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Distressed mortgage borrowers get 6 extra months under new HUD rules

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By TED CARTER

Homeowners who have fallen significantly behind on their mortgages are getting six additional months to stave off foreclosure, thanks to a new mandate from the U.S. Department of Housing and Urban Development.

HUD, in rule changes announced last Friday, is requiring servicers of Federal Housing Administration-backed loans to delay foreclosure for a full year and to evaluate all borrowers for the Home Affordable Modification Program or a similar loss mitigation program. HUD previously encouraged servicers to help get borrowers into loan-assistance programs but now is mandating they do so.

HAMP allows homeowners with mortgages taken on before Jan. 1, 2009 to work out new mortgage terms, including putting current day values on the property securing the loan and interest rate reductions.

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HUD said its new rules and the “non-profit pool” provision should help make the distressed loans more attractive to non-profit organizations that participate in HUD’s Neighborhood Stabilization Outcome portion of the Distressed Asset Stabilization Program. This includes giving non-profits a first look at vacant properties, allowing purchasers to re-sell notes to non-profits and allowing a non-profit-only pool.

The first sale will be in June.

At the outset of the nation’s foreclosure crisis, HUD resold its foreclosed properties, recouping some of its costs through the principal mortgage insurance its requires on each loan its backs. In 2012, the agency began selling the distressed loans ahead of foreclosure, typically at discounts of 40 cents to 60 cents on the dollar.

The arrangement worked well enough for HUD to report at the close of the second quarter of 2014 that a resolution had been reached on 50 percent of distressed FHA loans. Of these, 34 percent avoided foreclosure and 11 percent became classified as re-performing, meaning the borrower had resumed making timely payments.

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With those steps, HUD lowered its overall loss rate from 63 percent in 2010 to 53 percent in 2014, the agency reports.

Those numbers should improve even further with the additional six months HUD is giving borrowers to get mortgage help, said Phil Eide, senior VP of Jackson-based Hope Enterprise Corp.’s Community Development and Housing division.

Further, the additional time will give non-profits such as Hope Enterprise time to consider taking on some of the distressed mortgages, Eide said.

“We’re looking at that,” he said, but added: “We’re not saying we’re ready to pull the trigger.”

Hope Enterprise, parent of FHA-loan originator Hope Federal Credit Union, does not yet fully understand how the new effort will work. But “it is an intriguing opportunity,” Eide said.

“It could give us another angle for helping someone work through” mortgage distress, he said.

Before the rule changes HUD announced last week, loan servicers could foreclose six months after they received the loan and were encouraged, though not required, to assess a borrower’s qualifications for loss mitigation programs. Purchasers of the geographically targeted neighborhood stabilization pools have always been required to ensure that at least 50 percent of the loans in a pool help areas hardest hit by foreclosure avoid the neighborhood decline associated with numerous vacant properties, HUD said in a press statement last week.

“These changes reflect our desire to make improvements that encourage investors to work with delinquent borrowers to find the right solutions for dealing with the potential loss of their home and encourage greater non-profit participation in our sales,” said Genger Charles, acting general deputy assistant secretary for the Office of Housing.

“The improvements not only strengthen the program but help to ensure it continues to serve its intended purposes of supporting the MMI Fund and offering borrowers a second chance at avoiding foreclosure.”

Meanwhile, Mississippi is winding down a foreclosure prevention effort funded by a 2012 legal settlement with the nation’s main loan services for fraudulent practices.

Established through Attorney General Jim Hood’s office as the Mississippi Mortgage Foreclosure Prevention Consortium, the effort allocated $1.92 million to the Mississippi Center for Justice, North Mississippi Rural Legal Services and the Mississippi Center for Legal Services for legal assistance to distressed borrowers. The program ends June 30.

Charles O. Lee, an attorney with the Mississippi Center for Justice, said his non-profit organization used the money to help borrowers get their mortgages modified to more affordable terms. And, in some instances, the Center used the money to take loan services to court, Lee said.

“Anything we did to help homeowners stay in their homes was part of the grant,” he said.

Those efforts will continue after the grant expires next month, according to Lee.

Through the grant awards to the Center for Justice and the two other non-profit assistance organizations, many more Mississippians today know their options for keeping their homes than did earlier in the foreclosure crisis, Lee said.

“I think there is still some fallout from the crisis,” he said. “I think individuals who underwater or facing foreclosure are in a better position to be informed.”

The Mississippi Home Corp., a quasi-public housing assistance agency, received a $2.1 million allocation that went to hire counselors to advise distressed mortgage borrowers on a range of topics. Many helped by the agency were people caught up in foreclosures and in need of help repairing their credit. Others were people who needed to learn more about home buying and mortgages before buying their homes, said Scott Spivey, executive director of the agency the Legislature created in 1989 to help provide affordable housing across the state.

The Home Corp. has not had a lot of success with HUD’s Home Affordable Modification Program, according to Spivey.

“We found that a lot of our borrowers didn’t qualify for HAMP,” he said. And many of those who did qualify were discouraged to learn the modifications did not change the mortgage payment amount enough to make it worthwhile, he added.

More effective, he said, has been the Home Corp.’s participation in the Treasury Department’s Hardest Hit Fund, known in Mississippi as the Home Saver program. The program temporarily paid the mortgages of qualified homeowners who lost jobs or received pay cuts.

The loan servicers were largely receptive to working with the Home Corp. to help distressed borrowers, Spivey said. “They are not eager to foreclose. They say they don’t want to be the bad guys here.”

That’s right, said Scott Dickey, BancorpSouth’s mortgage division president.

“For us, foreclosure is always the last option and one that we certainly want to avoid if possible,” he said in an email.

The new HUD rules should provide some clarity, Dickey added. “The most recent announcement by HUD will provide additional guidance for mortgage servicers and homeowners who may be in one of the affected distressed neighborhoods.”

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2 comments

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  2. What happens to the people who fall between the cracks and duly should not lose their homes. I am disabled and cannot qualify for the Home Saver Program. After Katrina I attempted to make money on the internet after a fraud contractor took me for $62,000.00. Got Judgment but he hasn’t paid one dime. Seems you have to have money in order to make money online especially for advertising. I wasn’t behind in my mortgage. I was looking to lower my note or interest rate. I did not qualify for the More Affordable P ro gram either (Hemp or Harp) due to refinance date of 3/2010. Origination date was 2001. After Katrina my Escrow doubled due to their insurance industry doubling our homeowner’s insurance. That hurts the fixed income homeowners tremendously. Then the mortgage company offered me an In-House Loan Modification telling me they could lower my note or interest rate. It’s been since 2013 and FOUR loan modifications and I still don’t have a lower note or interest rate. In fact, they raised my note. Also, I wasn’t delinquent when I started the process and now they have me delinquent over 15 months. Yes, I said 15 months. Why? They refused my monthly payments and then foreclosed on me for non-payment. They cannot do this and yes it is against the law. Who did this to me ? JP Morgan Chase. I attempted a Reverse Mortgage but they would not give me a discount for the months they refused nor would they remove the fraudulent foreclosure fees they charged me for fraudulently putting me in this foreclosure. They finally removed the foreclosure. They also falsely dismissed one of the Loan Modifications which was protecting me from foreclosure. They said I did not return the documents even though I finished my trial payment months properly. I was under the care of the Executive Offices of Chase and they told me not to send in my documents because they were running a new Escrow Analysis to correct the figures in the Loan Modification. Told me to wait until the Analysis was completed. They then said an Escrow Analysis could not be done while in Loan Modification so they removed the Exe Office Specialist running the Escrow Analysis on my Loan Modification and dismissed the Loan Modification for failing to turn in documents. They also misappropriated my 3 month trial payments by applying them to the 3 months of arrears to be put in the Loan Modification. They were to put my trial payments on the side or in a special account according to Fannie Mae Statutes. So when they dismissed the loan modification and misappropriated my funds it left me wide open for foreclosure. But the reason for foreclosure was for NON-Payment. Chase refused my payments stating they could not accept same while I was in Loan Modification. I’ve counted over 4 violations of the law in this paragraph. In 2014 (July) Chase closed my original loan and attempted to sell same to another servicer. This was also a loan procedure violation of my rights. Why? They did this while I was in Loan Modification #2. Homeowners are protected from their loans being sold to another servicer while in Loan Modification. But they did something even more worse to me…..they covered their actions up for 5 months until I found out they closed my Original Loan. Chase had to take my loan back after the new servicer found out about me being in Loan Modification and Chase was in a predicament. They had already CLOSED the Original Loan. So what did they do? They opened a “fake” new loan for me and told me they changed my loan number for security reasons. A part of their cover-up. Fannie Mae also covered this up because for Chase to do any of those things to my Original Loan they had to get Fannie Mae permission. We are now talking about corruption and conspiracy and Cover-up of their illegal actions on my loan. They are reporting to the Credit Reporting Agencies my original loan was CLOSED. They are reporting I have a NEW Loan beginning in July 2014. I don’t have a new loan. I did not authorize a new loan. Chase says they have no new loan documents but they are reporting I have a new loan. If they closed my Original Lo an and they have no new Loan Documents I shouldn’t have a loan with them any longer. Now they claim they want me to pay over 15 months of mortgage including the payments they REFUSED (which breached the loan agreement when they refused my payments) along with corporate fees, interest, attorney fees, foreclosure fees. I absolutely refuse to pay anything to do with the fraudulent foreclosure. So the present Loan Modification trial payments are failing because I refuse to pay these fraudulent fees they included in the newest Loan Modification #4. If I make the trial payments I am saying I accept the loan modification with these fraudulent fees and I will not partake in their illegal actions. How many violations have you read so far ? I left out that they only allowed me 6 days to file a “Notice to Dispute the Dismissal of Loan Modification #3 and/or Reinstatement of Loan Modification #3.” Homeowner usually get more than six days to file and prepare this “Notice.” Before Chase even answered same they foreclosed on me. Then took 45 days to Answer the “Notice.” Which of course left me wide open for foreclosure since homeowner’s are protected from foreclosure while in Loan Modification. By them not answering the Notice for 45 days it gave them plenty time to foreclose on me before they approved the reinstatement of the Dismissed Loan Modification. But you see, they already knew they wouldn’t reinstate the Loan Modification that is why they waited 45 days to answer and foreclosed on me in the meantime. Now, would you believe Chase called me after they dismissed the Loan Modification and Foreclosed on me and asked me if I would consider accepting the Dismissed Loan Modification? But I had to accept the Loan Modification as it was….Remember the Exe Office Specialist was running an escrow analysis to correct the figures? They wanted me to accept the Loan Modification with the incorrect figures. How many violations and laws have you counted so far in this posting? I usually end up with about 22 including fraud, corruption , conspiracy, cover-up, consumer rights, loan and loan modification right violations, lo an procedures violations, etc. At this point in time I told Chase they needed to send me my Deed “Paid in Full” to me along with a check for damages. I’m disabled and my health has exacerbated. I’ve been going through this since January 2013. I haven’t listed everything they have done to me. But don’t you think there should be a program for the Disabled Senior who has high equity and a mortgage company is trying to steal my home away from me by their illegal tactics? I haven’t found ONE program for the disabled senior citizen, like myself, during the mortgage crisis. Because of Chase refusing my payments and putting me in this fraudulent foreclosure they have ruined my credit. I cannot even refinance. What does a person like myself do? Does anyone know of a program that could help me? Remember, I could not qualify for the “More Affordable Loan Program” because I refinanced in 2010 (Origination date 2001). The Hardest Hit Fund does not accept disabled persons even if they were attempting to work on the side to make more money. Disabled persons are allowed to work up to a percentage. I was trying to supplement my income at home through the internet and ended up losing more money. The fraud contractor that ripped me off of $62,500.00 lives in Texas. I have to file my Judgment in Texas and hire a Texas attorney. With what money? Legal Aid will not help you if it involves “monetary gain.” Not only was I ripped off by a fraud contractor? I am being ripped off by a fraudulent mortgage company. When I contact government officials I get the go-around. If anyone knows a miracle worker I sure could use one right now. I can’t keep holding this elephant up by myself any longer. I tell my relatives if I should die to please make sure the DA charges my mortgage Company for Murder. Thank you for reading this honest and true multiple incidents that have happened to me. I attest the above and foregoing is true and correct to the best of my knowledge and belief. God Bless.

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