Bank of America resumes foreclosures

Posted on October 19, 2010 by Robert Dickson

 According to the LA Times, Bank of America is ending its temporary foreclosure "freeze" in 23 states.

Given that FHA has altered the waiting period for those who engage in strategic foreclosures (this applies to those who make the strategic decision to "walk away" from their home), seeking a loan modification might be the best option.  According to "HAMP" or the Home Affordable Modification Program: "Borrower eligibility is based on meeting specific criteria including:

 

1) borrower is delinquent on their mortgage or faces imminent risk of default 
2) property is occupied as borrower's primary residence 
3) mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties.

 

After determining a borrower's eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower's total pretax monthly income:

  • First, reduce the interest rate to as low as 2%,
  • Next, if necessary, extend the loan term to 40 years,
  • Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.
Note: Servicers may elect to forgive principal under HAMP on a stand-alone basis or before any modification step in order to achieve the target monthly mortgage payment."

 

 

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If at first you don't succeed, try, try again! The federal government takes another shot at curbing the foreclosure crisis

Posted on March 26, 2010 by Robert Dickson

After the first attempt by the Obama Administration to stem the foreclosure tide fell flat (only a fraction of eligible home owners facing foreclosure secured permanent modifications), the federal government is proposing a broad new initiative.

The New York Times reports that the government will now try to reduce the principal for home loan modifications.  To do this, it intends to provide a program by which those who are "underwater" (home value less than what is owed) can refinance into a government-backed mortgage.

This is significant because most (if not all) loan modifications up to now consisted of banks largely shifting interest rates and extending payment terms.  Thus, the actual principal of the loan was never really effected, merely the interest.  As a result, the underlying problem which plagued a lot of homeowners was never truly addressed (that they simply had purchased homes which were beyond their budget). 

To fund this new program, the government intends to utilize $50 billion funds previously allotted to the Troubled Asset Relief Program, more commonly known as "TARP."  Though reaction from many non-profit groups is generally positive, it remains to be seen whether banks will cooperate with the new program. 

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