“Incredible,” headlines the Washington Times, “Dick Durbin urges run on Bank of America.”

“UNPRECEDENTED,” echoes Fox News. “Dick Durbin Tells Citizens ‘Get The Heck Out’ of Bank of America”

This is silly stuff. You would think that far-right news outlets would praise Sen. Dick Durbin (D-IL) because he’s suggesting that citizens make free-market choices in their best interest.

The issue here is the debit card swipe fees have finally been reduced. With less money coming in, several major banks now want to charge a monthly fee for the use of a debit card. For its part, the Bank of America wants $5 per month or $60 per year.

As Durbin explains:

“It seems that old habits die hard for Bank of America. After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It’s overt, unfair and I hope their customers have the final say.

“Earlier this year the Federal Reserve determined that the interchange fees Visa and MasterCard fix for big banks grossly exceed the cost of processing a debit card transaction by some 400%. These hidden fees were designed to boost big-bank profits by charging small businesses and merchants every time a debit card was swiped. And profit they did. Bank of America hauls in billions in debit interchange each year.”

Not a Loan

Debit cards involve the use of account holder money, no loan is involved. The bank gets the “float” for holding the cash and with more on deposit can make additional loans. Traditionally there’s no charge for putting your money in a bank, though effectively this is the result of monthly fees for debit cards use.

Durbin also said “we passed a law over 1 year ago — an amendment that I offered to the Dodd-Frank Wall Street Reform Act — which said to the Federal Reserve Board: Investigate this. Find out how much it actually costs the bank and credit card companies to process a transaction with a debit card. They came back, after a long study, and they said: If it uses a PIN number, which some do, it is about 4 cents. If we sign it, it is about 7 to 12 cents. Then they said: Incidentally, the average charge by the credit card company and bank for each swipe fee is 44 cents — dramatically larger than the cost of the transaction to the bank or the credit card company.

“Remember, in the old days, when we processed checks? It cost pennies to process a check no matter what the face amount was. But now, retailers face the 44-cent average swipe fee every time somebody uses a debit card. So we can understand some retailers don’t like this much. There is no competition. These banks and credit card companies tell them this is it, take it or leave it; if they don’t like it, don’t use plastic. It is secret. Nobody knows it except the retailer, the bank, and the credit card company. It is a hidden fee, and it is a killer for a lot of small businesses.”

There are a lot of depository institutions out there if you need to bank. Take a look at community banks, local S&Ls, and credit unions. They may not have international operations or lots of derivatives but most people don’t care, all they want is a safe place to keep their money without excess cost. It shouldn’t be too much to ask.

The Fake “Run” on Banks is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Under the Mortgage Assistance Relief Services rule, the FTC says that mortgage foreclosure rescue and loan modification services cannot collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. Individuals and organizations that violate the rule will be subject to FTC civil penalties. Excluded from the ruling are banks, savings and loans, federal credit unions, common carriers, and insurance companies. Attorneys may charge advance fees — but such fees must be held in an escrow (trust) account.

The MARS rule will be a substantial problem for foreclosure rescue companies and loan modifiers. Without the ability to quickly collect up front — and with a requirement to show results — most will instantly go out of business.

However, the new FTC regulations do not go as far as some states. For instance, in Maryland if a foreclosure rescue specialist sells a distressed property within 18 months after acquisition then 82 percent of any profit must be paid back to the original owner. Illinois and Minnesota have similar regulations.

The FTC further explains the details of the new regulation as follows:

The MARS rule applies to for-profit companies that, in exchange for a fee, offer to work on behalf of distressed consumers to help them obtain modifications to the terms of mortgage loans or to avoid foreclosure on those loans. The Final Rule, among other things, would: (1) prohibit providers of such mortgage assistance relief services from making false or misleading claims; (2) mandate that providers disclose certain information about these services; (3) bar the collection of advance fees for these services; (4) prohibit anyone from providing substantial assistance or support to another they know or consciously avoid knowing is engaged in a violation of the Rule; and (5) impose recordkeeping and compliance requirements.

Advance fee ban

The most significant consumer protection under the FTC’s new rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.

Disclosures

The Rule requires mortgage relief companies to disclose key information to consumers to protect them from being misled and to help them make better informed purchasing decisions. In their advertising and in communications directed at individual consumers (such as telemarketing calls), the companies must disclose that:

• they are not associated with the government, and their services have not been approved by the government or the consumer’s lender;
• the lender may not agree to change the consumer’s loan; and
• if companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating.

Companies also must explain in their communications to consumers that they can stop doing business with the company at any time, can accept or reject any offer the company obtains from the lender or servicer, and, if they reject the offer, they don’t have to pay the company’s fee. The companies also must disclose the amount of the fee.

Prohibited claims

The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:

• the likelihood of consumers getting the results they seek;
• the company’s affiliation with government or private entities;
• the consumer’s payment and other mortgage obligations;
• the company’s refund and cancellation policies;
• whether the company has performed the services it promised;
• whether the company will provide legal representation to consumers;
• the availability or cost of any alternative to for-profit mortgage assistance relief services;
• the amount of money a consumer will save by using their services; or
  the cost of the services.

In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.

Attorney exemption

Attorneys are generally exempt from the rule if they meet three conditions: they are engaged in the practice of law, they are licensed in the state where the consumer or the dwelling is located, and they are complying with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must meet a fourth requirement — they must place any fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

All provisions of the rule except the advance-fee ban will become effective December 29, 2010. The advance-fee ban provisions will become effective January 31, 2011.

Mortgage foreclosure rescue scams (finally) blocked by feds is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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In practical terms the affidavits will be corrected and the overwhelming majority of foreclosures will be justified because owners failed to make their payments. That, however, is not the point. First, you can bet that among such a large number of foreclosures some were flat-out wrong and the result was that innocent families were thrown out on the street. Second, we have numerous trial lawyers standing ready at a moment’s notice or the squeal of an ambulance tire to take on such cases. Third, any family that improperly lost their home will likely get millions of dollars in damages and remedies.

So why did this happen? Writing in the esteemed Week In Review published each Sunday by the New York Times, Eric Dash raises the question of “who is really at fault?” and answers this way:

The foreclosure system, which became like Lucy and Ethel, overwhelmed at the chocolate factory. As millions of homeowners fell behind on their mortgage payments, the banks were overwhelmed. Their loan collection operations were designed to process regular payments, not handle the specialized needs of troubled borrowers.

Computer systems were outmoded; the staff lacked the training and numbers to respond properly to the flood of calls. Traditional checks and balances on documentation slipped away as filing systems went electronic, and mortgages were packaged into bonds at a relentless pace. To make matters worse, many tasks were outsourced, with little oversight by the banks or their federal regulators.

The banks say they tried valiantly to cope, including hiring more employees. Even so, many acknowledge that they were caught flat-footed. (See: A Paperwork Fiasco, October 24, 2010)

I read this and thought: You’re pulling our leg, right?

Overwhelmed?

If the banks were “overwhelmed” then they were overwhelmed selectively. They certainly had no trouble staffing mortgage subsidiaries and selling as many toxic loans as possible. No staff shortage then, no worries about old computers or untrained staff. Indeed, according to the just-released book, The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America–and Spawned a Global Crisis by Michael W. Hudson, a former reporter with the Wall Street Journal, in case after case lenders wanted to hire the least-experienced mortgage loan officers they could find, people who would be entirely unfamiliar with any notion of lending norms.

In addition, of course, big banks have no trouble finding staff or computers to sell credit cards and student debt, obligations they love to market.

Missing Checks & Balances

Mr. Dash tells us that “traditional checks and balances on documentation slipped away as filing systems went electronic.” Okay, and who was and is at fault for the loss of such checks and balances?

Then we learn that “to make matters worse, many tasks were outsourced, with little oversight by the banks or their federal regulators.” This is a bonanza of upside-down logic. If the banks could outsource activities that made profits why can’t they outsource services that might save homes? As to our well-paid regulators, the only less observant group you could possibly find would be a gaggle of long-comatose geese.

And let’s be clear. Not all banks sold toxic loans. Most community banks didn’t and neither did most credit unions and S&Ls.

Valiant Bankers?

“The banks,” says Mr. Dash, “say they tried valiantly to cope, including hiring more employees. Even so, many acknowledge that they were caught flat-footed.”

The #1 group in the country that should have been prepared for foreclosures were the very people who created toxic loans and lowered application standards. Does anyone really think that the massive number of foreclosures we have today was not anticipated by various lenders?

The foreclosure crisis is no surprise despite repeated claims to the contrary. And even if we agree that brilliant people on Wall Street did not know what was happening with the toxic mortgages they created, marketed and sold the foreclosure crisis is not new. RealtyTrac reports that foreclosure notices have been at the rate of 300,000 per month for 17 months in a row — and that was as of July! we’re now up to 19 months in a row.

Nineteen months in a row and bankers are still under-staffed! Has no banker noticed the very large number of intelligent, articulate, educated people who are now looking for work — some of whom no doubt have experience in finance, accounting and administrative tasks? Could not some Wall Street bonus money be diverted to hire people and upgrade computers?

It would be the valiant thing to do….

Foreclosures: Why The New York Times Is Wrong is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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In basic terms the world of lending can be divided into two groups, regulated lenders such as banks, S&Ls and credit unions and lenders who are not regulated such as your Uncle Ralph, friends and local investors.

In the first category we have national lenders and their mortgage subsidiaries who are regulated by the federal government. We also have stated-based lenders who are regulated by, well, individual states.

The regulated lenders must play by the rules — but since lenders have lots of PAC money and many lobbyists in Washington the “rules” are hardly tough — how else would you explain why regulators allowed lenders to offer toxic loans such as option ARMs and interest-only mortgages to borrowers who plainly would be unable to repay?

Private Lenders

The attraction of cash from private lenders is that it can be available very quickly, an underwriting process may not exist and in the best case there will be little cost to originate the loan.

On the other side of the spectrum we have private lenders, a wide-ranging species of folks with cash to lend.

First, we have friends and relatives who are distinguished by the fact that they have money and are willing to provide mortgage financing for you. There are not too many of these people, in part because few individuals want to lend money for a period of 15 to 30 years.

But, if you can find friends and family who will advance you money, then you need to consider two ideas. First, congratulations, you have found a lender. Second, beware of the sticky stuff.

When you borrow money from people you know your relationship will change. Egos and status may shift. If it happens that your relationship sours over time there can be big problems. There can also be problems with other friends and relatives become jealous, or if your benefactor dies or becomes incapacitated.

To protect the lender — and to protect you — there must always be a written mortgage agreement. One source to consider is Virgin Mortgage which offers a program tailored to social lending among friends and family. Alternatively, you can have a local attorney draw up a proper loan agreement.

It could happen that when a private lender passes away that the loan will be forgiven by the will — but maybe not. In any case you need to protect yourself with a proper loan agreement just in case Uncle Ralph suddenly wants his money back or there is some question regarding interest rates or other loan terms.

Hard Money Lenders

You may also be able to get money from hard money lenders. These are lenders who seek to finance individuals who really need cash. And, as you might guess, those who need cash have lousy credit credit. The result is that they pay very high interest rates.

Hard money lenders are often unregulated because they make few loans in a given jurisdiction. Sometimes several individuals get together to create an investment group or club to share risk and to increase funding.

Whatever the situation, with a hard money lender you’re likely to need considerable equity (say 25 to 50 percent, depending on local market conditions) and you will face big up-front costs that are taken from the loan — say three to five points.

Given the enormous costs of hard-money lending you can bet that a lot of borrowers fail. However, with a lot of equity the hard money lender does okay because they can foreclose and re-sell the property.

In other words, if you have a need for a hard money lender you should really consider selling the property or getting a loan modification. For specifics, speak with a HUD counselor, a local attorney or legal clinic, or find help with a community housing group or local bar association.

Should I Use Private Mortgage Lenders? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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For much of human history mortgage lenders have been vehemently opposed to loan modifications — except when it’s to their advantage. Now, however, a nationwide foreclosure glut is forcing lenders to re-think the issue and for the first time do-it-yourself mortgage modifications are possible.

Not likely. Not guaranteed. But possible.

What we commonly call a “mortgage” is really a contract between a borrower and a lender. The borrower gets cash up-front and in exchange the lender gets a promise of full repayment with interest over time. Importantly, a mortgage is secured by the property — if the borrower doesn’t pay, the lender has the right to sell the property to get back its money.

The paragraph above pretty-much describes the traditional lending system. A local lender — say a bank, savings and loan association or a credit union — made a loan to a local homeowner. The lender made sure the borrower was qualified for the loan and that the property value was sufficient to repay the debt if something went wrong. Why? The lender kept the loan for as long as it was outstanding. The lender’s profit was in the cashflow from the loan — the difference between the interest being paid each month by the borrower and the lender’s cost of funds.

In other words, mortgages were traditionally made by so-called “spread” lenders, companies that had a vested interest in getting loans right. Such lenders wanted fully-documented loans, careful property appraisals and sizeable downpayments because they were prepared to hold the loan for many years. What they didn’t want were foreclosures because foreclosures mean losses. Examples of spread lenders today include community banks, credit unions, Hudson City Bancorp and ING DIRECT USA.

Lenders Without Cash

In recent years the system has changed. Now we have lots of companies that look like “lenders” and who make loans to local borrowers. The catch is that such “lenders” either don’t have any cash to fund mortgages or they have the money but don’t want to keep the loan.

Huh? How can companies without money make loans? They sell the mortgage in an electronic arena called the secondary market. Money from the sale of the mortgage on the secondary market funds the loan.

The benefit of this system is that by selling a loan the lender now has more dollars to lend. More loans, in turn, mean more fees, charges and profits. No less important, the secondary system means that local lenders will not run out of money. If a lender has $5,00,000 and makes 10 loans for $500,000 each then it might seem as though the lender could not fund any more mortgages. However, by selling the loans in the secondary market the lender gets fresh cash and therefore can make new loans.

Now the loan — most-likely your loan — is owned by an investor, not a lender. That investor paid a given amount for your loan under the assumption that your loan would generate a certain interest rate. No less important, you probably don’t know the investor that owns your loan. Instead, your payments are likely being collected by a servicer.

Fannie & Freddie

We now know that your mortgage most probably is not owned by the company that sold you the loan. If that’s the case then who does own it?

Remember we said the loan was sold in the secondary market to an investor. Buyers on the secondary market include pension funds, insurance companies and investors worldwide. However, the two biggest buyers of local loans are Fannie Mae and Freddie Mac.

To understand the importance of Fannie Mae and Freddie Mac consider some numbers. First, it’s generally estimated that there are about 50 million homes which have been financed with a mortgage. Second, Fannie Mae and Freddie Mac own more than 30 million of those loans.

Because Fannie Mae and Freddie Mac own so many mortgages other mortgage investors — but not all — have generally adopted their standards. If you want to know how the loan system generally works it’s good to keep your eyes on Fannie Mae and Freddie Mac.

No Modifications, Not Now, Not Ever

The mortgage system generally worked well until the past few years. There surely were foreclosures in the past, but typically there were very few foreclosures and most were related to such issues as the loss of a job, the death of a spouse, medical bills and divorce.

In the last few years the situation has changed. As the federal government reported in late 2008, “delinquencies on mortgages have tripled, not just for subprime and Alt-A, but also for prime mortgages. Foreclosures have increased almost 150% from two years ago.” Figures from the foreclosure listing site, RealtyTrac.com, show that during the months of March, April and May 2009 there were more than 1,00,000 foreclosure filings nationwide –more filings than in all of 2005.

Despite new and higher foreclosure levels, investors — the folks who own loans — have generally refused to modify mortgages. Their reasoning goes like this:

First, a contract is a contract. You got the money we promised and you should pay the money you promised.

Second, if loan terms are modified we’ll get a lower rate of return.

Third, if we have an asset with a lower rate of return it’s worth less and we will have made a bad investment.

In fact, investors have a pretty good argument except for one looming problem: Foreclosure rates are high and climbing — and the loss from a foreclosure according to a Congressional report is typically $40,000 to $80,000 per property. Given the lousy choice of foreclosure or the less-lousy choice of a loan modification, investors are beginning to consider modifications.

Workouts

When lenders talk about loan workouts what they typically mean are two options:

• Modifications. A situation where the debt is restructured. For example, the loan term might be increased from 30 years to 40 years, thus reducing the monthly payment.
• Payment Plans. Loans where there’s a change in contract terms. For instance, the interest rate is reduced 1 percent for the next 12 months or penalties and fees are forgiven.

Notice that with workouts there’s one option lenders typically do not offer: A principal reduction. Notice also that in some cases monthly payments can actually rise with new mortgage terms.

Claim Advances

If you have mortgage insurance (MI), if you’re facing foreclosure and if you’re having a tough time that’s temporary then you may be able to get help from your mortgage insurance company with a claim advance.

If the property is foreclosed then the mortgage insurance company can owe big money to the lender. Instead, if your situation is short term, the mortgage insurance company may be willing to lend you money to bring the mortgage current, typically with little interest and very soft terms. Ask your lender and your mortgage insurance company about such help.

The New Deal

In November 2008 the Bush Administration announced that Fannie Mae and Freddie Mac would now offer a streamlined modification program (SMP) so that borrowers could more easily obtain loan modifications.

However, a look at the SMP standards suggests that meaningful modifications — if any — were enormously difficult to get under the program.

• SMP targets borrowers who have missed three payments or more, own and occupy their property as a primary residence and have not filed for bankruptcy.
• SMP creates a standard definition of an “affordable mortgage payment” — no more than 38 percent of a household’s monthly gross income.
• Servicers will have flexibility in modifying loans, including reducing the mortgage interest rate, extending the life of the loan or even deferring payment on part of the principal. The servicer receives an $800 payment for each modification.

The SMP standards are ridiculously impractical. Here’s why:

First, they require borrowers to miss three or more monthly payments, meaning that homeowners who participate must have lousy credit.

Some lenders counsel borrowers to purposely miss payments so they can qualify for the SMP. The view here is that such advice is terribly harmful because there’s no guarantee that the borrower will, in fact, get SMP relief and also because whether or not an SMP arrangement is possible the borrower will now have terrible credit, meaning that a new loan on sane terms from other sources will be virtually impossible.

Second, the SMP applies only to owner-occupants. This means the SMP effort is useless when an investment owner is in trouble. This anti-investor approach may seem somehow warranted because investors are supposed to face more risks than owner-occupants, but if you think about the consequences of this policy you can see that it’s misguided: If a property down the street is foreclosed and the value of YOUR home declines, no one cares if the foreclosed property was owned by an investor or an owner-occupant. All anyone sees is that there was a foreclosure and therefore a lower price shows when buyers look at local sales.

Third, the SMP says borrowers must devote at least 38 percent of their gross, pre-tax income to housing costs. In comparison, the usual qualification standard for a conventional loan is that 28 percent of the borrower’s income can be devoted to principal, interest, property taxes and insurance, what is known as “PITI” to lenders. In effect, borrowers who qualify for the SMP are required to spend vastly more money on housing than baseline conventional borrowers. The better idea is to lower monthly housing costs for troubled borrowers so their homes are not foreclosed.

Fourth, if you have declared bankruptcy you do not qualify for a loan modification under SMP — the very modification which may prevent the loss of all your assets.

Early Workouts

In December 2008, Fannie Mae — which held 18 million mortgages at the start of 2008 — said it would offer an “early workout” program as an alternative to the SMP.

How does the early workout program differ from the SMP?

• Early workouts, says the company, are “a separate Fannie Mae effort to assist a wider spectrum of distressed borrowers in various stages of delinquency, including those who are current on their loan payments but facing imminent default.” Translation: The new program can apply to borrowers who are current. You don’t have to miss mortgage payments to qualify, you don’t have to lose your credit standing.
• The early workout program has two phases, a trial period and then a modification. During the trial period a non-delinquent borrower must complete four timely, consecutive monthly payments at the new level. A delinquent borrower must make at least three consecutive monthly payments. Translation: Make certain you make all trial-period payments in full and on time. In fact, be smart — pay early.
• “Preforeclosure sales, acceptance of deeds-in-lieu of foreclosure, and short payoffs (accepting a payoff for less than the amount owed), will not be permitted loss mitigation alternatives for use with borrowers whose loans are current but are determined to be in imminent default,” says Fannie Mae. Translation: If you’re not in default why not try to save both the home and the mortgage?

While the early workout program has started with Fannie Mae it will logically be expanded to other lenders and investors. Since investor programs can differ, it’s important to know who or what actually owns your loan. Most probably, the people you identify as your “lender” are actually loan “servicers” and not the loan owners. The ability of servicers to make modification decisions may be limited — or non-existent — depending on the arrangement they have with the loan owner, something usually called a “pooling-and-servicing” (PAS) agreement.

The Obama Plan

In February 2009 the Obama Administration came out with a $75 billion foreclosure prevention plan which combines the best approaches from Fannie Mae and the FDIC.

The program is complex, but in basic terms it has two elements:

First, if you’re facing foreclosure and your loan is one of the 30 million owned by Fannie Mae and Freddie Mac, you may be able to refinance if the value of the property is not more than 25 percent greater than the remaining mortgage balance (originally the government limited refinancing to a 5 percent shortfall). In other words, the program does not require borrowers to have any equity in the property, but it does limit the amount of risk which the government is willing to take.

As the government explains: “The unpaid principal balance of the first lien mortgage does not exceed 125 percent of the current market value of the property. (For example, if the property is worth $200,000, the borrower must owe $250,000 or less on that first lien mortgage).”

Second, imagine that you’re not facing foreclosure but have a toxic loan. Payments have risen rapidly or about to rise. You’re not in trouble yet, you’re making all your payments, but you could be in hot water within the next few months.

In this case, hopefully, the lender will try to reduce your interest rate so that no more than 38 percent of your gross (pre-tax) income is set aside for housing. The government will then subsidize your loan to bring the monthly housing cost down to 31 percent. Note that not all lenders are participating in the Obama plan as of this writing.

In other words, this is the Fannie Mae early workout program supported, finally, with government funds.

The Obama plan, for the first time, uses federal dollars for real people with real mortgage problems, not just bankers and Wall Street insiders.

It’s estimated that as many as 7 to 9 million borrowers will be helped by the Obama program, however the program will not protect everyone against foreclosure. If the value of your home is too low, if you do not earn enough income or if you have a rental property that’s in trouble, you won’t be eligible for help. Unfortunately, for millions of people who have bought in recent years with little or no money down, or have bought with loans that negatively amortize, or who have lost their jobs, the Obama program will not work for them. For a list of specific limitations and exclusions, press here.

The Obama plan if successful could substantially reduce the inventory of unsold homes in many areas and thus bring a halt to home-price declines — assuming job losses can be contained. We should get some sense of the program’s success or failure by mid- to late-summer, 2009.

For additional information, try:

• http://www.financialstability.gov/makinghomeaffordable/
• http://www.freddiemac.com/avoidforeclosure/
• http://www.fanniemae.com/homeowners/index.html

Steps To Take

As you look at loan modification options you can see that loan owners logically do not want to make such arrangements if they can be avoided and they are not required to modify loans. Thus, if you want a loan modification, if you want to avoid foreclosure, you must make the first move.

What should you do? The first step is to analyze your financial situation,

1. What percentage of your gross income (your income before tax deductions) is now devoted to housing costs, meaning mortgage principal, interest, taxes and insurance — PITI.
2. How much could you pay each month if PITI was limited to 38 percent of your gross income?
3. How much could you pay each month if PITI was limited to 31 percent of your gross income? This is an important question because the FDIC has been using a 31-percent benchmark when modifying loans made by IndyMac, the lender taken over by the FDIC in 2008. The 31-percent standard has now spread to other programs.
4. What are your assets? Include such items as savings accounts, IRAs, other retirement accounts, certificates of deposit, stock, bonds, vehicles, other real estate. Be sure to include account numbers, the date when valued, contact information for the account holder such as a brokerage or bank, balances and required payments.
5. What is the value of your home? Local real estate brokers may be willing to help provide a general valuation on a pro bono basis with a comparative market analysis (CMA) or a broker’s price opinion (BPO)– it’s good PR for the broker and you could be a future source of referrals and business.
6. What are your debts? Include credit cards with account numbers, account information, total debt and required monthly payments. Also, student debts, auto loans, other mortgages, etc. Again, show account numbers, balances, required payments and contact information.
7. What are your typical monthly expenses for utilities, condo fees, gasoline, health insurance, child care, alimony, etc.
8. Have in hand your tax returns for the past three years and payment stubs for the last three payment periods.
9. Make sure your information is accurate and current. Have receipts and documents to support your statements.
10. No matter how enticing, do NOT sell your home with a quitclaim deed, especially if the property is being sold “subject to” the mortgage without FIRST speaking with a real estate attorney or legal clinic of your choice or to your state attorney general.
11. No matter how enticing, do NOT sell your home by making a payment to someone else. Remember, when you sell a home buyers pay YOU — not the other way around. Again, for specifics FIRST speak with a real estate attorney or legal clinic of your choice or to your state attorney general.

Once you’ve gathered baseline information arrange your data with a spreadsheet so it’s easy to follow — income, assets, debts, etc. Then review your numbers and write out a one-page letter explaining why your need for a modification is compelling.

One useful approach is to download and complete the free loan modification forms used under the Obama Administration’s Make Homes Affordable loan modification program.

1. Request Form (Request for Modification and Affidavit)
2. The Help Guide you can use to complete the Request Form (Request for Modification and Affidavit)
3. Tax Authorization (IRS 4506T-EZ Form)
4. Proof of Income
5. Proof of Income Checklist
6. Get contact information for major mortgage servicers that are participating in the program.

Your goal is to convince the loan owner that a modification is in HIS best interest. This is a business matter, it must reflect cold hard facts and it must be documented. Make sure your letter is properly written, properly spelled and grammatically correct. Write and re-write your letter until it discusses only the need for a modification and the probable consequences to the lender if you cannot modify the loan.

To see an example, go to LoanSafe.org and read their model hardship letter and related information.

Contacting The Lender

Take a look at your loan document. What is the loan number?

Who do you contact regarding mortgage payments? This will be the lender or the loan servicer, most likely there is an 800-number on your monthly bill. Check and see if there’s a specific number for the “loss mitigation” department or something similar.

As you communicate with the lender take these steps.

• Always write down the name of the person with whom you are speaking, the date and the time. Get their direct phone number if possible. Keep notes in a file of each and every phone call you make, with whom you spoke, the date and time, the number you called and what was said.
• Never yell at the person on the other end of the line. Their goal in life is not to make things hard for you. They may have instructions from the loan owner which makes it difficult or impossible for them to help in your situation. Always assume they’re trying their best. Remember the old saying, you catch more flies with honey than with vinegar. Treat lender representatives with respect and dignity.
• Ask for the name and number of people who actually make modification decisions. This usually means someone in the loss mitigation department. If you can’t get such information by phone, search around the lender’s website or search Google for the lender and the term “loss mitigation.”

Once you get to speak with a loss mitigator offer all the data you’ve put together. Make certain to send your materials by certified mail with a return receipt requested — this way you will have proof showing when the material was mailed, that it was received and when it was received.

Once the lender has your materials the real question then becomes will he make the modification? If yes, what changes will be made and how long will they last?

Be persistent. You must follow-up because there is no chance that a modification can be done with one letter or one phone call. Always ask what you can do to make the matter easier and faster for the loan owner — and then do it.

In the end what is your goal, what would you like from the lender? The best possible result would be a smaller and more-affordable monthly mortgage payment which has been created by a lower interest rate, a longer loan term, or both. In addition, getting the lender to waive accumulated fees, penalties and charges is also a benefit.

Once you have a lower payment then you must keep your end of the bargain — every payment, without exception, must be made in full and on time. This is not only fair to the lender, it will also help build your credit standing.

Getting Help

If you have mortgage problems there are plenty of people who are willing to help you — for a fee. Unfortunately, while there are experienced individuals and organizations who can provide assistance, there are others who simply want your money.

You are vastly more-likely to get a loan modification if you have assistance. Good sources of such assistance include:

• Local attorneys and legal clinics that specialize in real estate.
• Local law schools with pro bono or low-cost programs to assist members of the community.
• Local bar associations with pro bono programs. In Maryland, for example, the Washington Post reports that more than 600 lawyers have volunteered to help homeowners with mortgage problems.
• HUD has a list of foreclosure avoidance counselors at: http://www.hud.gov/offices/hsg/sfh/hcc/fc/.
• Your state attorney general. State attorneys general often have existing contacts with lenders. Contact your state attorney general directly for help and assistance.
• Community housing organizations — they often have contacts with local attorneys.
• Legal Services Corporation — Funds 900 offices around the country to help the poor obtain legal services.
• National Consumer Law Center — An excellent source of legal information for the public.
• LoanSafe.org has online tools and information and has been featured in the New York Times.
• The Neighborhood Assistance Corporation of America has been a forceful and effective advocate for those facing foreclosure.

Homeowners Assistance Program (HAP) For Military & Civilian Personnel

The government has established a Homeowners Assistance Program (HAP) to “assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.” Translation: It’s a program to help those who may be forced to have a short sale or foreclosure because a local base has closed or contracted.

HAP offers significant benefits — if you have any association with the military please go to the HAP site to see who qualifies and what benefits are available.

Making Home Affordable

Be certain to check the government’s loan modification web site, MakingHomeAffordable.com. This site is entirely-free and contains the latest information regarding loan modifications under the Obama program.

To Check The Stats

To see how lenders are doing, look for the latest Making Home Affordable Program Reports issued by the Treasury Department.

To Contact Lenders

The government maintains an extensive list of individual lender foreclosure and modification contacts including names, addresses, websites, phone numbers and fax numbers. Be sure to press the show all servicers link if you cannot find a lender in the search box.

Help for Lenders

If you’re a lender and want additional information, information, policies and news regarding the Making Home Affordable program, please see HUD’s special site for lenders at www.hmpadmin.com.

How To Get A Successful Loan Modification (With Obama Update) is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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