North Carolina Loan Modifications Blog

Consumer Protection Gets National Attention

august 10, 2010 01:53am

Consumers are (finally) in the driver's seat. A fundamental shift has occurred thanks to the housing crisis and the troubled economy that has taken control away from big business and given it to the people. The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed by President Obama on July 21, 2010 to add some teeth, and a new federal agency to educate, protect, and support consumers in a sea of uncertain economic times and in the face of increased scams. Under the Act, the new Bureau was created within the Federal Reserve Board and has authority to oversee any person or company dealing in any “consumer financial product or service”. The definitions contained in the Act are broad. It targets unfair and deceptive financial practices and requires that all financial products conform to federal consumer financial laws.

It will take some time for the new Bureau and the Act to work its magic. Currently, the implementation of the Act is in the hands of Treasury Secretary Timothy Geithner. He has a deadline of September 19, 2010 to designate a transfer date, when legal authority will shift to the new bureau from the FTC and HUD. It must be no earlier than Jan. 17 and no later than Jan. 21, 2011.

The first benefits of this Act will be felt in the real estate industry. One of the first targets is in setting uniform standards for appraisals. Also, a national hotline system will allow homeowners to lodge complaints and alert the Bureau of unfair and deceptive lending practices of mortgage lenders. The new agency will also assume control of a key consumer protection statute - RESPA -- the Real Estate Settlement Procedures Act. The bureau seeks to streamline the existing disclosures in the home purchase process and provide revised truth-in-lending and good faith estimate disclosures. Another benefit will be to require all loan officers to make good faith verifications that mortgage applicants have the ability to repay the loans they are seeking. The lack of this effort is largely what led to the downfall of the real estate market, and to the increasing default rates on mortgages across the United States.

The Federal Trade Commission has also expanded its consumer information and is fighting the good fight for consumers and homeowners across the nation. On its website, www.ftc.gov/bcp/consumer there lies a plethora of information easily accessible to consumers and homeowners to be informed about the latest programs available for consumers, and alerts for the most recent scams in areas such as automobiles, credit cards, home loans, and identity theft.

In North Carolina, Attorney General Roy Cooper has led the way for our state in consumer protection, and has created an easy way for consumers to sound off and report unfair and deceptive scams that prey on NC consumers and homeowners. For more information visit, www.ncdoj.com/consumer. On this site, consumers can submit a complaint, find help, or call the Attorney General’s office directly and speak to someone about their specific situation. If you or someone you know has been a victim of a mortgage prevention or loan modification scam, please report it to the NC Attorney General so we can keep these scammers out of NC, and put them out of business.

The best defense we have as consumers is to educate ourselves and those around us. Please read and research any financial product or services that you may consider. If the person is encouraging you to sign up quickly, without due consideration, they are not looking out for your best interests. There are people out there who are legitimately helping consumers with financial products and services, so do your homework to find the good ones!

Posted By: Jane Soboleski

Your House has been Foreclosed-Can it get worse

june 25, 2010 02:59am

Foreclosure of your family home may be one of the most stressful events you ever have to bear. When your home is in jeopardy, it seems like there is nothing more they can take from you. Unfortunately, that may not be the case. If your home value has declined substantially, and the bank cannot recoup what you owe at the foreclosure sale, in North Carolina, the bank can sue you for the difference. So, you could be faced not only with a foreclosure but also a lawsuit where the bank is seeking to collect the balance of what was owed on the Note.

Sounds like banks are having their cake and eating it too? Well, North Carolina lawmakers thought so too. And, in 2009 the NC General Assembly enacted a new Anti-Deficiency Statute (N.C.G.S. 45-21.38A) to add protections for consumers and homeowners. The new Anti-Deficiency Statute was enacted on October 1, 2009 and applies to actions filed on or after that date.

The new statute abolishes deficiency judgments in most cases where the property secured is the borrower’s primary residence. It applies to loans that were originated on or after January 1, 2005. The loan amount and type of loan also has to meet certain Fannie Mae guidelines to qualify for this exemption. Basically, the loan must have been a “rate spread loan” or a nontraditional mortgage. The statute does not provide relief for home equity lines of credit, construction loans, reverse mortgages or bridge loans. The statute even includes a clause giving the Court discretion to award attorneys’ fees to borrowers who prevail in a suit against a lender for wrongful deficiency brought under this statute.

The “old” NC anti-deficiency statute (N.C.G.S. 45-21.38) abolishes deficiency judgments where the seller of the property holds a purchase money Note and Deed of Trust. This law’s application is much more limited, but still aids a buyer/borrower in avoiding a deficiency judgment if they default on a seller-held mortgage. A seller-mortgagee is only entitled to recover the real property offered as security in an action for foreclosure, and cannot additionally pursue a separate action for a deficiency.

All in all, the new NC anti-deficiency statute may not help all homeowners, but it seeks to aid those who where most impacted by the "bad loans" granted to homeowners in the boom of the housing market. At least those homeowners will escape additional financial strain of a monetary judgment once they have lost their homes to foreclosure. In these tough economic times, we must count our blessings - and be aware of new laws, both state and federal, that are out there to help consumers and homeowners to recovery.

Posted By: Jane Soboleski

Loan Modifications Slowing Foreclosure Activity

june 18, 2010 09:03am

For a large number of people in North Carolina, loan modification programs represent one of the few possible ways they can try and stop foreclosure. NC homeowners who have reached the point where they need to try and get help to avoid losing their homes are looking to loan modifications in hopes of either preventing or resolving mortgage delinquency.

According to the monthly foreclosure report on RealtyTrac, released in June, while total foreclosure activity is decreasing, the number of homes being repossessed by the banks has hit a new high. This, right after Bank of America announced they will start to push short sales and other alternatives to foreclosure. It appears that lenders are working faster to complete forestalled foreclosures rather than carrying the burden of putting these homes back on their books. It's important to note, however, that the influx of delinquencies into the foreclosure system has slowed down as more and more borrowers are securing loan modifications.

There are reports that more than 68,000 trial mortgage modifications through the U.S. Treasury’s Home Affordable Modification Program (HAMP) became permanent in April. This represents an increase of 13 percent from March when about 60,000 three-month trial modifications converted to permanent loans. Another 104,000 borrowers received non-government related modifications through their lenders during the month of April. This information was reported by Hope Now, a private alliance of investors, mortgage servicers, mortgage insurers and nonprofit counselors.

Back in March, servicers and lenders began verifying information about income documented by borrowers; prior to a U.S. Treasury requirement that recently took effect, some servicers were green-lighting trial modifications without verifying the borrowers' stated income. HAMP data shows that servicers who began trials based on verified documents generally had higher conversion rates than those who did not.

In other loan modification news, according to a HAMP press release, by July 1, all mortgage servicers participating in HAMP will be offering extra assistance to homeowners who are struggling to make their mortgage payments because of unemployment. This new HAMP unemployment program will offer homeowners a forbearance period of approximately three months to lower or suspend their monthly mortgage payments while they are looking for work. The forbearance period will end and the homeowner will be assessed for a loan modification if they become re-employed. Under the new unemployment program, unemployment benefits no longer qualify as income for the loan modification.

HAMP has helped many Americans dodge foreclosure, but in many ways, the mortgage modification process has been slow and the criteria are tight, bottlenecking the influx of delinquent (or nearly delinquent) borrowers looking for relief. For North Carolina residents wishing to know more about the new loan modification guidelines, there are few professionals better equipped to answer your questions than a good debt counselor or a consumer attorney. NC residents now have even more incentive to learn about the loan modification process - it doesn't work for everyone, but it has saved many families from losing the roof over their heads.

***

Jane Soboleski is a consumer law attorney with Soboleski Law, PC. For more information on how to help stop foreclosure through loan modifications, call (828) 285-8888.

Posted By: Jane Soboleski

Bank of America offers principal forgiveness on consumer mortgages

april 21, 2010 06:47am

In late March 2010, Bank of America announced its National Homeownership Retention Program (NHRP) to help distressed homeowners by offering principal reductions on mortgages on underwater (or negative equity) properties. Bank of America leads the industry in this type of relief for homeowners. This program will provide assistance to approximately 45,000 homeowners and will relieve $3 billion dollars in consumer debt. Bank of America hopes that the combination of the government-backed Home Affordable Modification Program (HAMP) and NHRP will encourage more permanent loan modifications and that homeowners will be more motivated to make payments over the remaining term of their mortgage.

Bank of America has been widely criticized for their performance under the Making Home Affordable Program. At the close of February 2010, BOA was reported to be servicing 1.09 million mortgage loans that were 60 or more days delinquent. Common complaints from consumers include inconsistent information provided by customer service, extremely long hold times, and rude and threatening calls from collections agents.

This new program is offered to those homeowners who are deeply underwater on their mortgage – or who have a loan-to-value ratio of over 120 per cent. This means they owe at least 20 per cent more on their mortgage than the current value of the property. While there is no limit on the amount of depreciation on the property, there is a limit on the amount of principal forgiveness of 30 per cent. This program was created to assist consumers who were victims of the mortgage products that were marketed during the real estate boom. These programs include interest-only mortgages, adjustable rate mortgages with "teaser" introductory rates, and mortgages with balloon payments – to name a few.

Bank of America’s proposed program will reward homeowners over a five year period by allowing them to pay reduced monthly payments based on the adjusted value of the property. Each year, if the borrowers are successful in meeting their payment arrangements, an amount will be forgiven from their overall mortgage debt. For example, if a borrower had a $350,000.00 mortgage and their home is now only worth $300,000.00, the principal would be reduced $50,000.00 over the five year period – or $10,000.00 per year. After year three, the bank would perform an appraisal to determine the status of the value of the property.

The Obama Administration included principal forgiveness as an element in its improvements to the Making Home Affordable initiative. The new programs require servicers to consider an alternative modification approach to write down mortgage debt on negative equity properties. For borrowers who have already received a permanent loan modification, or who are still in a trial modification payment arrangement, servicers are required under these HAMP amendments to retroactively consider reducing the principal amount of the mortgage if it exceeds 115 per cent of the value of the property.

Following Bank of America’s lead, Wells Fargo also recently announced that it will consider principal forgiveness as an option for underwater/negative equity mortgage clients. Consumers can find more information about Bank of America’s program at www.bankofamerica.com/homeloanhelp.

Posted By: Jane Soboleski

Short Sales Help Homeowners Avoid Foreclosure and Maintain Credit

april 21, 2010 04:33am

A short sale is a transaction where a bank agrees to accept less than what it is owed on a mortgage from a potential buyer in order to release the property and absolve the current owner from a possible foreclosure. In most scenarios, the owner will not be liable for the remaining amount due and the owner can escape the financial obligations of the property without foreclosure or bankruptcy. A short sale is a win-win situation for all parties involved: the buyer gets the property for a reduced price, the lender receives a monetary payoff rather than having the expense of a foreclosure action, and the owner walks away from the property and away from the stress of unaffordable payments. Short sales also help reduce the overall foreclosure rate so that neighborhoods can recover from the foreclosure crisis that has been affecting housing prices across the nation. Another benefit to the owner is that a short sale is usually reported to credit bureaus as “account paid in full”. However, it is important during the negotiations to make sure that the lender agrees to this in writing.

Short sales are difficult to manage when there is a second lien on the property held by a different servicer. Usually that servicer is unwilling to take a total loss, and is also unwilling to negotiate with the primary servicer. Also, as with loan modifications, there is rampant fraud associated with short sales. It is advisable never to sign over your property to a “short sale investor” or any person who promises quick results. It is best to hire experienced real estate professionals, including a real estate attorney to assist with this process.

Short sales are being encouraged by the Obama Administration in a new initiative that was released in March 2010, and became effective on April 5th. The Home Affordable Foreclosure Alternatives plan, or HAFA, is aimed at homeowners who have already qualified for the government’s primary foreclosure prevention options and have been unable to complete their reduced mortgage payments under that plan. The intent behind the HAFA program is to streamline the short sale process, and to spread the word to educate the public about this foreclosure avoidance option. Under the new program, the mortgage servicer will receive $1,000.00 in compensation to comply with the short sale option. If there is a second loan on the property with the same lender, the lender can get another $1,000.00. And, the government will give distressed homeowners $1,500.00 in “relocation assistance” under the program.

Homeowners must qualify for assistance under HAFA, and can be pre-approved for short sales before listing the property to simplify the process. Before a borrower is approved, the mortgage servicer must determine the minimum acceptable net proceeds that the investor can accept from the sale of the property. Servicers are held to strict standards under the plan to ensure that the approval process is fair and even handed. It is important for consumers to work with real estate professionals who have experience with short sales so that the process is handled proficiently.

Posted By: Jane Soboleski