Recently I was reading an article by Cheyenne Hopkins in Mortgage servicing, titled Right Target But Mod Plan May do Little. The article focused on the Obama administration's latest plan that targeted the right people (unemployed and those where the mortgages exceeded the value of their home).
The article focuses on the administration's lack of implementation in addressing the issues. The article indicated thatÃ¢â‚¬ consumer groups and industry analysts did not see the proposed changes addressing the cumbersome process, investor resistance and continued second lien hurdles.Ã¢â‚¬
So implantation of the plan has been bad! The thought is that until the administration requires the plans to be mandatory the plan will not meet the objectives.
The plan focuses on:
Ã¢â‚¬Å“The administration's Home Affordable mortgage Program will emphasize principle write downs over interest rate and payment reductions. In order to participate lenders must write down the principle by at least 10% and ensure the total loan to value ratio of the home is not greater than 115% after refinancing. The lenders will be able to refinance these borrowers into FHA loans. To qualify, homeowners must be current, meet FHA underwriting guidelines and have a fico score of at least 500.Ã¢â‚¬
Barriers to success from the administration side:
. This is implementing a plan that was tried in 2009 with the hope program, which has helped less than 50 people.
. As FHA increase its underwriting guidelines what does that do for applicants
. Does not change the program to make less cumbersome
. Does not address the investor issues
. Does not address the issues with second lien holders
. The program is not mandatory
Issues with the banks
. Banks not doing a good job of reviewing mods or refinances when applications received
. Not able to respond to customer inquires, just tell customers it is review status, no one checks anything
. If loan is current lots of lenders are not blocking credit reporting and creating negative credit on current loans under trail mods
. If borrowers are self employed complicates the situation and approval
. Banks are trying to push out their losses as far in the future as they can
. At some time the banks will have to say enough is enough!
So there is enough blame to go around! It is time for a real discussion rather than kicking the can down the street!
First Weber Group
Certified Distressed Property Expert
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