Archive for the ‘Loan Modification’ Category

The End of an Era: Home Affordable Modification Program (HAMP) Ends

As of December 31st, 2016 the US Trasury’s Making Home Affordable Program or HAMP as most people call it will officially come to an end after seven fairly successful years. Born out of the Great Recession, the US Treasury unveiled this program to not only make save homes from foreclosure but to also prevent some houses from entering foreclosure altogether. HARP or Home Affordable Refinance Program, which helps homeowners to refinance their mortgages to a lower interest rate, was extended until September 30, 2017.

The main benefit to a Loan Modification under HAMP was that the Mortgage Servicers and Investors recieved an incentive from the Government for helping borrowers stay in their homes. In many instances, a HAMP modification was able to help borrowers who were struggling financially, mainly because of these incentive payments. It was estimated that in 2016 50% of all loan mods were under the HAMP program.

What Are My Options Now?

Well, there has always been what is called an “In House Loan Modification Program” or a “Proprietary Modification Program” which was essentially a set of criteria and modification underwriting standards that are set in place by specific mortgage investors, such as Fannie Mae and Freddie Mac. Not all Government Sponsored Enterprises (GSE’s) have in house Loan Modification Programs, it mainly varies from investor to investor, but there are a fair amount of private investors who do offer such programs. For the most part, a mortgage investor would rather keep a borrower in their home and earn interest from them, than take the house back in foreclosure and hope to sell it for a fair price. It’s a much safer proposition for a lender, but only if you have income and they deem you qualified to make monthly payments.

How Does This Affect My Mortgage?

If you are behind on your mortgage, this actually may affect you substantially. The lapse of HAMP essentially removed any governmental incentive servicers and investors were getting for modifying loans, which should theoretically make it harder to get a modification. But as I have noted above there should still be In House programs under which you can apply. This article also seems to suggest that there may even be a lack of consistency in the modification programs throughout the industry. I.E. Wells Fargo may seek to modify your mortgage to 31% of your income and Chase could do 28%, but these are just guesses. Also, it appears that the timeline for modifications will be sped up, since homeowners will no longer be considered for the HAMP program. This may increase the effectiveness of modifications, since in my experience one of the greatest determining factors is the length of the modification process and the arrears accrued at the end of the process.

It yet remains to be seen how the housing market will react to this change, and whether the lapse of the HAMP program will bring a new wave of foreclosures in Cook County and around Chicago. If you or someone you know if facing foreclosure or has missed a mortgage payment call Steven Grace at 312-493-6912 for a free phone foreclosure consultation.

Cook County Foreclosure Rate Slows

Cook County Foreclosure Sale Rate Lower by 75%

Although Foreclosure rates in Cook County and the surrounding counties has decreased I have recently seen a few cases that have been in the courts for years hoping for a conclusion. Many times, the homeowner has been struggling with the bank to work out a modification and may have even gone through a Chapter 13 or even a Chapter 7 bankruptcy already in hopes of saving the home. I have even in cases of high mortgage balances, seen Chapter 11 bankruptcies to save a home.

To complicate the foreclosure picture further, many people are now facing increases on their Making Home Affordable (HAMP) Loan modification interest rates which increases the monthly payment amount. For many people even a small increase could mean losing a home. The question as to whether the foreclosure rate will remain low remains to be seen.

Furthermore, real estate values haven’t rebounded in many areas. The affluent neighborhoods have seen increases, but there are many areas around Chicago that have built zero equity since the Great Recession. As a result, many homeowners are still making the decision to stop paying their mortgage payment or to make a strategic default on their mortgage. Dealing with a losing investment such as an underwater home could potentially be the best decision of your life. There are substantial legal risks associated with such a default and you need a competent legal advisor to guide you through.

Chicago Strategic Default, Loan Modification and Foreclosure Defense Attorney

If you would like to speak further about your issues affecting you and you mortgage call The Law Offices of Steven J Grace at (312) 493-6912 today for a free 15 minute phone consultation.

Illinois Attorney General Foreclosure Settlement

New Mortgage Servicing Standards

One of the most important parts of the $25 billion foreclosure settlement against the big banks are the underlying servicing standards that have been enacted. As a result of this settlement, there has been some help offered to Chicago homeowners in foreclosure by way of banks extinguishing second liens. But these new laws go much further. These will protect Illinois homeowners from bank abuses for many years to come. This includes Chicago, which has been hit particularly hard by the mortgage crisis.

How This Affects Chicago Foreclosures

The Illinois Attorney General has released a Bank Foreclosure Settlement Overview which gives some of the details of this new servicing settlement and specifically how it affects Chicago homeowners facing foreclosure.

Here are some of the main points:

– Banks will consider homeowners in default for a loan modification before they are sued by a foreclosure attorney. This is a much better approach to the situation, because it will somewhat eliminate the ‘dual track” foreclosure practices, which can be very confusing for homeowners. It will also speed up the system because it will show homeowners whether or not a modification is realistic well before the foreclosure process starts.

– Banks will also be prevented from referring loans to foreclosure attorneys while a loan modification is in progress.

– Chicago homeowners will be allowed to appeal loan modification denials. The details as to who they are to appeal to has not been discussed, but I feel as though this is another safety net to maximize the amount of valid modifications.

– One of the most helpful, and compassionate rules is that banks are now required to provide one point of contact throughout the modification process. One phone number, one person, which will give much more peace of mind to Chicagoans.

– And finally, the banks will have deadlines to meet when they approach loan modifications. This will also alleviate some of the headache in regards to waiting for an answer from the banks on a modification.

The Future of Chicago Foreclosures and Loan Modifications

At the very least, these new laws will increase public perception of the banking industry. There will be a little more respect for the industry and some people may even see that there’s some compassion at the banks, rather than a bureaucratic nightmare full of dropped calls and confusing rules. I think this is a step in the right direction to get the Chicago housing market back on track. Which will in turn put more faith in the housing market, and increase sales by encouraging people to return to the market.

Call 312-493-6912 to speak with Chicago Foreclosure Attorney Steven J. Grace to speak more about these topics and to determine what strategy to pursue to avoid foreclosure.

Banks Extinguishing Second Liens

The Background

On April 9th, 2012 a Federal Judge approved a mortgage foreclosure settlement between most Attorney Generals and Bank of America, CitiMortgage, Ally Financial, Wells Fargo and JPMorgan Chase. The total settlement amount was $26 billion. This money will go towards offering compensation for the “Robo-Signing” scandal and other bank failures in regards to foreclosure. The settlement also increased administrative oversight. Under this settlement banks have until Oct. 2 to comply with more than 300 new foreclosure processing standards. In addition, $17 billion will go towards mortgage modifications and principal reductions. A principal reduction is when the bank agrees to forgive a certain amount of mortgage debt, or to cancel that debt completely. As of August 29th 2012, these banks reported that they granted $10.56 billion of relief to 137,846 homeowners between March 1 and June 30. This type of “relief” offered is cloudy, and it was stated that almost half of those helped weren’t keeping their homes.

Second Lien Cancellation

In the past two weeks I’ve had three clients call and tell me they’ve received letters stating that the second liens on their homes have been eliminated. The specific banks that I’ve seen these from were Bank of America and Chase. These letters are being sent out unsolicited, and are assumed to be agreed to by the homeowner unless they explicitly reject the offer. The total amounts due on these second mortgages has been in the hundreds of thousands of dollars! The homeowner doesn’t have to do anything, and I’m assuming the bank will file a release of lien with the recorder of deeds. Theoretically, this could even give a home equity. The thing that is important to remember is that this does not solve foreclosure issues if a first mortgage is still delinquent. Which, I would guess, is the case for many homes in Illinois receiving these letters. Realistically, this seems like a way for the banks to abide by the Attorney General settlement while still doing the absolute least to help homeowners. A much more effective, and generous, solution would have been to grant principal reductions to first mortgage AND bring them current, which I haven’t seen yet. This way homeowners could be in the black with their investment while saving their homes in the process. In my opinion, this is good news for homeowners, but I doubt it will make a real difference in saving homes.

Call 312-493-6912 to speak with an experienced Chicago Foreclosure Attorney to explore your options regarding Bankruptcy, a Deed In Lieu of Foreclosure, a Short Sale or a Foreclosure Defense strategy.
Also, a Chapter 13 Bankruptcy will enable you to catch up on your mortgage, possibly strip a lien, and to discharge your credit card debt for cents on the dollar.

Loan Modification Re-Default Rates

The Study

Early this year, Moody’s released a study of the re-default rates on around 78,000 loans that were modified between January 2009 and July 2010 by most of the major mortgage servicers. Re-default means that once a mortgage has been modified and brought current, the homeowner then defaults (or stops making payments), once again.

The Data

Here are the re-default rates for the participating servicers:

– Wells Fargo – 29%
– Bank of America – 33%
– American Home Mortgage – 26%
– JPMorgan Chase – 22%
– Ocwen – 24%
– GMAC Mortgage – 23%
– Litton Loan Servicing – 20%
– CitiMortgage – 20%

What This Means

This means that around 25% of all mortgages that have been modified to make the payment more affordable for a homeowner, eventually go back into default. For the most part, this means that HAMP is a success in what it intends to do, make mortgage payments easier to make for homeowners. But it also says something about the state of the housing industry, and the economy in general. I would guess a large portion of the re-defaults are because homeowners realize that even if they can afford their mortgage, its still a losing investment, their property is still underwater. Also, I’d guess that some of these re-defaults are as a result of a further decrease in income, or even from homeowners losing their jobs (or experiencing other financial hardships) even after they have received a modification.

Chicago Foreclosure and Bankruptcy Attorney

So until these underlying fundamental problems with the housing market and the economy are fixed, I’d expect re-default rates like this to continue into the foreseeable future. There are many things that can be done when faced with foreclosure issues. Please call 312-493-6912 to speak with an experienced Chicago Foreclosure Attorney to explore your legal options. An experienced foreclosure lawyer will be able to devise a strategy using foreclosure defense, bankruptcy, a deed-in-lieu of foreclosure or a short sale to guide you through the process. Depending on your goals we should be able to devise a custom strategy to help make the process as stress free as possible.

A Foreclosure Attorney’s Warning to Big Banks

The 7th Circuit finally gave some guidance to big banks for when they think of violating HAMP Loan Modification Finalizations: Beware. In Wigod v. Wells Fargo Bank, N.A. Appeal No. 11-1423 (7th Cir. Mar. 7, 2012) the Court stated that the Plaintiff Lori Wigod did have standing to continue with her class action lawsuit against Wells Fargo Bank for violating its loan modification agreement.

Some HAMP Background

HAMP stands for Home Affordable Modification Program which is a government program that gives incentives to lenders to help make mortgages more affordable for homeowners. There is certain criteria that must be met before the process can be started but a large percentage of Americans qualify for this assistance. Simply put, Lenders use specific formulas with the goal of lowering a person’s mortgage to 31% of their gross monthly income. Once a homeowner has submitted all the necessary documentation to support their situation, the lender then puts a borrower on a “trial plan”. This is basically a period where the bank determines whether or not a homeowner can afford the new lower payments. At the end of this period the bank determines whether or not to make this trial permanent, barring changes in circumstances and other problems with paperwork.

What I’ve Seen

I can’t tell you how many times I’ve seen the banks take payments for the entire trial period, and then deny a final modification. In my experience, banks will look for whatever reason they can find to deny a final modification. That’s because, in my opinion, the banks get to collect these fees for as long as the homeowner is willing to make payments, and they can still foreclose on the house in the end. For the most part, a trial period is nothing more than an elaborate way to collect mortgage payments from a struggling homeowner. A debt collection method. I’ve seen banks collect for up to 9 months and still sell a person’s house in foreclosure!

What This Means

In the case mentioned above, this is exactly what happened to Lori Wigod. She was offered a trial period, made her payments and submitted all necessary paperwork, and was still denied her final modification. The Court stated that she did have the right to pursue a breach of contract claim (among others) under Illinois State Law. This is a big blow to banks who think that they can just take a borrowers money and throw them aside in the end. This has been happening to too many people and has been going on for far too long. This is very good news for homeowners, and hopefully banks will take this as a warning.

Chicago Foreclosure Attorney or Chicago Bankruptcy Attorney?

Here, it may not have been realistic, but a foreclosure defense strategy and a chapter 13 bankruptcy will also deal with many of the issues that a delinquent homeowner faces. For example, by contacting a Chicago Foreclosure Attorney to look for legal issues with your mortgage you may be able to force the bank to grant a modification. Also, by contacting Chicago Bankruptcy Attorney to file a Chapter 13 bankruptcy, you can repay your arrears over a period of 3-5 years. Furthermore a Chapter 7 Bankruptcy may also clear up your debt which will increase your chances of receiving a modification. Please call 312-493-6912 to speak with Attorney Steven J. Grace about your options.

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At The Law Offices of Steven J. Grace, based in Chicago, Illinois, we represent clients throughout Chicagoland, including the cities of Deerfield, Jefferson Park, Lisle, Northbrook, Oak Brook, Park Ridge, Schaumburg, St. Charles and Warrenville; and other communities in Cook County, Dupage County, Will County, Grundy County, Kendall County, Kane County, LaSalle County and Lake County.