Mortgage servicers have always worked as collection agents – this being their business and as such they are ill equipped to handle en masse modification of mortgages. This was the view of Patrick Madigan the assistant attorney general of Iowa. Speaking at an interview he said, “The mortgage industry has responded to this crisis with a series of half steps based on a notion that a turnaround in the housing market was just around the corner.”

The mortgage modification plan introduced by the Treasury stipulates that three parties have to take part in it – the firm that owns the loan, the company that services it and the house owner. All shares a portion of over $20 billion that the federal government has calculated would have to be spent to contain foreclosures. The Treasury wanted to involve as many servicers as can be possible but the GAO noted that the department was not monitoring the process as much as it should.

GAO noted in its July report that there were “significant gaps in its oversight structure.” The firms were under staffed in overseeing the work of the office and it’s monitoring of the modifications. By July, 8 months had passed since the programme was underway but many posts remained vacant.

The government has taken “readiness reviews” of a mere 7 out of a total of 27 servicers. There are no further plans for further reviews. That too the reviews consisted of discussions only with the senior officials. The information gleaned was not later checked. GAO said, “Treasury cannot identify, assess and address risks associated with servicers that lack the capacity to fulfill all program requirements.”

The Treasury however was quick to reply that it was speeding up reviewing procedures and trying to rectify the defects that have been identified. Seth Wheeler of the Treasury said, “Clearly, we’re not there yet. Clearly there’s still inconsistent application of the program, even though we have made progress.”

Many firms have been identified and mentioned by the judges and or regulators for having indulged in erroneous activities with their clients. One of them is Ocwen Financial Corporation, based in Florida that deals with the servicing of over 300,000 mortgages across the country. It will be receiving over $200 million from TARP funds.

Nationwide law suit has been filed against Ocwen. One of the plaintiffs is Brad Rhoton. He said, “Ocwen has screwed up my finances so bad you can’t believe it. It’s been the most maddening process you can imagine.”

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As per the new agreement they were to pay per month $2,600. Later they found out that property taxes were due. Adding all this up led to their monthly payment jumping to $3,500. They got the loan modified in June this year and are now already lagging behind two months in payment. Foreclosure seems imminent. Samantha complained, “The bank could have done more and reduced our principal. You have the anticipation of relief and then you realize it’s not going to make it better. It’s like being punched in the stomach twice.” Modification of the mortgage can be done in many ways. Lenders can permit the borrower to jump few payments and add these to the loan amount.

They might bring down the interest rate, stretch the loan period or bring down the total loan amount by waiving part of the principal. Many of the lenders contend that bringing down the principal is generally not done – except as the very last resort for modification when there are no other options. More than 80% of the modifications done by Wells Fargo during the last three months have permitted lower payments for the borrowers but most of these have reduced rate of interest.

Over 240,000 modifications have been effected by the bank and over 30,000 executed following the guidelines of the Obama programme. CitiMortgage claims to have effected 92% modifications by bringing down interest rates and or stretching loan period. 8% were able to have their principal reduced. It is complicated and difficult to provide relief to the borrowers because the lender does not comprise of one entity. Innumerable mortgages were parceled, sliced and sold to various investors right across the globe. The servicers contend they do not have the right to modify loans.

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1. The current mortgage crisis is really affected by mortgage frauds? How?

Yes, mortgage frauds will affect the current mortgage crisis. It is important to remember that frauds that are committed onto the real estate market as well as the real estate loan processes will affect not only the companies that are providing the loans. In addition, those that are buying the bonds that are being issued by the mortgage loan companies (as the means to get new financial funding to provide new mortgage loans). In addition, mortgage frauds will affect those new homeowners that have been credited with new mortgage loans as a result from the sale of those bonds.

Consequently, mortgage frauds affect the mortgage market and enhance the current crisis in an outward spiral. Therefore, it is important to conduct a thorough research on any property that one might be interested in acquiring so that there will be no ill surprises.

2. What happens to a second mortgage when a home is purchased at a foreclosure auction?

A person gets a mortgage loan when they want to buy a house; if they back fall on the payments, they risk being foreclosed. Once this happens, the whole debt as well as the property is placed up for sale. In the case of foreclosures, it can be that the buyer will acquire the property and be held accountable for the liens of mortgages, the senior and the junior one.

Of course, it might also be that the smallest mortgage will be cancelled because the seller is the current holder of both mortgages, so the company will try to recover and make the most out of a problematic situation. Sometimes mortgage lenders will place “undercover people” in the auction to bid and increase the selling price, but in the end, the final decision will come for the bidder. So it is of the utmost importance that before he or she bids, that he or she asks if who and how is the liens holder willing to go in terms of the second mortgage or the smallest mortgage on the property.

3. Can I get a refinanced mortgage if i start a home business with no employees and still work my regular job?

Refinancing a mortgage loan is an action that many borrowers seek to get the process of managing their household income in a more effective way, but it is a process that might seem complicated and hazy, so say the very least, especially to the laymen who are simple people who try their best to live a good life. In truth it is not a complicated issue, in the eyes of the mortgage company, they need to know that you, the borrower will be able to keep paying your monthly instalments in time.

Therefore, yes, you can start a home business and have a refinanced mortgage IF you can provide them with proof that you will be able to keep the monthly instalments. Even if you do not have employees, you will still have expenses to cover while you set your home business up; you will also have to prove that your debt is still under your income, so that you will not have to choose between paying your mortgage loan and buying food, for instance.

4. I have a mortgage on one home; can I get a second mortgage to pay for another house?

Yes, you can. That is the simple and most direct answer; however, there are several “buts”… The first one is that you need to prove to the mortgage lender that even though you will be taking on two mortgages your debt-income ratio is still healthy. Once again, this means that if you take on a second mortgage your income will still be enough for you not to be forced to choose between paying for groceries or the mortgage loan.

There are several alternatives, of course. One is that you can actually sell the property and in this case, ask the mortgage lender that the remainder of the debt is transferred to the new owner. Or you can rent the property so that the product of the lease will go to the payment of the mortgage, or at least a part of it, this will allow you to have more manoeuvring space with your monthly income.

5. Can you get a mortgage allowing you to bid on a foreclosed property?

It is not an easy task. This action would be considered an oxymoron, since for getting a mortgage loan you will need to go through several steps that cannot be done until the property has been awarded to you. And you cannot bid on the property until you have the mortgage loan.

One way to go about it is to approach the liens lender or the seller that is placing the property for auction and inquire or apply with them for the mortgage loan, so that your bid, if accepted, will require inside processes instead of turning around and running from one place to the next. However, it will always be recommendable that you conduct a thorough search and that you have all your documents as well as income and outcome expenses well identified.

In this manner, you will be able to provide proof that you can take on the mortgage loan and that you will not fall back on the payments, which is the first interest of the company.

6. What happens to the second mortgage when the first mortgage forecloses?

Well, according to the current legal dispositions, you will not be able to get on a second mortgage if the first one has fallen into back payments, this means that even if you try to, you will not be able to get a second mortgage until you have recovered and are current with the payments of the first one.

However, when it happens that you already have the second mortgage and you face with being foreclosed on the first one, there will be an attempt made by the mortgage lenders to try and sort things out. Then, if there is no positive outcome, they will try to seize the whole house so that they can put it for auction and recover their investment.

If you happen to be in a back payment, it will be a good idea to seek for a mortgage loan modification, so that you can keep the house and the payments under control.

7. What happens to a real mortgage when a debtor files for bankruptcy?

Regardless of the terms in which the debtor has files for bankruptcy, the assets that he has and that are worth selling will be sold. This means that the resulting money from the sale of all the assets will be used to pay back the debts that this person has. In the case of a real mortgage there are two ways that it can go; in the first case, the real estate property is sold and the owner or creditor of the property will have “first dibs” on the product of set sale so that he can recover the original investment.

In the other alternative, it could be that the real estate property is returned to the creditor (depending on the amount that the debtor still owes on the property) a then the creditor will have the duty or choice to sell the property again or in a foreclosure auction.

8. How do I calculate mortgage payments when buying a home from a family member?

Well, the first thing to consider is that as the seller of the property, selling to a family member is not as secure as selling it to a stranger through a mortgage loan company. However, when the commercial transaction (the sale) is being done, it can be done privately, meaning that the person who is buying will pay the house or real estate property in monthly instalments with an agreed interest rate (usually a percentage lower than bank interests) or with no interest at all.

The other alternative is to run the process with the participation of a mortgage loan company, in such a case, and then the mortgage company brokers will take care of the process and the calculation.

In both events and since it is a family member and communication is supposed to be better, then sit down and do some number crunching, remember that the ideal mortgage will never put you in a spot where you will have to choose between buying groceries or paying the mortgage.

9. Do you still make mortgage payments while your home is on the market to sell?

Yes. According to the type of the property, the amount that it is projected to be sold and the amount that you still owe on the mortgage loan, it might be plausible, through a contract, that you can “skip” some mortgage payments while the house is on the market. However, this is just a temporary measure, in the end, as soon as the house is sold; the amount of the mortgage loan that is owed will be deducted from the total that the house was sold for.

Once again, yes. You have to keep doing the mortgage payments while the house is on the market, especially since the current financial crisis causes so many to be in a much-stressed financial situation. Stopping payments and not being able to sell the house will put you in the fast track to a foreclosure situation and that is something that you definitely do not want and should always avoid.

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The strident appeal has come straight from President Bush and also from Federal Reserve chairperson, Ben Bernanke. They assured of standing beside those who had been trapped into teaser loans. Bush spoke of a plan to permit government housing administration to try to help besieged borrowers keep home fires burning. It is not just a mere coincidence that the joint statement is made a day ahead of a hearing of sub-prime collapse before US House Financial Services Committee.

Foreclosure figures are alarming. These point to worse days ahead. Nearly 1.3 million sub-prime mortgages is about to reset to higher rates this year. In the following year another 1.2 million will follow suit. It is the combination of high interest rate and low property value that has caught house owners unawares. Late payments and or debts rose to more than 14% during the first quarter of 2007 – making it the highest in four years. In July this year the number of foreclosures across the country doubled from what it was last July.

Sub-prime mortgage agents themselves are in trouble and many have been forced to down shutters as credit supply from investors has begun to dry up. Many jumbo lenders are desperately trying to contact borrowers for their own interests. For the lender foreclosure procedures are time and money consuming. Idle property is dead weight. They want money to trickle in. Generous options about refinancing and modifying rates are being made with Wall Street averse to real estate business.

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It was a profitable venture for lenders. Since the credit history of the borrowers was poor they were charged high interest rates for being granted the favour of a loan. But the operation turned sour when with the spiraling of default numbers the very base of the exercise became shaky. Flow of money coming into the kitty came to a standstill. The fact that there was very little equity left in the units the borrowers could easily walk off without a backward glance. The property was not worth much to cry over and in any case their credit was bad. There was nothing new to lose!
Overnight shutters began to be pulled down on sub-prime divisions. Only a few limped along. Some filed for bankruptcy while others pruned the number of staff. Among the prominent ones who filed for the protection of bankruptcy laws in April are New Century Mortgage Corporation and its auxiliary Home 123 Mortgage Corporation The waves touched each corner and pocket of the country. The nation’s largest lender, Countrywide Financial Corporation, had borrowed $11.5 billion from 40 banks. The crisis had pushed its smaller cousins into insolvency.

Those lenders who had diversified income avenues and who have mixed and matched sub-prime with conventional prime loans will be able to surface from this catastrophe. There is little or no hope for those who had put all their eggs in the one sub-prime basket. They do not have a spare one to clutch on to.

It is estimated that 325,000 units are already in the foreclosure net. The quarterly rate during the previous two years was 230,000. It is this point from which the entire credit market is being infected says prominent economist Covarrubias from the University of Texas.

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One of his passengers Neil Carey, kicked off a fund administered by Grassroots Crisis Intervention Center, helped Poku meet his debts, his survival expenses as well as legal costs for fighting the matter out. Poku had been evicted a year ago having failed to legally prove that the original mortgage had been paid off during the refinancing period because of documents and checks had been lost by the jumbo financial body involved in this deal.

Howard County based Congregation Concerned for the Homeless has been operating for the last 17 years. The state on its part has started off the Family Stabilization Program through the county government to help sufferers like Poku. Its scope of activity involves continued support, counseling on budgets,, use of credit, proper parenting and business advice.

The help programmes try to get the business going again. Poku is one of their ideal subjects. Foreclosure had given him a bad name and so it was not easy for him to find a rented home without help. But finally one was found that suited the work compulsions of his wife and himself. The group saw to the waiver of security fees.

Poku insists that the loan had been paid off but the Seattle based mortgage firm denies it. Poku found his house sold off within six weeks of his being issued a notice. As per Maryland law quick foreclosures are the norm and do not require lenders to prove that the borrower had been notified. Many Maryland officials are keen to change the law. Right now these resolutions will not help Poku who had migrated from Ghana and struggled to set up his small business. He had built up his taxi service from scratch after learning everything about repair and maintenance during off work period at night.

Poku’s lawyers failed in May to prove his point in the Court of Special Appeals. Right now two court actions are pending after the matter was again filed. His lawyers are demanding compensation and a share of the proceeds from the sale of the house.

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Five states of California, Florida, Michigan, Ohio and Georgia bore the brunt of more than half the country’s foreclosure burden. In the middle are squeezed in Missouri (18th) and Kansas (32nd). In Missouri the ratio was 1:1,275 and in Kansas it was 1:2,782.The figures are inclusive of default, sale and bank repossession notices. Because of multiple mortgages some of the property units may have been counted more than once. But the tracking group has listed separately individual properties. During the first six months of the current year 573,397 properties showed foreclosure activity in some form or the other. It amounts to 58% rise from the first half of 2006 and 32% rise from the last six months of that year.

In July Nevada, Georgia and Michigan showed the highest numbers. California, Florida and Ohio were the states with the highest foreclosure numbers.

The sub-prime loans and ARM loans have been battering the mortgage market during the last few months. One by one delinquency is being reported and houses are being foreclosed. Falling real estate prices have added woe to misery with owners not being able to sell off units and pay off dues. Sub-prime loans had been given to those with shaky credit history. It started with interest-only repayments but when the grace period was over the cracks began to appear and widen.

But the story did not end there. From the housing credit category it infected the country’s savings and loans. Never had the situation been so bad in the past 14 years. USA Office of Thrift Supervision is nervous and edgy with $14.2 billion in repossessed assets and loans whose dues are more than 90 days old. In other words property is lying around idle with no cash flow coming in. To avoid further decline it is being advised that properties should be sold off quickly without thinking of profit and loss.

According to reliable sources foreclosures rose by 93% from July last year to July 2007 across USA. It went up by 9% from June. In July last year the number of foreclosures had been 92,845 but this year during the same month the number read 179,599. In June the foreclosure number was 164,644. The figures have been released by one of the oldest reliable online groups, keeping track of this specific situation. The national foreclosure rate is 1:693.
Five states of California, Florida, Michigan, Ohio and Georgia bore the brunt of more than half the country’s foreclosure burden. In the middle are squeezed in Missouri (18th) and Kansas (32nd). In Missouri the ratio was 1:1,275 and in Kansas it was 1:2,782.The figures are inclusive of default, sale and bank repossession notices. Because of multiple mortgages some of the property units may have been counted more than once. But the tracking group has listed separately individual properties. During the first six months of the current year 573,397 properties showed foreclosure activity in some form or the other. It amounts to 58% rise from the first half of 2006 and 32% rise from the last six months of that year.
In July Nevada, Georgia and Michigan showed the highest numbers. California, Florida and Ohio were the states with the highest foreclosure numbers.
The sub-prime loans and ARM loans have been battering the mortgage market during the last few months. One by one delinquency is being reported and houses are being foreclosed. Falling real estate prices have added woe to misery with owners not being able to sell off units and pay off dues. Sub-prime loans had been given to those with shaky credit history. It started with interest-only repayments but when the grace period was over the cracks began to appear and widen.
But the story did not end there. From the housing credit category it infected the country’s savings and loans. Never had the situation been so bad in the past 14 years. USA Office of Thrift Supervision is nervous and edgy with $14.2 billion in repossessed assets and loans whose dues are more than 90 days old. In other words property is lying around idle with no cash flow coming in. To avoid further decline it is being advised that properties should be sold off quickly without thinking of profit and loss.

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Inevitably ARM’s gained in popularity during the first half of this decade. Brokers with the bait of commission dangling before them went all out to sell the mortgage scheme. The legal side with was purposefully not fully explained to the borrowers. But when the time came for the actual work of refinancing it was difficult to get in touch with the person whom the lenders had never seen. When the foreclosure went public prospective buyers began to crowd in. Such a situation spells trauma for a family with children.

Some are fortunate to refinance into a longer period fixed rate mortgage but others have to move out bag and baggage unable to repay mounting debts.

Chicago recorded 10,294 foreclosures in 2006 according to reliable sources keeping track of the situation. The number is 36% higher than the figures of 2005. This year and in 2008 the fear is that the numbers might rise to anything between 16,000 and 17,000.
During the early part of the defaulting crisis the families who were mostly affected came from the low or moderate income groups. However the scenario in Chicago is not quite so bad as that in other parts of the country because the economic picture here is diverse. A factory closing down in one place does not affect the whole of Chicago, unlike the tendency in places like Michigan and Ohio.

In Chicago foreclosures on prime loans jumped to 46% in 2006 as compared to 21% in 2002. Until the new players butted in Fannie Mae and Freddie Mac were the two largest loan wholesalers dealing with conventional loans. But the new comers saw to it that borrowers could not go back to the shelter of the traditional market by imposing fines for premature loan closure. The mortgage market became liquid trying to accommodate all and sundry. Solutions are being tried out but till then the borrowers remain in limbo.

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Mortgage experts of the locality pin down the cause to the usual disasters that grips the populace from time to time – divorce, death and unemployment. The situation gets aggravated with natural calamities. Unfortunately this reasoning is not holding water this time.

McCoy, President of Mission Mortgage points her experienced finger at the investors who speculated in Austin. Based on promises investors would walk in and buy up units. But reality did not live up to their dreams. These investors are now having problems tackling their mortgage payments in their home territory. So they want to get rid of units here in Austin, which is having to shoulder other people’s crosses.

Mortgage broker Bray of Lone Star Lending warns borrowers never to sit idle on default notices. Communication lines between lender and borrower must be kept open at all times. The lender doesn’t want the house but wants the money coming from it. It is to their interest to see that the borrower is doing the utmost to keep the home fires burning.

There are five clear instructions. Take the initiative and contact lender for discussion. Secondly arrange for debt counselling with the object of refinancing the deal. Thirdly if the house has equity then the monthly payments may be lowered for a short term with high interest loan to tide over the immediate crisis. Fourthly grace periods are not impossible to get. Lastly directly sell the house. This option is much better than slipping into the foreclosure coma. A foreclosure victim has rights. Know it.

There are agencies of renown that buy these loans and do whatever is feasible to help people keep the roof above their heads.

Many Americans are losing hearth and home because of defaults in the sub-prime market but that is not happening in Texas. Of 7,000 loans here not a single one is ARM. It is not saleable here in Austin, Texas. This means that the people here are not those who cannot afford the readjustment in instalments. It is good news for the market. Texas is standing out as an island in the turbulent sea all around.

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The company comprises of human beings and not just robotic computers. This is the guiding force motivating the action of the company. May went on to add that his company is mainly concerned with government loans to people who can keep up the mortgage commitment but whose credit ratings may not meet the usual loan standards. Shore Mortgage has always been particular about not entering either the sub-prime or Alt-A loan areas if they are not satisfied with the proof of the income of the lenders. They take into consideration people who can show employment records of about two years and are able to make a down payment of 5% in ready cash. Then they overlook the aspect of the credit history being good or bad. If the clients lack traditional credit cards and previous history of repaying loans Shore takes into account their records relating to payment of bills and rent. That is why till date they have not had any problems about foreclosures.

Shore Mortgage advances about 4,000 loans annually and has been in this business since 1984. However the real estate fiasco has meant a slow down in the business of Shore Mortgage. It has under its umbrella 200 employees in six offices across Michigan. Ohio and Alabama too feature under its zone of operation.

Michigan had the distinction of ranking third in the mortgage delinquency rates, new and old foreclosures during the first quarter of this year according to figures released by Mortgage Bankers Association. The President of Michigan Mortgage Brokers Association Paya Leyrer opines that although sub-prime has been mainly blamed for the foreclosure there are other economic factors like unemployment. In Michigan a good number of people have lost their jobs. A lot of effort is being made to make the borrower aware about what taking a loan involves and how to avoid failure and register success.

Source

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