Ocwen rolls out a new loan modification for underwater borrowers

 

Finally a lender gets a brain! Locally based Ocwen recently revealed a plan that incorporates many of the components of a loan mod/refinance that I suggested over a year ago: Reduce the loan amount to today's value, write off the ‘underwater portion’ over a number of years if the owners stays current on all mortgage obligation aspects, and if/when the home is sold, Ocwen will recoup some of the regained equity…Brilliant! The other big added benefit to the lender is that they get to draw up new loan documents without all of the defects that are being challenged in court right now…and I wouldn’t be surprised if they slip in some new restrictive language to the now docs too!

For all of you with an underwater Ocwen loan…CALL THEM TODAY to see if you can qualify, then call me and let me know the details of the process/qualification/final terms so I can spread the news.

Below are excerpts from the article that was in the Palm Beach post.

The company is rolling out a new loan modification plan for underwater borrowers that lowers the amount owed on the loan - thus reducing the monthly payment - but asks for a share in the appreciated value when the house is either sold or refinanced.

The kickback to the lender may deter people who can afford to make their payments from defaulting, while giving an incentive to either the lender or investor to modify the loan.

"We think this answers some of the critics who say that by reducing principal, you are rewarding imprudent borrowing behavior," said Ocwen Executive Vice President Paul Koches. "What we see is unprecedented delinquencies, and we're doing our best to resolve them."

Offered in 33 states, including Florida, the plan is available only on loans where it will earn more for either the lender or investor than if the home went into foreclosure.

Called a shared appreciation modification, it's fairly simple on its face.

A home's principal amount is reduced to 95 percent of the current market value. That portion is forgiven in equal amounts over a three-year period as long as the owner stays current on the loan.

When the house is later either sold or refinanced, the homeowner must give the lender 25 percent of the appreciated value of the home.

For example, say the principal balance on a loan is $125,000, but the current value of the home is only $100,000. Ocwen's plan would reduce the balance to $95,000, putting $30,000 in a non-interest-bearing account that will be forgiven over a three-year period.

If the house is later sold for $120,000 - marking an appreciation of $20,000 - the homeowner would get to keep $15,000, while $5,000 would go to the lender. If the home doesn't appreciate, then the sale occurs as it normally would.

Ocwen, which has about 245 employees in its West Palm Beach office, estimates about 53,000 home­owners nationwide will be eligible for the principal reduction program.

The company specializes in servicing the nation's riskiest home loans and has a portfolio of about 460,000 loans. Ocwen's recent acquisition of Litton Loan Servicing will add 250,000 loans to its portfolio.

A test of the new loan modification program that was launched last year found that of borrowers offered the plan, 79 percent accepted it. The default rate has been about 2.6 percent.

"You have folks breaking their necks to make payments on a home where there is no hope in their lifetime of it regaining equity," Koches said. "A homeowner in a negative equity situation is one-and-a-half to two times more likely to go into delinquency."

In Palm Beach County, nearly 43 percent of homes with mortgages were underwater during the first quarter of 2011, according to real estate analysis firm CoreLogic.

Most home loan modifications result in an interest rate reduction, which can do little in the long run for homeowners who owe more on their loan than their home is worth, said Kathleen Day, spokeswoman for the Center for Responsible Lending.

"We've felt for a long time that unless you do principal write-downs, you really aren't getting at the problem," Day said. "It's in everyone's best interest to keep a credit worthy person in their home."

 

Thanks for reading…Steve Jackson

10 million more foreclosures in the pipeline

In August, the Obama administration asked the housing industry for ideas on how to more efficiently sell or unload this overhang, and the Senate heard testimony from various housing players Tuesday.

Roughly 10.4 million mortgages, or one in five homes with a mortgage will likely default if Congress refuses to implement new policy changes to prevent and sell more foreclosures, according to analyst Laurie Goodman from Amherst Securities Group.

At the end of the second quarter, more than 2.7 million long-delinquent loans, others in foreclosure and REO properties sat in the shadow inventory, more than double what it was in the first quarter of 2010. With the market averaging roughly 90,000 loan liquidations per month, it would take 32 months, nearly three years, to move through the overhang…and that number is contingent on NO other loans going into default.

"Many analysts looking at the housing problem mistakenly assume it is limited to loans that are currently non-performing (or 60-plus days past due). Such borrowers have a high probability of eventually losing their homes. However, the problem also includes loans with a compromised pay history; these are re-defaulting at a rapid rate," Goodman told a Senate subcommittee Tuesday.

Most of the proposals included recommendations to sell properties ‘in bulk’ to investors with one of the stipulations being that they be turned into rentals. (italics mine)

Stan Humphries, chief economist for Zillow, said the rental market is currently booming and would be able to handle a mass conversion of foreclosures into rentals. "Investors smell a distinct opportunity in this situation: The chance to buy an asset cheaply and rent it out. In fact, close to one-third of the purchases of existing homes this year have gone to all-cash buyers, the bulk of whom are real estate investors," Humphries said.

This sounds to me like the housing equivalent of ‘cash-for-clunkers’ which resulted in the removal from the market of tens of thousands of good, affordable used cars, as the requirement was to “junk’ the clunker trade-in (the dealers were not allowed to re-sell them)…The same thing will happen with homes; currently, a lot of buyers can’t purchase a great many of the foreclosed homes as they require too much work and/or don’t qualify for an FHA loan. Typically, the buyers in the under $250k market, (where a great percentage of the foreclosed homes sell), are FHA buyers because they DON’T have a lot of cash…so they are not able to ‘buy and rehab’. BUT, that is where cash buyers come in…they buy, rehab to move in condition, and re-sell…quite often to FHA or other low-down-payment buyers and they make a little money doing it…as they should. But if you take away these homes by requiring that they be converted to rentals, how does that help? Well, it helps the big companies, REITS, and investment groups that will get a piece of that sweet deal!

Just read my recent posts regarding the scary legislation working its way through Tallahhssee now…going to make it sooo easy, cheap and fast for the banks to get these homes back…We need everyone to PAY ATTENTION…and thanks for reading!

Steve Jackson

Foreclosures ramp up: County's 13% jump the trickle before the dam breaks, experts warn

More Palm Beach County homes received first-time foreclosure notices in August than the previous month, and experts warned Wednesday that the 13 percent increase is just a trickle before the flood.

Statewide, new foreclosure filings were up 10 percent last month from July, according to findings to be released today by the Irvine, Calif.-based company RealtyTrac.

Nationally, initial notices of foreclosure were up 33 percent.

But unlike previous reports that found increases and decreases in foreclosure activity were similar nationwide, there was a marked difference in August between judicial states, where a judge is required to sign off on a home repossession, and non-judicial states.

In the 25 states RealtyTrac considers non-judicial, initial foreclosures leapt 46 percent in August from July, although they were still down 10 percent from August 2010. In judicial states, including Florida, there was only a 21 percent increase in August from July, with a 25 percent drop from last year.

"I've been told by a number of banks' lawyers that they have cases ready to go and are just waiting for approval to file," said Mike Wasylik, a foreclosure defense attorney with the firm Ricardo, Wasylik & Kaniuk, which has an office in Boca Raton. "I've been expecting the dam to break for months now and I think there is still uncertainty about what is going to happen with regulatory actions and pending settlements."

Foreclosures were suspended last fall following questions about the validity of court documents used to take back homes. Activity remained on a simmer through early spring and has jumped around since then as lenders continue to patch up their foreclosure processes.

The nation's largest home lender and servicer, Bank of America, confirmed Wednesday it had ramped up foreclosures in non-judicial states, including Nevada, which saw a 31 percent increase in new filings in August from July. California, also a non-judicial state, saw a 55 percent increase.

"Strong gains like that from July to August demonstrate our progress, clearing more volume to advance to foreclosure once we pass the numerous, improved quality controls we have in place and only after all other options with homeowners have been exhausted," said Jumana Bauwens, a Bank of America spokeswoman. "The industry has not yet returned to normal or necessary foreclosure activity levels, but progress is certainly being made."

Still, lenders face more uncertainty.

Earlier this month, the Federal Housing Finance Agency sued 17 financial firms for selling Fannie Mae and Freddie Mac billions of dollars' worth of risky mortgage-backed securities that turned sour when the market collapsed.

Also, settlement negotiations continue between banks and the nation's attorneys general. The attorneys general joined last year in an effort to investigate the robo-signing scandal, penalize lenders for their paperwork missteps and help struggling borrowers.

"The banks don't know what their exposure is from past problems or that they have resolved the problems to the satisfaction of the attorneys general," said Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance.

But foreclosures have not come to a complete standstill.

Last month, 715 Palm Beach County homes were sold at auction - the final step in a foreclosure - according to Palm Beach County Clerk of Courts data released Wednesday.

Just 31 percent of scheduled auctions were canceled, a decrease from a high of 51 percent in January when banks hurried to delay sales in the wake of the robo-signing scandal.

The Palm Beach County clerk's office tallied 1,126 initial foreclosure filings last month. That's slightly higher than RealtyTrac's 926, but could be a function of when the numbers were gathered.

"We were anticipating another wave of foreclosure filings this year, based on expert forecasts, but so far an influx of new cases has yet to materialize," said Clerk Sharon Bock.

RealtyTrac has lowered its nationwide prediction of total foreclosure filings - initial notices, sale notices and auctions - for 2011 from 3 million to 2.5 million.

"As painful an issue as foreclosure is, it has to get back on track, otherwise we'll slip further and further behind," Cecala said. "The year 2011 will go down as the year that nothing got done."

If you have been reading my blog, you have read about the scary pro-bank bill under review now in Florida…my guess is that the banks are holding back going forward here in full force in the hopes that this bill gets passed in the dark of night. Then, the banks can EASILY FORECLOSE AND TAKE POSSESSION OF HOMES. The bill even has a provision that if you defend your foreclosure but the bank eventually does get to foreclose…YOU AND YOUR ATTY HAVE TO PAY THE BANKS LEGAL FEES!

Thanks for reading…Steve Jackson

 

Our sales manager, John Durante, is an accomplished drummer/musician. Just days after the 9-11 tragedy, John and his band wrote this tribute to the victims. Below is the video of John and his band performing that song.

Your 2011 proposed property tax bill…think it’s wrong?

At the end of last week you should have received your 'proposed' 2011 Tax bill in the mail. If you haven't taken the time to open it up and dig into it...now is a good time to do that. I have put together a short video regarding the tax bill/appeal. September 16, 2011, is the deadline to file a petition with the Value Adjustment Board to challenge a property’s market value, classification, or an exemption.

If you would like some help in determining if your assessed value is accurate, send John or I an email or give us a call: John can be reached at 561-685-1867 and I can be reached at 561-602-1258.

Also, below, I have placed several links that are helpful in navigating the tax appeal process.                                                               



Click on the image above to go to the VAB site for all forms and instructions.



And if you haven't received your proposed tax bill, misplaced it already or just threw it away, click on the image above and pull up your tax bill from the property appraiser site directly.



Click on this image, above, to go directly to the appeal form

Here is the link to the Frequently asked questions

portion of the appeal website

Thanks for reading our blog.

Steve Jackson