Jan. 19 (Bloomberg) — The U.S. Treasury Department has failed to win agreements to get struggling borrowers’ home- equity debt reworked, among the biggest roadblocks to reducing foreclosures that may reach a record 3 million this year.

None of the lenders holding a combined $1.05 trillion in the debt has signed contracts requiring participation in the second-mortgage modification plan announced eight months ago. The largest banks remain “committed” to joining, Meg Reilly, a department spokeswoman, said in an e-mail.

President Barack Obama in February announced a $75 billion program to cut first-mortgage payments. The Treasury detailed a plan on April 28 in which second-mortgage owners modify or retire debt when the first lien is changed, saying it would be running in a month. The near-record level of home-equity debt held by lenders including Bank of America Corp. and Wells Fargo & Co. may lead to foreclosures that threaten housing stability after the worst slump since the 1930s.

“The issue of the second liens has to be escalated,” said Richard Neiman, New York’s banking superintendent and a member the Troubled Asset Relief Program’s Congressional oversight panel. The government should consider forcing banks to participate and to recognize the “true value” of second liens, he said.

Bank of America, Wells Fargo, JPMorgan Chase & Co. and Citigroup Inc. carry such mortgages at about $150 billion more than their value, according to estimates by Joshua Rosner, an analyst at Graham Fisher & Co. in New York.

Equity lines and other second mortgages rank junior to typical mortgages, meaning they get wiped out in a foreclosure unless sale proceeds from a seized home exceed the first debt.

Still Struggling

As Obama’s Home Affordable Modification Plan, or HAMP, lowers first-mortgage payments, some borrowers are still left with bills they can’t afford, according to Newport Beach, California-based Pacific Investment Management Co.

“Modifying the first mortgage doesn’t necessarily get the homeowner to good shape,” Scott Simon, head of mortgage-bond investing at Pimco, manager of the world’s biggest fixed-income fund, said in a telephone interview.

About 25 percent of homeowners who received trial loan modifications are failing to keep up with their reduced payments, the Treasury said Jan. 15.

Rosner said overvalued home-equity debt prevents residents from getting the aid likeliest to keep them in their homes: principal forgiveness.

First-mortgage owners usually won’t agree to the deeper principal reductions needed to reduce the loan to at or below the home’s value when home-equity holders aren’t willing to make sizable cuts, said John Taylor, chief executive officer of the Washington-based National Community Reinvestment Coalition.

Considering Changes

Three million U.S. homes will be repossessed this year as high unemployment and depressed values leave borrowers unable or unwilling to make their payments or sell, RealtyTrac Inc. forecast on Jan. 14. Almost 10.7 million, or 23 percent, of residential properties with mortgages were in negative equity as of Sept. 30, according to First American CoreLogic.

Policy makers may be able to reduce re-defaults on modified debt from an average of 57 percent within a year “significantly” more by getting mortgages lowered rather than by spurring larger payment cuts, New York Federal Reserve Bank researchers wrote in a December paper.

The government is considering changes to permanently cut balances on which borrowers owe more than the property is worth, said Michael Barr, the assistant Treasury secretary for financial institutions.

“We are in the process of reviewing that now as we have been continually,” Barr said on a conference call last week. “You have to be very careful not to design a program that would change people’s behavior across the country.”

Banks’ Efforts

Bank of America CEO Brian Moynihan “recommitted” to participating in the Treasury program this month as part of “our aggressive efforts to help customers,” Rick Simon, a company spokesman, said in an e-mail.

“We are waiting for final guidelines,” Simon said.

Citigroup is “actively engaged with the U.S. Treasury in finding a workable solution,” Mark Rodgers, a spokesman, said in an e-mail.

Wells Fargo is working with the government “to understand the program specifics,” Mary Berg, a spokeswoman for the San Francisco-based bank, said in a phone message.

Tom Kelly, a spokesman for New York-based JPMorgan, declined to comment.

Banks’ reluctance to write down second mortgages also hampers short sales, when homeowners sell a house for less than they owe.

Sticking Point

“If I had to name one sticking point, it’s the second mortgage,” said Ethan W. Gregory, an agent with First Coast Realty Associates in Jacksonville, Florida, who specializes in short sales.

Americans tapped home equity as values more than doubled between the start of 2000 and the market’s apex, and took “piggyback” loans in lieu of down payments.

Home prices rose in each of the six months through October, increasing 5.3 percent, after a record 33 percent plunge from the 2006 peak, an S&P/Case-Shiller index for 20 metropolitan areas showed. Gains were driven by a decline in the share of sales involving “distressed” properties that will reverse this year as foreclosures climb, Deutsche Bank AG said Dec. 18.

The government’s Home Affordable program offers subsidies to lenders, bond investors, loan servicers and consumers to rework first mortgages so that payments, insurance and taxes don’t exceed 31 percent of a borrower’s income.

Lender Relief

The Treasury said in April that home-equity lenders would receive a subsidy to reduce interest rates to as low as 1 percent. Lien holders could get as much as 12 cents on the dollar to retire debt. Officials said on a conference call that within about a month its program would start helping borrowers, and that as many as half of “at risk” homeowners had second mortgages.

The Treasury “has been working to create program infrastructure and technology, including a new platform that matches second liens to first liens modified under HAMP,” Reilly said Jan. 7. “Because there has not been a systematic method of notification to second lien holders when a first lien on the same property is modified, ramp up has taken some time.”

BlackRock Inc. CEO Laurence Fink, who oversees the world’s largest asset manager, has called the government’s effort flawed because of its treatment of second mortgages, which he said should be wiped out before first liens are touched.

“There is modification going on protecting our banks, protecting their balance sheets,” Fink said in a September interview. With the right types of changes, he said, “the homeowner is better off, America is better off, and you could say the first lien holder is better off.”

Loss Allowances

The Federal Deposit Insurance Corp. last year urged lenders to consider whether borrowers’ housing debt exceeds the value of their properties and whether first mortgages have been reworked when determining loss allowances.

Bank of America’s allowance for home-equity losses equaled 6.4 percent of its $152 billion portfolio as of Sept. 30, according to a slide from an earnings presentation posted on its Web site. Half the portfolio was tied to borrowers with debt exceeding 90 percent of their property’s value.

Spokesmen for Fannie Mae and Freddie Mac, the largest owners of first-mortgage risk, declined to comment. The companies were seized by the U.S. in September 2008 and are being supported by unlimited taxpayer capital through 2012, after drawing $111 billion so far.

While Home Affordable allows loan servicers to reduce borrowers’ principal instead of just their payments, such steps aren’t required and decisions are designated to the servicers.

The four U.S. largest banks, which own almost $450 billion of home-equity debt, are also the biggest servicers handling payments and collections on loans held by others.

“If they can get the first to eat it, why would they want to on the second?” Simon said.

To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: January 19, 2010 00:01 EST

During the Christmas and New Year’s Holiday I got a chance to catch up with a lot of my old friends and family and of course we got to talking about the mortgage and lending industry!  Yes, believe it or not, this is still a very popular topic these days!  : )

We got to talking about horrible loans and the dishonest practice that took place in the past and other not so great experiences that they themselves and their co-workers experienced.  I allowed them to vent and express their thoughts and opinions.  After a good 30 minutes or so of people just taking turns of bashing the lending industry, the Obama Administration and all this bailout hooplah, I told them these magical words that caught everyone’s attention:

“In today’s lending environment and the many reforms that have taken place in the industry, I couldn’t give you a bad loan if I even wanted to!”

This statement opened up a great discussion and informing everyone of how mortgages are done today and why people who are thinking of getting a new home or a new mortgage, should not be so scared. 

Here are a few key reasons why getting a mortgage today is not only safe but to your advantage:

• You have a choice of vanilla, vanilla and….vanilla!  Would you like vanilla sprinkles with that?  Mortgage Programs today are pretty straight forward – 30 Year Fixed, 15 Year Fixed and a few other terms in between.  There are still a few ARM Programs hanging around but they’re definitely not the exotic programs of the previous years and are actually a bit tougher to qualify for in some cases.
• Interest Rates are still at all time lows!  I really didn’t want to use this line because it sounds so generic and “salesy” but I’d be lying if it wasn’t true!  Interest rate are still very low.  How long will they last for?  If I knew, I sure as heck wouldn’t be doing this for a living! But take advantage of them while they’re here!
• The NEW FORMAT of Disclosing to Consumers.  Folks, with the new disclosures and rules implemented with them, there are no more surprises at closing (and if there are you will know about it and you will be given time to think about it).  Whatever amount of fees are disclosed to you up front (from the very begining), that amount has to stay the same or if it is different you will be given up to 7 days to think about it!
• Tax Credit for Homebuyers has been extended!  As the media has done a very good job informing everyone of this, the tax credit for homebuyers has been extended – just in time for tax season!!!  Today’s homebuyers will not only enjoy the benefits of buying a home at a very low price, enjoy tax benefits of being a homeowner but also have an additional tax credit of $8,000, too! (ask your tax advisor for further details).
• Implemented Investor and Lender Overlays = Stable, New Generation of Homeowners and Mortgage Industry! Though this can be extremely annoying to the customer and everyone involved in the transaction, the good news in the midst of all the mayhem and scrutiny is that it does 2 things: (1) minimize risk for the lenders and investors which keeps the flow of lending, credit and cash throughout the whole system and (2) If you’re able to get through all the scrutiny of underwriting, approvals, re-approvals and hoops required to jump through to obtain a loan – not only do you deserve to have that loan, YOU DESERVE A MEDAL!!!  You’re a solid and ideal customer to get a home and chances are, everyone else who got their home about the same time as you are solid and ideal JUST LIKE YOU!  This is a start to what we all hope will be a stable, new generation of homeowners in America!  

Again, for more specific information on your situation, please contact your tax advisor and local real estate and mortgage professional.  Not sure who to contact?  I’d be more than happy to refer you to someone in the Metro Detroit region, with expertise in Macomb County, Oakland County and St. Clair County Michigan.

Jeff Marsack, Mortgage Loan Officer

Great Lakes Mortgage Funding

Obama Home Rescue: 650,000 Get Help

By Tami Luhby

CNN Money

 

Latest report shows that 20% of eligible borrowers have gotten trial modifications under administration’s $75 billion mortgage relief plan.

 

Some 650,000troubled borrowers have been put into trial loan modifications under the president’s foreclosure rescue plan, the Treasury Department said Tuesday.

 

That number represents 20% of eligible homeowners at least 60 days behind in their payments, according to the Treasury report. This is up from 16% a month earlier.

 

Despite the progress, housing counselors say the number of people falling into foreclosure vastly exceeds the ranks getting assistance. The number of filings hit a record high of 937,840 in the third quarter, according to RealtyTrac, an online marketer of foreclosed homes. That’s a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

 

The $75 billion Obama plan is “lagging behind the massive number of foreclosures that continue to pile up,” said John Taylor, head of the National Community Reinvestment Coalition.

 

But administration officials have said that the program, which was projected to help up to 4 million homeowners, is on track.

 

The rescue tries to keep borrowers in their homes by adjusting monthly payments to no more than 31% of a borrower’s pre-tax income. Servicers, borrowers and investors can get financial incentives to participate.

 

Administration officials have been pressuring loan servicers to ramp up their modification efforts. Many people have complained that financial institutions lose their paperwork, transfer them repeatedly between departments and require that they fill out applications again and again.

 

But the rising unemployment rate is prompting more homeowners, even those with strong credit histories, to fall behind on payments. And the president’s plan is not designed to help the jobless.

 

At Neighborhood Housing Services of Chicago, only about one in four people are getting help from the Obama program, said Michael van Zalingen, director of homeownership services.

 

About 30% are not being put into trial modifications for reasons including too little income or too much equity in their homes, van Zalingen said. The rest are in limbo, mainly because the banks say their applications are incomplete.

 

Certainly, banks have quickened the pace of loan modification approvals, van Zalingen said. His group secured 180 modifications for clients in the second quarter, but was able to help 400 in the third quarter. He expects that a total of 1,000 clients will be put into trial modifications by year’s end.

 

Still, the modifications are not keeping pace, van Zalingen said. NHS-Chicago will see 3,000 to 3,500 distressed borrowers seek help this year. “Loan servicers are offering trial modifications more often, but not anything like the need or demand,” he said.

 

Just how many modifications are completed depends on the servicer. Performance remains very uneven, as it has since the start of the program.

 

Through October, Saxon Mortgage Services put 44% of eligible delinquent borrowers in trial modifications — the highest percentage of about two dozen companies. Among the largest banks, Citigroup (C, Fortune 500) came in at 40% and JPMorgan Chase (JPM, Fortune 500) 32%, while Wells Fargo (WFC, Fortune 500) has placed 29% and Bank of America (BAC, Fortune 500), the biggest servicer, 14%.

 

What’s becoming even more important is how many people in trial modifications receive permanent adjustments. The Treasury in September lengthened the trial period to five months, from three months, to give borrowers more time to send in their paperwork and banks to process it.

 

Treasury’s monthly updates are expected to start reporting the number of permanent modifications offered within the next few months.

At times the sellers themselves thwart the efforts of the Real Estate Agent. Nothing can be quite as frustrating as trying to pull all the weight when someone else is adding to the burden by being uncooperative!

If you have a seller who is not making sure their home is presentable to a potential buyer, remind them that, in a competitive market with more inventory than we’ve seen in some time, presentation is everything! By eliminating points the potential buyer may find fault with and bringing out the positive amenities, they are more likely to sell the home and get the price they are asking for. Here are just a few tips that will help them support your efforts as their representative in the transaction:

Let There Be Light. Buy some 100-watt bulbs to brighten the rooms, and open curtains or blinds to let light in. Unless a window faces a brick wall or some type of eyesore, open the drapes!

Garage, Not Garbage. Have a garage sale to clean out the clutter and make the garage more spacious. Your clients are moving and will need to start organizing anyway, so why wait until the last minute? Clean up oil spots in the garage or carport with a good cleanser to remove that “lived-in” appearance. The home may not be brand new, but it’s new to the potential buyer.

Make Scents. Get a nice potpourri air freshener, or keep some refrigerated cookie dough on hand to throw in the oven when a prospect is coming over. Make the house smell like a home.

Paint-relief. Consider re-painting any areas that need to be touched up, especially the front door and entryway, and any appliances that are showing their age.

Power Plants. Trim down any jungles outside, especially if they cover the house. Get rid of any half-dead houseplants. Water the lawns briefly before any visit, and keep the lawns mowed and edged.

The Price is Right. Price may be a sensitive issue, but with increased inventories and declining home values in many neighborhoods, remind your clients that every shopper in a buyers’ market is determined to get the best deal possible. Let them know that now is a good time to compare their house with others on the market in the same area, because the right price is the one thing that will sell their house faster than anything else.

The World is Your Stage. Professional staging can help to showcase the best side of a home, create more interest, and get your clients top dollar. With increased inventories, staging could provide the competitive edge you need.

These tips were derived from 33 Ways to Sell Your Home Fast!, an info-marketing booklet I use as part of my campaign to market my services to FSBOs. In many cases, people who are attempting to sell their own home eventually become frustrated and end up asking me to refer them to a professional Real Estate Agent.

If you are looking to sell your home in Macomb, Oakland, Wayne, or St Clair County, please call or email me anytime for a referral to a great local Realtor.

 

Thanks for checking in on this great program that is available for home buyers to consider when buying a new home. As you may already be aware many home in Metro Detroit are in bad shape. This is due in part to the homes being abandoned by the current owners, vandalized during the foreclosure process or any other number of reasons.

In order to buy these homes that were in need of repair you would have to pay cash, because you could not get a new mortgage with the homes in that condition……until now!

Introducing the FHA 203k Streamline program. This allows you to buy the home AND finance in the cost of the repairs to the home up to about $35,000!!

Check out this link for more details:

http://portal.hud.gov/portal/page?_pageid=73,1826449&_dad=portal&_schema=PORTAL

But to find out if you qualify for this AWESOME new way to buy a home and take advantage of this housing market, please email me now to get more info on your situation.

Email me at jeff@glmf.com and let me know your interested in buying a “Rehab Home” I will get in touch with you and qualify you on the spot so we can get you in a new home this Summer!

Or call at 586-421-1639

God Bless,

Jeff Marsack

Metro Detroit Home Loan Expert