Community Service Announcement: Modification Warnings

Community Service Announcement: Modification Warnings

There is a lot of positive which can be said of getting your loan modified and the mortgage payment changed to one which is more affordable. But you would be wise to consider some new twists which may mean it is not as great a bargain as you thought.

Temporary or Permanent Change

Back in the olden days—just a few months ago—loan modifications were made by lenders for distressed borrowers who had demonstrated the ability to resume payments and sustain them as permanent changes to the existing mortgage. The modification was processed as a PERMANENT change in the loan terms so the borrower could rest assured that the new loan was, in fact, one which could work for them. Many of the new modifications are only TEMPORARY. The trial period may be as short as 3 months or as long as six months. This is being used as a new test period to see whether or not you are able to sustain the payment. The problem is that there is no ironclad guarantee that the ‘modified’ loan payment will remain in place after that introductory period.

Life Happens

What happens if your loan is transferred to another servicer during your trial period? Worse yet, suppose your financial institution is sold or otherwise acquired by someone else? In either case, you would be holding an unenforceable, short-term agreement with a party different than the one you actually have to deal with concerning payments. You would be wise to consult with an attorney about the terms of ANY modification being proposed by your lender or to have an attorney to help you with structuring a modification which is practical given your current situation and the value of the property.

Temptation Could be too Strong …

Under the current administration’s plan to encourage lenders to modify as many loans as possible, lenders/servicers are being paid a fee to process those modifications. Substantial fees. They are paid based on whether or not they get the modification completed. They are paid whether it is an agreement which works for you or not. They are paid whether or not you have received what is called “net tangible benefit” (did it do you any good?).

We would hate to think that a bank might process modifications in order to receive payment even when they were aware that the payment amount was not sustainable for the borrower, but remember these are the same institutions which processed loans for some folks who clearly were not in a position to make those payments either. I’m just saying....

Has the modification been recorded?

One might argue that there is no point in recording a short term agreement and you could see their point. But maybe the reason for processing short term or temporary modifications was to avoid recording them in the first place. If there is NO RECORD officially—as in your local city’s Recorder’s Office—of the newly created Modified loan then the only record which exists is the OLD, unaffordable loan. IF your loan is transferred or sold, then the OLD loan is the current loan which is the ONLY loan that exists. Surely you can see where I am going with this.

Recommendation: If your loan has been modified and you want to keep that payment then it MUST be recorded.

HINT: Insist that your modification agreement contain a provision for the loan to be recorded promptly after agreement is finalized by your and your lender/servicer. Otherwise, you could be in for some heartburn.


Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Loan Modification Specialist (LMS) Certification Offered in Florida

Dates: July 27, 28, 29, 2009
Times: 8:30-4:30 every day

Location: Perdido Bay Golf Resort
1 Doug Ford Drive
Pensacola, FL 32507

Sponsor: Home Ownership Matters Training Institute

Trainer: Mildred Wilkins, (FIS) Foreclosure Intervention Specialist

Former Fannie Mae Broker-Specialist

Get the training you need from someone who has:
1. Learned property valuation from Fannie Mae

2. Sold real estate/processed many successful short sales

3. Lost a home to foreclosure/I can teach you about deficiency judgment

4. Learn from a professional; TO BECOME MORE PROFESSIONAL

Registration: Early bird registration ends 4/25, so HURRY and register TODAY, seats are VERY LIMITED: ONLY TEN AVAILABLE! (Yes, ONLY 10)

Lodging: The Cottages at Perdido Bay (http://www.perdidocottages.com) (Lodging NOT included in the price of the certification)

Course Description:

This Loan Modification Specialist (LMS) certification program is comprehensive, rigorous 3 day training designed to prepare attendees to successfully facilitate loan modifications. Professional development is necessary to be competitive in this emerging field. This certification has been designed and is taught by a former Fannie Mae Broker-Specialist who has specialized in foreclosure intervention training since 2002.

Wilkins created the (FIS) Foreclosure Intervention Specialist certification program for REALTORS, the first such certification for real estate professionals in the nation in 2005. (FIS) for Housing Counselors was added in 2006. The (LMS) certification will set apart those who have taken substantive hands-on training and are truly prepared to call themselves ‘specialists’.

Let the (LMS) certification move you closer to transitioning into a whole new career. There is pent up demand for this service, a limited number of qualified providers and even less training available for those in the private sector who currently own or plan to open a for-profit business.

(LMS) certification. Your answer. Today. Register. NOW!!!!

Why offer certification?

HOM Training Institute is the training arm of Home Ownership Matters, LLC. Providing quality education to real estate professionals such as REALTORS, attorneys and housing counselors has been the focus of the institute for several years, with the goal of training professionals to be competent in the fight against foreclosure. The dramatic increase in the sheer number of modifications which are being utilized, along with the fact that most individuals or organizations which offer them have little to no training in the field has created a need for practical, comprehensive training in this area. HOM Training Institute is responding to that need with the (LMS) certification training. The consumer is the person who ultimately benefits from this program.

Is this training right for you?

This is a fast-paced, but comprehensive, look at the many details which need to be considered if you have concretely decided, OR you are contemplating opening, a business which specializes in providing loan modification services. You will not be taught how to create a database of consumers who have already received foreclosure notices from public records and do direct mailing to them to get business. You will, instead, be taught how to set up a professional office where you meet with clients who have been referred to you from sources such as local counseling agencies, your local foreclosure hotline, reputable non-profit organizations and others in the community who are looking for competent, professional loan modification service providers to meet the growing need as the housing crisis deepens. While there is a significant move across the country to provide training to housing counselors within non-profits who help low to moderate income borrowers, there is no corresponding training to meet that same need for middle to upper income borrowers who are simultaneously struggling.

What to expect:

As attendees, you will:
1. Receive clarity on the legal process of foreclosure (state specific) and the applications for a potential loan modification

2. Cover the components of the mortgage documents which specifically impact the possibility of workouts

3. Learn the elements necessary for a successful modification and the practical strategies for implementing such a workout

4. Receive instructions on how to successfully (LEGALLY) block foreclosure long enough to complete the modification process

5. Gain a thorough understanding of the inner workings of the Loss Mitigation shop and how to work effectively with them

6. Leave this training with a clear picture of the ethical and legal constraints which should (and must) govern your business in order to avoid lawsuits

(LMS) Loan Modification Specialist
Certification Training

Day 1: Practical and Professional Strategies
Session I: Understanding the Foreclosure Process

This session will cover the basic process for foreclosure, beginning with default and culminating in the particulars of the foreclosure process. Both judicial and non-judicial foreclosure will be discussed, since they are vastly different. It is impossible to help someone effectively with a modification without understanding the bigger picture of what the foreclosure process is for your state and where the consumer is in that process. The class will cover the differences between foreclosure with a note and foreclosure under a deed of trust. Additionally, such things as redemption rights will be covered with a general focus on what they are and the intention under the law (and the way they are abused by foreclosure intervention scam artists). Each attendee will have an opportunity to get clarity on the ‘specific law’ for your state in a timeframe tailored for this purpose.

Lunch—The Perdido Grill

Session II: Loan Modification—An Intervention Solution Whose Time Has Come

This session will provide clarity on the details of what exactly constitutes a modification, the components of a good, sustainable one and how to structure such a workout. Just as important, this session will cover the risk factors which can undermine a mod and cause the consumer to re-default. Learning to more accurately analyze the short term capacity of the borrower and the long term feasibility of the workout proposal, prior to an agreement being reached, are the keys to long term sustainability. Success should be measured not by whether or not you got someone to say yes, but by whether or not the workout is ‘working’. If the answer is no after a month, then it would fail the test of a workout. It was, in fact, just a band-aid. This training is designed to train you how to offer long-term, sustainable proposals for modification and get them accepted.

***********************************************************

Individual appointments for state law coverage

(filled on a 1st come, best choice basis)

Appt 1—5 until 6 p.m.

Appt 2—6 until 7 p.m.

Appt 3—7:15 until 8:15 p.m.

Day 2: First Thing’s First for a Successful Modification
Session III: “Buying TIME” – When the Money is Running Out

The focus of this session is worth the cost of the training, even if you failed to attend any other sessions. Time—or the lack thereof, is a major stumbling block to any successful workout—including a modification. This session will cover a highly successful strategy which combines strategic and legal restraints that will give you several extra months and a very strong negotiating position. When time is on my side—and I have your undivided attention—then we can work something out. Using the power of an under-utilized federal law will give you the time you NEED to get the attention REQUIRED for a successful workout. A team of foreclosure attorneys have put together a comprehensive list of all the possible ‘audit items’ you might use to challenge the servicing on a loan or the validity of the loan itself. This TOOL will be the focus of this session. Let’s say, “It gets a servicer’s attention.”

Lunch—The Perdido Grill

Session IV: Behind the Scenes of a Loan Servicer’s Shop

As a former Fannie Mae Broker-Specialist the trainer was introduced to the inner workings of the disposition department of the largest insurer of properties in the United States. That introduction to the mindset behind the scenes, as well as subsequent Fannie Mae training on servicing, has been invaluable in teaching students in other classes what to expect from the servicer’s shop. Once you understand the mindset, you are better prepared to GIVE THEM WHAT THEY WANT—to get what you need. It’s a basic negotiating concept—the trick is knowing what the other party wants (which is seldom what they ACTUALLY tell you they want) and then being able to provide it. A successful modification agreement—in truth, an agreement between two parties for anything—hinges on a meeting of the minds with whether or not the needs of both parties are being addressed. Crafting a modification which has the potential to be both accepted and sustainable for the consumer is possible when you understand what the servicer shop truly wants.

**********************************************************

Individual appointments for state law coverage

(filled on a 1st come, best choice basis)

Appt 1—5 until 6 p.m.

Appt 2—6 until 7 p.m.

Appt 3—7:15 until 8:15 p.m.

Day 3: Practical and Professional Strategies
Session V: Modification Stripped Down

We’ll cover the basics of modification during this session. How to determine what recommendation to make and what supporting documentation should be supplied in order to validate that recommendation. Would a combination of components work better for this borrower? Is the medication a permanent ‘fix’ to the borrower’s financial situation or must you consider some additional long term strategy? Does the modification agreement provide protection from onerous terms? Is your client protected with a provision for timely recording of the modification to avoid repercussions during a subsequent transfer to a new servicer? If you don’t already know how to do all of the above mentioned things, then sign up today so you can learn how to structure a modification which will provide immediate relief and long term sustainability for your client. Remember: “If it ain’t on the paper, it don’t exist.” Feel free to repeat that quote by HOM founder Mildred Wilkins.

Lunch—The Perdido Grill

Session VI: Ethical and Legal Constraints

This final session is, perhaps, the most important session. It will focus on the need for clearly understanding how critical it is not only that you operate a modification business in an ethical manner, but that you also avoid even the appearance of borderline behavior. A number of states have already enacted legislation which covers businesses and individuals who are “foreclosure intervention counselors”. Offering a modification for a fee would definitely put you in that category. Not only are you obligated to abide by Federal privacy laws and fair housing laws, but there is an assortment of other laws which are geared to protect consumers from unscrupulous providers of service. There is, and will continue to be, aggressive investigation and prosecution of organizations and individuals who seek to take advantage of consumers during this trying time. HOM is basically a consumer advocacy agency and is, therefore, strongly supportive of legal action against any modification service provider who uses their knowledge and influence to take advantage of a consumer who has trusted you to help them at this difficult time. HOM will not endorse nor condone any illegal or unscrupulous behavior as it relates to foreclosure intervention, including loan modifications. Attendees of all training sessions offered by the Institute will clearly recognize that behavior above board, at all times, is continually advocated and expected of HOM graduates. Completion of a HOM Institute training should not be used as a cover for unscrupulous behavior. Be forewarned that the reputation of the company will be fiercely and publicly defended if a graduate seeks to use the integrity of the company in order to validate themselves.

**Dinner option available: Class vote required!

REGISTER TODAY, it may be the only way you are able to reserve your spot! Remember, there are only TEN spots open for this training!

Other training dates: May 25-27 and June 8-10

Airports:

Pensacola; 17 Miles Away
Mobile; 55 Miles Away
Okaloosa Regional; 53 Miles Away
Ft.Walton Beach; 48 Miles Away

Assessing HAMP a year later

H A M P—Home Affordable Loan Modification Program was discussed in detail yesterday. If you missed it, it would be valuable to read it before you read today's blog.

First, let’s analyze what has been accomplished under the program. The program was projected to reach over 4 million homeowners with much needed help to sustain home ownership. The end of the year report indicates that fewer than 100,000 have, in fact, been granted permanent (5 year permanent) mortgage modifications since the program was implemented in March, 2009. For those 100,000 or so, they see it as a success (even if they do feel 20 years older because of the process). I feel pretty sure that the other 3,900,000 would consider it a failure. The horror stories of run-arounds, and lost paperwork and so on and so forth defies explanation and even the most mild-mannered person can be pushed too far.

Why Has HAMP failed?

The simple reasons are that it was created without a clear understanding of how the bank world works (the role of the guarantor behind the loan) and some other critical components were just overlooked.

Capacity—The dilluge of consumers instantaneously seeking help totally overwhelmed servicing shops who were already stretched past capacity because of defaults. Without funding for the hiring and training for substantial increases in staff to handle the flood of requests for help, the plan was doomed to be as ineffective as history has shown it to be. Individual lenders have sent PR teams across the country to talk about the way they handle modifications, but I am talking about a massive, organized, on-going effort to train the staff within the lender shops what was expected from the government and how the program was to be implemented. For a simple look at the capacity issue—I have folks tell me all the time, “You should be offering this and you should be doing that and why aren’t you answering questions online from individual borrowers?” I look at them like they’re crazy. HOM is a small company with 3 employees and the company’s income is generated almost exclusively from speaker fees. You want production equilvalent to a large company but you are not offering any funding or staffing just creating more jobs. The NEED for something does not translate into the CAPACITY to provide it without resources which include funding and personnel. HAMP did not adequately address the capacity to get the job done.

Resources—The expectation that only HUD approved housing agencies or similar non-profits should be the ONLY endorsed sources for help totally belies the fact that the program was designed for borrowers with mortgage balances up to $725,000 and non-profits primarily restrict their services to folks who earn less than middle income. Hence, no provision for a referral to anyone if you are not at the lowest end of the income spectrum. Worse, a condemnation (by our President no less) of any organization which offers help for a fee (to middle and upper income borrowers who are looking for such help). This major oversight means there were no guidelines, training, or criteria established for this needed service and YES, some vultures stepped in to fill the gap. California now has some pretty strong anti-vulture legislation which pushed most of the loan modification businesses there out of business, and not a day too soon for many of borrowers who have found that un-trained and un-regulated help can lead to a diastrous outcome.

Non-Profit Push Back

I understand that I am inviting non-profits to yell at me but before you start yelling to defend your position as the only people who care—What is your current back log? How many more people could you see? Is your staff already maxed out? Have all of your counselors received substantial modification and foreclosure law education in your state? Do you offer a sliding scale so any homeowner, any income level has access to your services? What is your success rate with completed modifications? Are borrowers re-defaulting within a few months? If the answer to any of those questions is yes, this indicate you are already serving your maximum capacity (and I am informed enough to know that most are). Stop arguing that help should ONLY be available to those whom you serve and embrace the idea that all borrowers, all income levels deserve to have representation to help them with the crazy world of banking. Businesses which have trained staff, operated ethically, with sufficient government regulations and appropriate bonds in place could go a long way to easing the foreclosure problem which continues to plague this county and will for the next several years. The time has come for the creation of Foreclosure Intervention Services—For Hire, as respectable businesses, listed in the phone book right next to non-profits as a resource for struggling borrowers. Repeat after me—Prohibition did not stop folks from getting alcohol—it just made the bootleg market prosper. When are we going to learn? Where there is a need—a provider will emerge.

Program Lacked Basic Understanding of the Bank World

It was a VOLUNTARY program. Lenders were not required to participate. In fact, they could NOT be forced to participate. It is not possible to force someone to alter the terms of a contractual agreement AFTER the fact. It doesn’t matter that the entity trying to compel cooperation was the US government. Mortgages are legally binding contracts. Lenders already had not only the contract with the borrower, but contracts with the investor, the guarantor, the hedge fund, and so on. The performance of one contract impacted several other contracts and therefore made it nearly impossible to make a significant change to the original contract (the mortgage) because of the cascading impact on all the other contracts which had grown out of the securitization of the underlying contract. Formulating a plan without a clearcut understanding of the securitization process was a major misstep in trying to implement HAMP.

Motivation Insufficient

Beyond the securitization problem, the issue of sufficient motivation to modify made the challenge almost insurmountable. While many would argue that the lenders were paid for their cooperation, that argument fails to address what they would receive by NOT cooperating. Now lenders are going to be mad when I state emphatically that they receive MORE to foreclose than they do to modify. How could that be you ask. Lenders lose money DURING the default process: they must pay the investor as agreed, incur expenses associated with the servicing of the loan, work to avoid having a lien placed against the property for failure to pay homeowners’ association dues, cover the cost of insurance to avoid an uninsured loss, etc, etc. All of these are out-of-pocket expenses—UNTIL a foreclosure is completed. Then, on ALL insured loans, which is MOST of them, the lender recoups many of the expenses which they have put out and collect the amount of the insurance on the loan. It is true that they will seldom get back the missed payments (that remains a loss to them) but the other expenses are usually reimbursable expenses. If you’ve wondered why it seems that the lender is not really trying to work with you, simply consider they need the process to be over, so a claim can be filed.

HAFA—A New Program announced on November 30, 2009 will be addressed next week.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)