San Diego Obama Home Rescue
CNN Real Estate has two interesting articles on the Obama Home Rescue Plan. The first article titled “Obama home rescue: 650,000 get help” talks about how bank are helping home owners stay in their homes by modifying their home loans. The article states in many places about these 650,000 homeowners being put into a “trial loan modifications under the president’s foreclosure rescue plan”. Basically the homeowners are not really getting a loan modification their just getting a trial loan modification. Here are a couple of excerpts from the CNN article:
Some 650,000 troubled 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 the end of the article in the article there was the sentence:
What’s becoming even more important is how many people in trial modifications receive permanent adjustments.
The words “permanent adjustments” went to another article titled “Long-term Obama loan modifications prove elusive”. This article talks about how many of the trial loan modifications are not and will not turn into permanent loan modifications. The loan servicers state that they are having a hard time getting the homeowners to send them proper paperwork to complete the process. Here’s some information directly from the article:
Half a million people are now in trial modifications under the Obama administration’s mortgage rescue plan, but getting them permanent help is proving to be difficult.
The foreclosure prevention plan, which reduces eligible borrowers’ monthly payments to no more than 31% of their pre-tax income, requires homeowners to make three on-time monthly payments before they can receive a permanent modification.
Loan servicers use the trial period to verify borrowers’ income and ascertain whether they can handle the reduced payments.
But servicers say they are having a tough time collecting the necessary documents to determine whether troubled borrowers should receive permanent adjustments. They contend that some homeowners aren’t sending in their tax returns, bank statements and pay stubs. Borrowers, on the other hand, complain that their paperwork is being lost.
The Obama administration recently made several changes to the program to give the transactions more time and streamline the plan.
Last month, it extended the trial period by two months to give servicers more time to collect the documents. And last week, it announced that servicers could automatically move qualified borrowers into permanent modifications without their signatures.
The Treasury Department said these moves should make it easier for qualified borrowers to get permanent modifications, according to a spokeswoman. Officials are discussing ways to make it even easier, she said, including allowing servicers to access tax records directly from the Internal Revenue Service.
It is in servicers’ interest to convert eligible borrowers since they only get incentive payments when the modification is made permanent, the Treasury spokeswoman said. Plus, if the government finds institutions to have wrongly denied swaths of people, it could impose penalties.
“Treasury is also working intently with servicers to help ensure that they execute in helping more borrowers convert to permanent modifications,” she said.
Who’s to blame?
Servicers say they are wrestling with getting the completed documents they need to put borrowers in permanent modifications.
At JPMorgan Chase, for instance, representatives call and send letters to homeowners detailing what they still need to mail in. The bank says it has improved its system for collecting paperwork so that lost documents are not the problem. The issue, it says, is that homeowners are simply not sending in what’s required.
Many borrowers are growing increasingly nervous as they near the end of their trial modification periods with no decision from their servicers.
Jim Copley, a Minneapolis homeowner, was given a trial modification five months ago. He found he could no longer afford his $1,650 monthly payments after the housing collapse decimated his home-painting business.
After receiving a temporary adjustment that cut his payments to $955 a month, Copley sent his servicer, Bank of America, all the required income documentation in June. He was shocked to learn two months later that there was some paperwork missing. He called again and was told that his file was, in fact, complete and that he should continue making reduced payments until he was told otherwise.
The loan modification HOPE from the Obama Administrations seems to be again lots of HYPE and falls in with all the other UTOPIA DREAMS of the current leadership. Everything is a temporary fix. We need permanent solutions. Let’s let things run their course without big brother intervention and economics, good and bad, will cycle through. I wonder what’s next.
CNN Articles
http://money.cnn.com/2009/11/10/news/economy/obama_mortgage_plan/index.htm
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