Bank Appologizes for Accidental Foreclosure
Watch this news breaking story….Bank Appologizes for Accidental Foreclosure
Pennsylvania helps jobless residents pay their mortgages
Erin and Robert Smith had no problem handling the $2,000 monthly payment on their home … until they lost their jobs.
The Harrisburg, Pa., couple fell behind in September 2008, a few months after their consulting business faltered in the wake of a client’s bankruptcy. Their loan servicer refused to help them, instead sending them a foreclosure notice.
“All we needed was a break,” said Erin Smith, 33, who feared her family of five would wind up homeless. “We knew once we found employment, we could start making those payments.”
A break came in the form of the Pennsylvania Housing Finance Agency’s emergency mortgage assistance program. The agency gave them a $30,000 loan to cover their arrears and real estate taxes.
The Smiths are among the 3,250 homeowners that the housing agency’s mortgage assistance program saved from foreclosure last year. Created in 1983, the initiative provides loans of up to $60,000 for as long as 36 months to Pennsylvania residents suffering financial hardship, such as job loss, divorce or medical problems.
The program, which has distributed $450 million on behalf of 43,000 homeowners since its inception, has an 80% success rate in helping borrowers avoid foreclosure. And the recent housing crisis has prompted thousands to seek assistance. A record 14,000 homeowners applied for help in 2009, up from 10,000 in most years.
“If you allow people some time to find a job, they can keep their home, which saves their family, their neighborhood and their communities,” said Brian Hudson, the agency’s executive director.
The Smiths are a prime example. Not only did they save their home, but by the time the loan came through, Robert Smith had landed a new job. This allowed the family to resume their monthly payments.
The Pennsylvania program has come into the spotlight in recent weeks as the Obama administration searches for a way to assist the unemployed keep their homes. Thus far, that segment has not reached by the president’s foreclosure prevention efforts.
“Not too many mortgage companies say we’ll only take a small payment until you get back on your feet,” said Linda Harvan, a foreclosure intervention counselor with Action Housing in Pittsburgh.
President Obama late last month announced a $1.5 billion initiative that gives money to the states hardest hit by the mortgage crisis: Arizona, California, Florida, Michigan and Nevada. The effort calls for the states’ housing authorities to assist the jobless and those who are underwater — meaning they owe far more than their homes are worth.
Already, officials in Nevada, California and Florida have been in touch with Hudson to learn how to replicate Pennsylvania’s program. Similar efforts also exist in Delaware, North Carolina and Massachusetts.
Here’s how the Pennsylvania program works: When a borrower falls behind on their payments, they receive a foreclosure notice from their lender with a list of housing counselors who may be able to help them. The counselor collects the borrowers’ financial information and forwards it to the housing agency, which runs several foreclosure prevention programs.
Those suffering temporary hardships beyond their control are reviewed for the loan program, Hudson said. He attributes its success to a careful inspection of applicants’ financial backgrounds, which are reviewed annually. Those who’ve racked up credit cards debts are not likely to gain approval, for instance. Those likely to land a job within a few months or years are.
“You must have a reasonable prospect of resuming full payments within 36 months and of paying the mortgage in full,” Hudson said.
In 83% of cases, the agency wiped out borrowers’ arrears. For the remaining 17% of clients, it pays their monthly mortgage obligation.
Loan payments are made directly to the servicers and a lien is placed on the property. The aid is repaid at a 5.25% interest rate over 10 years on average, though the borrower’s financial circumstances are taken into account.
Such loan programs are not that easy to administer, however. Fannie Mae unveiled a similar program, HomeSaver Advance, in 2008 to help those suffering temporary financial hardships. It provided unsecured loans of up to $15,000 that borrowers could use to clear their arrears.
But the program was effectively discontinued within a year after redefault rates soared to nearly 70%. By August 2009, HomeSaver Advance accounted for only 3% of Fannie Mae’s foreclosure prevention actions, down from 42% a year earlier.
Awilda Mercado is thankful that the emergency loan program in Pennsylvania continues to serve the state’s residents. In 2008 she lost her factory position and her husband had an on-the-job accident that left him unable to work. To help her stay in her York, Penn., home, the agency took care of her arrears of $7,386 and paid four months of her mortgage.
Now that she’s receiving unemployment and her husband is on disability, the Mercados have been able to resume their mortgage payments. They also are reimbursing the housing agency, often sending in more than the $25 minimum payment.
“They helped me not only save my home, but got me back on my feet,” said Mercado, 52, who has three grown children.
Obama Considers Foreclosure Ban
02/26/2010 By: Carrie Bay DSNEWS.com
President Obama and his administration are floating an idea to prohibit lenders from foreclosing on a home unless the borrower has been considered for the government’s Home Affordable Modification Program (HAMP).
The proposal would require servicers to initiate contact with all borrowers who are 60 or more days behind on their mortgage payments and offer them access to the federal modification program. Only after the homeowner has been screened under the HAMP guidelines and it is determined that the loan cannot be saved, could foreclosure proceedings commence. The proposal would also halt any foreclosures already in process once a borrower has been accepted into the trial phase of the program.
The proposal was reviewed by lenders last week on a White House conference call and “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” Bloomberg News reported, citing a Treasury Department document outlining the plan.
Some lenders have been voluntarily suspending foreclosure proceedings while they evaluate a homeowner’s eligibility for HAMP, but under the program’s current guidelines there is no requirement to do so, and a number of homeowner advocacy groups have submitted complaints to the administration that even borrowers who are making their trial payments are being hit with foreclosure litigation.
A Treasury spokesperson confirmed that a foreclosure ban is under consideration, but stressed that it is one of many ideas on the table and has not been approved yet.
Laurie Goodman, a senior managing director at the Amherst Securities Group who has been highly critical of the government’s modification program, told the New York Times that even if the proposal came to pass, it would
not be “a major change. We think there is a large public relations element to this,” she said.
As the Times noted, the government could use some favorable public relations for its modification program. Lawmakers have begun to openly express their disappointment with the program. On Thursday, members of the House Committee on Oversight and Government Reform said matter-of-factly in a report, that by every practical measure, “HAMP has failed.”
Reps. Darrell Issa (R-California) and Jim Jordan (R-Ohio) called the program a misuse of taxpayer money, the Washington Post said. The program has been allocated $75 billion to pay incentives to servicers, investors, and borrowers for loan restructurings, but the paper says that so far only $15 million has been spent.
As of the end of January, 116,297 troubled mortgages had been permanently modified under HAMP. About 830,000 more were in the trial phase of the program. The administration’s goal is to help three to four million borrowers save their homes through the program by the end of 2012.
News of a draft document by the Treasury outlining additional changes to HAMP also circulated this week. Besides the proposed ban on foreclosures until after a HAMP review, the administration is also considering implementing a mandatory 30-day appeal period for borrowers that are denied a federal modification. Servicers would not be allowed to proceed with a foreclosure sale during this time.
The proposal would also require servicers to prove that they have made multiple attempts to contact delinquent borrowers both by phone and via written notices, and would require them to consider HAMP applications from homeowners that have already filed for bankruptcy.
Lenders have expressed concern that the proposed requirements would prolong foreclosure delays beyond the current 12 month timeline that it typically takes to resolve the loans that don’t qualify for a modification.
Earlier this month at the American Securitization Forum’s annual meeting, Seth Wheeler, a senior advisor at the Treasury Department, told mortgage bond investors and lenders that the administration is also considering revising HAMP’s net present value (NPV) model in order to incorporate more principal writedowns into the equation. The NPV test is applied to determine if the mortgage owner can recoup more money by restructuring the loan or by foreclosing.
