are current on their mortgage when they enter into the trial modification period should NOT be reported as late, according to servicer guidelines for Fannie Mae, Freddie Mac, as well as other loans (“non-GSE loans”) being modified by HAMP-participating servicers.
Homeowners who were delinquent when they entered the modification trial period, however, will continue to be reported as delinquent during the trial period. See below for more detail.
Information to forward to your servicer if it’s reporting incorrectly
If your loan is owned or guaranteed by Fannie Mae, see page 12 of Fannie Mae Servicing Guide Announcement 09-05R for information about credit reporting for HAMP-modified Fannie Mae loans. It says:
ÂIf a borrower is current when they enter the Trial Period, the servicer should report the borrower current but on a modified payment if the borrower makes timely payments by the last business day of each Trial Period month at the modified amount during the Trial Period. If a borrower is delinquent when they enter the Trial Period, the servicer should continue to report in such a manner that accurately reflects the borrowerÂs delinquency and workout status following usual and customary reporting standards. In both cases the servicer should report the modification when it becomes final.Â
ÂBorrowers who are current when they enter into the Trial Period and make payments by the 30th day of each month, report as current, but on a modified payment. Borrowers who are delinquent when they enter into the Trial Period or do not make payments by the 30th of each month, report according to borrowerÂs delinquency and workout status. Notify when borrowers have completed the modification.Â
If your loan is NOT owned or guaranteed by Fannie Mae or Freddie Mac, see page 22 of “HAMP Servicer Supplemental Directive 09-01″ for information about credit reporting guidelines for modified non-GSE loans. It specifies the following:
“The servicer should continue to report a Âfull-file status report to the four major credit repositories for each loan under the HAMP … on the basis of the following: (i) for borrowers who are current when they enter the trial period, the servicer should report the borrower current but on a modified payment if the borrower makes timely payments by the 30th day of each trial period month at the modified amount during the trial period, as well as report the modification when completed, and (ii) for borrowers who are delinquent when they enter the trial period, the servicer should continue to report in such a manner that accurately reflects the borrowerÂs delinquency and workout status following usual and customary reporting standards, as well as report the modification when completed. More detailed guidance on these reporting requirements will be published by the CDIA.”
What does this mean for homeowners who are thinking about applying for a modification?
To help minimize damage to your credit report and score, you should apply and try to get into a trial period while you are still current on your mortgage.
You do not have to be behind on your mortgage to apply for a HAMP modification.
What does this mean for homeowners who have recently applied for a modification?
Verify that your lender or servicer understands how it should be reporting your modified loan. Do this before starting your modification program, if possible.
Several homeowners have told our office they had to send a copy of the relevant HAMP credit reporting guidelines to the servicers, who were apparently unaware the guidelines existed.
Remember, you can review all the HAMP and HARP mortgage servicer guidelines at this link.
Will the reporting of “current, but on a modified amount” hurt my credit?
It is impossible to say for sure because FICO does not publish its scoring model.
But, “current, but on modified amount” might ding your score a little. This reporting is telling the credit bureau you are currently paying as agreed, but less than the original amount you contracted to pay.
The FICO scoring model may not give you full credit for paying as agreed. But, this will not be nearly as damaging as rolling 30-day lates.
What if my modification is not through HAMP?
The credit reporting guidelines above apply only to HAMP-modified loans. If you have arranged a non-HAMP modification with your lender or you have modified your loan through another mortgage relief program, these credit reporting guidelines will not apply.
Be sure to negotiate the credit reporting with your serivcer as part of your overall modification package. Even if the servicer insists on reporting your loan negatively, at least you can make an informed decision as to whether a particular modification package will work for you.
Bank of America, Wachovia, Wells Fargo HAMP Modification Performance Evaluated
August 9, 2009
The Making Home Affordable Plan has released its August 2009 Servicer Performance Report. The report analyzes the progress of the HAMP mortgage modification program.
The Data
To date, Bank of America modified just 4 percent of eligible loans. Wells Fargo has modified 6 percent.
Wachovia Corp. has modified a mere 2 percent of eligible loans. (Wachovia was taken over by Wells Fargo in December 2008.)
Several servicers- each of whom received significant amounts of TARP funds– report modifying ZERO mortgages.
Wachovia / Wells Fargo’s Response
Mike Heid, co-president of Wells Fargo’s mortgage unit, told MSNBC the company tries to sign up most homeowners with one phone call. Heid claims Wells Fargo then sends eligible homeowners a trial offer within two days. http://www.msnbc.msn.com/id/32281959/ns/business-real_estate/from/ET/
The Reality
This, however, is in marked contrast to what our office has heard from homeowners. Many homeowners come to us for help after trying for several months to work with their servicers directly.
Homeowers report that Wachovia and Wells Fargo have consistently failed to process modification request packages.
Once contacted by the homeowner for follow-up, the servicers claim additional documentation is needed– even though the homeowner already submitted all documentation the servicer requested.
However, the servicers do not attempt to notify the homeowners they need additional information. So, the files sit untouched until he homeowners contact the servicer to find out what is going on.
Weeks might go by before a homeowner discovers his or her file has been idle. But, time is obviously of the essence for people trying to avoid foreclosure.
What can be done?
The HAMP incentives were meant to discourage this kind of inefficiency. But apparently the incentives are not working.
As a side note, it does not seem possible the servicers are fulfilling their duty to their shareholders by leaving so much incentive money on the table. Recall the HAMP incentives pay servicers for every loan they modify while the loan is still current.
Our office would like to see some HAMP guidelines that would put a time limit on servicers’ processing, at least for Fannie- and Freddie- owned or guaranteed loans.
A guideline requiring the servicers to notify homeowners when they need additional information would be helpful as well.
What does this mean for homeowners?
If you plan to request or already have requested a HAMP modification:
- Start early. You should request a modification even before your mortgage is delinquent. Maybe you are current now, but you have had a reduction in income due to a layoff. If you qualify for a modification, apply. It will take a very long time for the paperwork to be processed. By the time you are in true crisis, hopefully your request will have been processed. But see below.
- Call your servicer at least weekly to ask the status of your file and whether you need to provide additional information.
- If your servicer seems to be making up requirements as it goes along, check to see if it is complying with the HAMP guidelines in its handling of your file. There have been many reports of homeowners being rejected for HAMP modifications for reasons not permitted under the HAMP guidelines. In fact, Freddie Mac has announced it will start auditing servicers for compliance with the HAMP guidelines.
- File a complaint with Freddie Mac if your servicer seems to be violating the HAMP guidelines and your loan is a Freddie Mac loan.
- File a complaint with the Department of the Treasury if you think your servicer has violated HAMP guidelines in processing your file.
To learn more, see these links:
The Making Home Affordable Servicer Performance Report August 2009
MSNBC: Mortgage modifications moving at snailÂs pace
HAMP Incentives: What Does Your Lender or Mortgage Servicer Get For Modifying your Mortgage?
July 27, 2009
HAMP: What is it?
The Home Affordable Modification Program (HAMP) was established in March 2009 using 50 billion in funds from the Troubled Asset Relief Program (TARP).
HAMP aims to get mortgage servicers and lenders to modify mortgages in default or in danger of default.
Which mortgages are covered by HAMP?
Your mortgage might be eligible for a HAMP modification if your mortgage servicer participates in the program OR if your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
Even if your servicer is not an official participant in the program, it may participate in order to receive the incentive payments described below.
If you need a mortgage modification due to a hardship, ask your servicer to help you modify your mortgage. Do not be discouraged if your servicer is not listed as an “official” participant in the HAMP program.
To find out if your lender or servicer participates in the program, call your loan servicer or visit the Making Home Affordable website.
Once your servicer has agreed to participate, you must determine whether your mortgage meets certain criteria.
You must:
- Be the owner-occupant of a one to four unit home;
- Have an unpaid principal balance that is equal to or less than $729,750 (higher limits apply for dwellings with 2-4 units)
- Have a first lien mortgage that was originated on or before January 1, 2009;
- Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31 percent of your monthly pre-tax income; and
- Have a mortgage payment that is not affordable due to a financial hardship you can document.
Why would servicers or lenders participate?
Earlier, similar programs did not provide incentives for lender participation. These programs were not terribly successful.
Consequently, HAMP offers lenders and servicers incentive payments from the government for every mortgage they successfully modify. Some of these incentives are described below:
HAMP Incentive Payments
Lenders are eligible to receive:
- A bonus incentive of $1,500 for any loan modified while the borrower is still current (including less than 30 days delinquent), subject to some restrictions.
- Reimbursement for part of the difference between the “new,” modified mortgage payment and the “old” mortgage payment. The government would pay this to the lenders for up to five years.
- Some compensation to offset losses on previously-modified loans
Servicers (including lenders who service their own loans) are eligible to receive:
- An initial payment of $1,000 for each successful modification.
- Annual payments of up to $1,000 for the first three years following successful modification if the borrower stays in the program.
- A bonus incentive of $500 for any loan modified while the borrower is still current (including less than 30 days delinquent).
Borrowers are eligible to receive:
- Principal reductions of $1,000 for each year they make mortgage payments on time under the program.
- This applies for the first five years of the borrower’s program participation.
- For more information, see the Department of the Treasury website.
HAMP Effectiveness Reviewed by Senate Banking Committee
July 20, 2009
This post is parially excerpted from the MortgageOrb article “Senate Banking Committee Focuses on Hamp” by John Clapp.
On July 28, 2009, there will be a meeting between Treasury officials and servicers participating in the government’s Home Affordable Modification Program (HAMP).
In anticpation of this meeting, the Senate Banking Committee held a hearing Thursday morning (July 16) in an effort to help lawmakers gauge HAMPÂs progress – or lack thereof – since its introduction in February.
The hearing included testimonies from the Treasury, as well as Wells Fargo and Bank of America servicing execs. It highlighted the programÂs administrative obstacles and shortcomings.
In recent weeks, lawmakers have increasingly expressed concern that HAMP, originally projected to save up to 4 million homes, is both underperforming and being implemented too slowly.
Committee members also focused heavily on the inconsistent application of HAMPÂs guidelines. Several senators noted cases of borrowers being denied entry into HAMP despite meeting eligibility requirements.
Participants also discussed the TreasuryÂs recently announced plan to release performance data in early August.
The data will be broken down according to servicer, and thus will presumably highlight those servicers who are underperforming in their HAMP implementations.
Since the department announced its intentions to release this data, HAMP administrators have seen increased activities from certain servicers.
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