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Showing posts with label Foreclosure Defense. Show all posts
Showing posts with label Foreclosure Defense. Show all posts

Wednesday, October 14, 2020

Consent to Foreclosure or Deed in Lieu as Mortgage Workout Options: Which is Better?

With roughly 10% of Long Island homeowners behind on their mortgage, it's time to start thinking about foreclosure settlement options. Andrew Lieb breaks down the difference between a deed-in-lieu and a consent to foreclosure in this helpful article for lenders and borrowers alike.




Monday, October 05, 2020

Federal Eviction and Foreclosure Moratoriums Invite Litigation

Andrew Lieb published the article in The Suffolk Lawyer, Federal Eviction and Foreclosure Moratoriums Invite Litigation. This article discusses issues that will be litigated if an eviction moratorium is raised as a defense to an eviction proceeding.

Tuesday, July 21, 2020

Foreclosure Tsunami Coming - Litigation Checklist

The moratorium on foreclosures expires on August 20th (EO 202.28) and a foreclosure tsunami is coming.

According to CNBC, "32% of U.S. households missed their July housing payments" based on a survey by Apartment List, which also advises that 17% of "homeowners [are] concerned about foreclosure."

To prepare for the tsunami, we are giving you our 10-Point Inspection Checklist to evaluate a foreclosure case. Whether we are representing the lender or the borrower, we utilize this list to evaluate the strength of the case, which, when coupled with an evaluation of the borrower's current mortgage terms (i.e., L/V ratio front end/back end, interest rate, principal, interest to date, penalties, attorneys' fees, months of missed payments, prior modifications/forbearances, etc.) is how we assess whether a modification, or other workout, should be considered.

10 Point Inspection Checklist:

  1. Standing of plaintiff (owner / holder of note on date of commencement or authorized agent of such owner / holder pursuant to Pooling and Servicing Agreement or other agreement)
  2. Record admissibility (swearing to business records of another entity; failure to attach business records to affidavits)
  3. RPAPL 1303 / 1304 / 1305 / 1306 compliance
  4. Acceleration / Deacceleration (statute of limitations) 
  5. Notices tendered in satisfaction of note terms
  6. Lis Pendens filing
  7. Payment history for default calculations / date (requisite missed months for default requirement in note / aligned with notices / statute of limitations)
  8. Default on Answer with time since settlement conference for late answer availability
  9. Service / personal jurisdiction issues
  10. Pleadings requirements (Certificate of Merit - CPLR 3012-B, RPAPL 1302)

In our upcoming Real Estate Investing shows, WRCN / FM 103.9 / Sundays at Noon, we will be breaking down this list into plain English and showing you how to litigate foreclosure cases whether you are the lender or the borrower.

Friday, January 10, 2020

New Law: Mortgage Forgiveness Debt Relief Act Extended to 1/1/2021

On December 20, 2019, Public Law No: 116-94 extended 26 USC 108(a)(1)(E) to 1/1/2021. 

According to the IRS, this law "allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief."

Short sales, modifications with debt forgiveness, and deeds in lieu of foreclosure are now viable options for many more distressed homeowners for the remainder of 2020.

Tuesday, December 24, 2019

New Law: Foreclosure Standing Never Waived - Renew Your Case Today

On December 23, 2019, S5160 was enacted and "the defense, in a mortgage foreclosure action, of the plaintiff's lack of standing is not waived because of the defendant's failure to raise such defense in his or her responsive pleading."

A standing defense is utilized to argue that the plaintiff is not the right party to sue in that it's not the owner of the mortgage or debt and has not been appointed the power by such owner to pursue the lawsuit. This is one of the most significant changes to the foreclosure litigation practice since the Great Recession and will impact litigation for years to come.

Real Property Actions and Proceedings Law section 1302-a is an early Christmas present to defendants in ongoing litigation as it took effect immediately and appears to apply up until sale even if a Judgment of Foreclosure has already been ordered. Specifically, the new section states that "[a] defendant may not raise an objection or defense of lack of standing following a foreclosure sale." As such, it appears the defense of standing can be raised at any time before the sale.

If you are defending a case that is post-Judgment of Foreclosure and Sale and pre-auction sale, you may want to consider bringing an Order to Show Cause with a Motion to Renew pursuant to Civil Practice Law & Rules Rule 2221-e immediately.

Saturday, December 07, 2019

New Law: Reverse Mortgages Regulated

On December 6, 2019, A5626 was signed into law to regulate reverse mortgages. The new law takes effect on March 5, 2020. 

A reverse mortgage means "[a] loan which is secured by a first mortgage on real property improved by a one- to four-family residence or condominium that is the residence of the mortgagor(s) the proceeds of which are advanced to the mortgagor(s) during the term of the loan in equal installments, in advances through a line of credit or otherwise, in lump sums, or through a combination thereof."

The new law has the following features at new Real Property Law section 280-b:

  1. Marketing & offering of reverse mortgage loans are regulated to avoid unfair or deceptive practices;
  2. Consumer protection materials are required to be included in marketing such loans & the Superintendent is authorized to promulgate rules & regulations to protect consumers;
  3. Loans that pay taxes, mortgage insurance, homeowners insurance, or other property obligations must provide the borrower with periodic account statements & a required warning notice;
  4. When the escrowed money for payments of obligations are depleted to 10% or less, the borrower will get a telephone & mailed notice about the borrowers obligations; 
  5. Restricts lenders from paying borrowers obligations on the property (taxes, mortgage insurance, homeowners insurance, etc.) as advance payments & only permits lenders to pay when there are arrears;
  6. Restricts foreclosures based on primary residence restrictions; 
  7. Requires both the lender & the borrower to be represented by an attorney at the closing of the loan; 
  8. Borrowers who are injured from a violation by a lender have a private right of action for treble damages & reasonable attorneys' fees; & 
  9. Violating this statute by a lender works a complete defense for a borrower in a foreclosure action.

Tuesday, July 26, 2016

Changes to New York Foreclosure Law Impose Stringent Penalties for Failing to Negotiate in “Good Faith”

Recently Governor Andrew Cuomo signed into law a comprehensive piece of legislation, which makes sweeping changes to New York’s requirement that Lenders and Borrowers negotiate in “good faith” during Mandatory Foreclosure Settlement Conferences.

Under New York foreclosure law, in a residential foreclosure action, commenced on or after February 13, 2010, involving a 1-4 family owner occupied property, it is required that a Mandatory Foreclosure Settlement Conference be held within sixty (60) days of service of the foreclosure summons and complaint. The purpose of the Mandatory Foreclosure Settlement Conference is to provide a venue for Borrowers and Lenders to settle the foreclosure action without further court action, via a loan modification, deed-in-lieu, short sale or other loss mitigation option. At this settlement conference, it is required that both parties negotiate in “good faith.”

However, the implementation of New York’s Mandatory Foreclosure Settlement Conference and its “good faith” negotiations requirement, has had its fair share of complications. To mitigate these complications, this recently enacted legislation, which takes effect on December 20, 2016, places stringent guidelines on the documentation and information that both parties must come to the conference with and requires that both parties, or representatives thereof, appear at the conference with full authority to settle the case.

Additionally, the legislation imposes more stringent penalties upon both parties should they fail to negotiate in “good faith.” Where it is found that a Lender has failed to negotiate in “good faith,” one or more of the following penalties may be imposed:
  • A toll of the accumulation and collection of interest, costs and fees during any undue delay caused; 
  • A civil penalty of up to twenty-five thousand dollars ($25,000.00); 
  • Actual damages, fees (including attorney’s fees) and expenses incurred by the homeowner as a result of the Lender’s failure to negotiate in good faith; or 
  • Any other relief that the Court deems just and proper. 
On the other hand, where it is found that a Borrower has failed to negotiate in “good faith,” the Court is required to remove the case from the conference calendar, meaning that the Lender will then be permitted to move forward towards obtaining a Judgment of Foreclosure and Sale. 

Since the Federal Making Homes Affordable (“MHA”) program is due to expire on December 31, 2016, these additional consumer protections, provided by the State of New York, will ensure the availability of continued protections for the State’s distressed homeowners by requiring that Lenders come to the Mandatory Foreclosure Settlement Conferences ready, willing, and able to settle foreclosure actions, or face the consequences.

Monday, June 20, 2016

Major Federal Foreclosure Prevention Program Will Come to an End in 2016

The Making Home Affordable (MHA) Program, which was launched in 2009 to assist millions of distressed homeowners facing foreclosure, is set to expire on December 31, 2016. Under this program, homeowners with non-GSE mortgages (i.e. mortgages not owned or guaranteed by FannieMae or Freddie Mac) may apply and be reviewed for refinancing, loan modifications, short sales, deeds-in-lieu, and unemployment assistance with their lenders in accordance with stringent guidelines set forth in the Making Home Affordable Handbook. Many homeowners who were approved for loan modifications under the Home Affordable Modification Program (HAMP) were also eligible for free HUD-approved credit counseling to assist them in creating a household budget that lowers the risk of default in the future.

Previously set to expire on December 31, 2015, MHA was extended through 2016 due to its widespread success and the continuing need for relief for millions of homeowners nationwide. However, the number of applications under the MHA program have declined overall in recent years due to both the stabilizing housing market and drop in the unemployment rate. At the end of 2015, RealtyTrac reported that there were 1,083,572 properties with foreclosure filings nationwide—a significant drop from the peak of 2,871,891 properties with foreclosure filings in 2010. As of May 2016, RealtyTrac reported a total of 896,913 properties in default, at auction or repossessed by the banks.

The Obama administration has not yet announced another one-year extension to the program through 2017, and it is unclear at this time whether such an extension will be granted. The unknowns that are involved with the looming presidential election make the possibility of an extension even less clear. Though the foreclosure rate is down, there is still a great need for the MHA program for the many properties currently in foreclosure and the many millions more that are still at risk for default.

Homeowners who are still facing the possibility of foreclosure may apply for any of the foreclosure alternative programs under MHA on or before December 31, 2016 deadline.

Though it is not necessary to have a decision on the application for a loan modification, short sale, or deed-in-lieu by the end of 2016 to be eligible under the MHA program, servicers are required under the MHA program to design policies and procedures that ensure that permanent modifications are effective by December 1, 2017 and short sales and deeds-in-lieu are closed by December 1, 2017.

Struggling homeowners should apply now to take advantage of the foreclosure alternatives provided by the MHA program before the deadline of December 31, 2016. If homeowners do not apply by that date, they will be limited to applying for lender/servicer in-house programs, which are usually limited in scope and may not be as affordable or reasonable as the offers under the MHA program.

The candidates for the 2016 election should take a position on the possibility of extending the MHA program through 2017 in order to help the millions in foreclosure and in default. 

Monday, September 28, 2015

Foreclosure & The Economy: The Short Sale Class

We have just opened enrollment for the Free CE on 10/15/15 in Patchogue at Briarcliff College. 

This course is instructed by Andrew Lieb, Esq. Online Registration Only. 

Foreclosure & The Economy: The Short Sale Class.

This course will shock you with the latest developments in New York's judicial foreclosure system from the perspective of a litigating attorney who spends his days in the Courts.
Yes, a short sale is not always arrived at in Court through a Foreclosure Settlement Conference and yes, you must also understand Equator, HAFA and Deficiencies to play in this field. This course will hit home when you gain an appreciation for how a foreclosure will work if a short sale is denied, a Referee is appointed and your listing is Auctioned.
Learn the dos and the don'ts. Become familiar with the terms of art. Know the players. Next, save a friend in need by avoiding foreclosure in this troubled economy.


Wednesday, July 22, 2015

Voice Your Support for Debt Relief for Underwater Homeowners

The Mortgage Forgiveness Debt Relief Act of 2007, which provided tax breaks to homeowners who were forgiven debt resulting from loan modifications, short sales, or deeds in lieu, was not extended through 2015. Though legislation has been introduced in Congress to extend the Act through 2016, it is incumbent on the people, especially on Long Island, where foreclosure rates are still higher than the national average, to contact their representatives and voice their support for the bill.

If you want to speak to your representatives to push for an extension for this bill, there is now an easy-to-use Web app called Democracy.io that allows its users to email their House representative and senators in a group and on a simple platform instead of having to fill out clunky forms for each representative on outdated government websites. Since easy access to the government is an important way of ensuring that the people’s concerns are heard by the government, Democracy.io will soon allow its users to send letters, call, and schedule meetings with their representatives as well.

Though it is still difficult for Congressmen to filter through the millions of messages that are received every day, Democracy.io is nonetheless a step forward in the right direction. As technology becomes simpler on the constituents’ sides, Congress will need to match on its side in order to keep up with the increased flow of communications. For now, all underwater homeowners should take advantage of Democracy.io and contact their representatives about The Mortgage Forgiveness Debt Relief Act of 2007. The more support behind the bill, the more likely it will be pushed through.


You can also track the bill here

Tuesday, May 26, 2015

The Making Home Affordable Program (MHA) has been formally extended 1 year

The Making Home Affordable Program (MHA), has been formally extended 1 year, through December 31, 2016, by Supplemental Directive 15-04. The program has been widely successful in providing affordable alternatives to foreclosure for millions of homeowners nationwide, and the extension through 2016 will provide relief to the millions more who will be in danger of falling behind on their mortgages in the next year.

This extension applies only to mortgages that are not owned or guaranteed by Fannie Mae or Freddie Mac and for applications that are submitted to the Lender on or before December 31, 2016. Though it is not necessary to have a decision on the application for a loan modification, short sale, or deed-in-lieu by the end of 2016 to be eligible under the MHA program, the transaction must close on or before September 30, 2017 if the borrower would like to receive incentive compensation, such as relocation assistance, payments for successfully completing a short sale or deed-in-lieu, or payments for making timely loan modification payments. Since the amount of relocation assistance that Lenders must offer has increased from $3,000 to $10,000 for all HAFA (short sales & deeds-in-lieu) transactions closing on or after February 1, 2015, borrowers must be mindful of the deadlines so that they may be eligible to receive this increased amount to assist them in moving costs.

This Directive also amends the MHA guidebook to allow servicers to establish a cap on the amount that they will pay to release the second mortgage liens, as long as the cap is not less than $12,000. It establishes a floor amount that borrowers may receive from their primary mortgage lenders to assist them in closing on their short sales or deeds-in-lieu.


These amendments ensure that borrowers will continue to have access to adequate relief through the MHA program.

Wednesday, January 21, 2015

Ocwen Financial May Lose its Mortgage License

By the end of this year, Ocwen Financial, one of the largest mortgage servicers in the U.S., may lose its mortgage license in California.

Ocwen has been subjected to numerous investigations over the years regarding improper foreclosures, misplaced and mislabeled borrower documentation, billing issues, and overall failure to comply with federal and state laws and regulations. In December, Ocwen settled an ongoing investigation by the NYS Department of Financial Services (DFS) by agreeing to pay $100 million, which was to be used to support foreclosure defense programs and other relief and $50 million to Ocwen borrowers who reside in New York. As a result, not only did the company’s chairman step down from his position, but DFS will continue to monitor Ocwen in the upcoming years for further unlawful conduct. Although this settlement greatly impacted borrowers in New York, it was held as a victory for borrowers all over the country because it was supposed to put Ocwen in check and to stop it from continuing its cycle of financial abuse.

Unfortunately, the story does not end there. California now wants to suspend Ocwen’s mortgage license in the state as a result of Ocwen’s failure to provide mandatory documentation to the Department of Business Oversight, which is responsible for determining whether Ocwen is complying with state regulations in California. Ocwen issued a press release on January 13, stating that it is committed to resolving the issues in California, especially since its shares are crashing as a result of the news. It is crucial that Ocwen turns its business practices around and finally provide high quality assistance to its borrowers. Otherwise, it will surely fail.

Settlement conferences will begin in February. If nothing is resolved, Ocwen will not be able to do business in California for at least a year. If that happens, Ocwen may not be able to survive such a huge blow.

Monday, January 12, 2015

New NYS Foreclosure Prevention Program is Closing its First Loans

Yesterday, the New York Attorney General, Eric Schneiderman, announced in a press release that the first loans have closed in the New York State Mortgage Assistance Program (NYSMAP) to help homeowners across the state pay off their mortgage arrears and/or liens in order to avoid foreclosure.

This program was launched on Long Island in September and was opened to the rest of the state in mid-October to provide funds to homeowners so that they may apply and be approved for loan modifications. Since one of the most common reasons for loan modification denial is the inability to pay off mortgage arrears, unpaid property taxes, and liens on properties in foreclosure, these NYSMAP loans are specifically designed to help homeowners pay off these types of debt up to $40,000. The program has already received 41 loan applications and approved 9 loans from Long Island alone. Mr. Schneiderman is predicting that hundreds of loans across the state will be approved over the next year, helping homeowners obtain loan modifications and keep their homes into the future.

Click here at nysmap.org or call 855-466-3456 to see if you are eligible for a loan through NYSMAP.

Thursday, November 13, 2014

New York Foreclosure Settlement Conferences are Tools to Help Homeowners Stay in Their Homes

New York is one of many states across the country that has implemented court-mandated settlement conferences for residential foreclosure actions.

It is important to understand how these conferences work so that homeowners can take full advantage of this opportunity to delay and avoid foreclosure. The initial conference must be scheduled within 60 days after the proof of service of the complaint has been filed with the county clerk and allows the borrower to meet with his or her Lender and a court referee or judge to discuss potential workout options, such as loan modifications or payment plans. If the borrower decides to apply for a loan modification, the Lender provides the borrower with a document request for the loan modification application, and the court referee sets deadlines for the submission and review of the application. Typically, there are numerous conferences throughout the application process in order to ensure that the borrower is complying with the Lender’s document requests and that the Lender is properly reviewing the application. If a borrower believes he was improperly denied a loan modification, his attorney may request a bad faith hearing with the judge to determine whether the Lender should be sanctioned for bad faith negotiations. These settlement conferences not only help homeowners delay the foreclosure process but also can stop the foreclosure process all together.

Not every person who has a property in foreclosure in New York State is entitled to these mandatory pre-trial foreclosure settlement conferences. The law in New York (CPLR 3408), extends the conferences only to owner-occupied residential properties, so if a homeowner has a vacant property or a rental property in foreclosure, he or she is not entitled to a CPLR 3408 conference as of right.

Further, CPLR 3408 does not apply in federal court, but settlement conferences are still available at the federal level. Rule 16 of the Federal Rules of Civil Procedure allows federal courts to hold pre-trial conferences for the purpose of settlement negotiations and encourages judges to take an active part in the settlement negotiations. The procedures differ at the federal level but the purpose is still the same. These conferences are often the difference between a homeowner staying in his or her home and losing it.

Wednesday, October 08, 2014

New Amendment Allows For Borrowers to Re-Modify Loans That Have Already Received a HAMP Modification If They Experience a New Hardship

Great news for those struggling with their mortgage after previously receiving a modification! Now, you can re-modify your mortgage due to recent amendments to the Making Homes Affordable (MHA) Handbook. On September 30th, Treasury released Supplemental Directive 14-03, which provides new guidelines, updates and clarifications that servicers must follow.

To better understand these new amendments, previously, a servicer could not re-modify a loan that received a HAMP permanent modification until either the loan lost good standing or more than 5 years had passed since the permanent modification effective date.

Now, the new rule permits a loan that was previously permanently modified under HAMP to be re-modified regardless of loss of good standing so long as, either, the borrower has experienced a change in circumstance, or at least 12 months have passed since the HAMP Modification Effective Date. This amendment will allow for borrowers to re-modify loans that have already received a HAMP permanent modification if they experience a new hardship or if one year has passed.

Tuesday, May 27, 2014

Foreclosure Activity is Down Nationwide

Nationwide foreclosure activity is at its lowest point since 2007. The amount of auctions, defaults, and repossessions have substantially decreased across the country. Only 17% of all mortgaged homes are seriously underwater as opposed to 29% in 2012, and negative equity is down overall.

It is anticipated that we will also start to see a decline in short sales in 2014 due to two major reasons:

a. The Mortgage Forgiveness Debt Relief Act has not been passed for 2014. This means that borrowers are liable for the income tax on the forgiven debt in a short sale. In many cases, this kind of tax bill is too high and the borrower must default on his or her tax bill. The IRS can subsequently garnish wages, freeze bank accounts, and place liens on assets without having to first obtain a judgment. Many borrowers are unwilling to put themselves in such a position and would rather let the property go to foreclosure than to have the IRS go after them for money they do not have.

b. Lenders are less likely to approve short sales today because they know they can successfully sell the properties at auction or as an REO (bank-owned property) at a higher price because fair market value for real estate is on the increase.


Please note that the total amount of foreclosures (percentage of units by area) in Suffolk County is higher than the national average and the New York State average, and the amount of Suffolk County homes in pre-foreclosure is on the rise. Overall, however, foreclosure auctions are down in Suffolk County just as the rest of the nation. Keep this in mind, brokers, as you navigate the real estate in Suffolk County.

Friday, May 16, 2014

New Policy to Reduce Foreclosures on Long Island

Starting in June 2014, judges on Long Island will take on a substantial role in Foreclosure Settlement Conferences as issues arise in foreclosure litigation. The purpose of this new policy is to solve homeowners’ issues in an efficient way and help more homeowners obtain loan modifications in an area of the country where the percentage of foreclosures is still quite high.

New York requires judicial intervention in the foreclosure process. It is New York State Law that the courts must hold Foreclosure Settlement Conferences for all residential foreclosure actions involving home loans originating between January 1, 2003 and September 1, 2008, or nontraditional home loans. Previously overseen only by Court-appointed referees, these conferences allow borrowers to discuss workout options with their mortgage lenders in order to avoid foreclosure. However, the process has always been flawed, as lenders oftentimes would send representatives who not only did not have knowledge of the cases but also had no authority. This new policy is supposed to address these types of issues quickly, correct the flaws of the Foreclosure Settlement Conferences, and protect borrowers against the wrongful practices of these mortgage lenders. A judge is much more equipped to handle these issues than a referee, allowing for fewer foreclosures on Long Island.

Thursday, April 24, 2014

Guidelines Shifting for the Federal Loan Modification Program

Updates to the Making Home Affordable Handbook for the federal Home Affordable Modification Program are available here and will be effective July 1, 2014!

Top things you need to know about HAMP:
  1. The Home Affordable Modification Program (HAMP) is a federal program designed to help homeowners obtain affordable loan modifications.
  2. HAMP Tier 1 only applies to loans of principal residences.
  3. A HAMP Tier 1 mortgage payment must reflect 31% of the homeowner's gross monthly income.
  4. HAMP Tier 2 may apply to loans of principal residences or to loans of rental properties.
  5. A HAMP Tier 2 mortgage payment must be within the range of 25% to 42% of the homeowner's gross monthly income.
  6. A HAMP Tier 2 mortgage payment must represent a reduction of at least 10% of the original mortgage payment amount. 
However, Supplemental Directive 14-02 to the Making Home Affordable Handbook is drastically changing the requirements under HAMP Tier 2 to make it easier than ever to get a loan modification on a non-GSE rental property!

In Section 6.3.3 of Chapter II of the MHA Handbook, the post-modification principal and interest payment under HAMP Tier 2 must be at least ten percent less than the pre-modification principal and interest payment. To clarify, if the original monthly principal and interest mortgage payment is $3,000, then the modified monthly principal and interest mortgage payment under HAMP Tier 2 must be $2,700 or less according to the ten percent reduction rule. Under this Supplemental Directive, however, this required percentage is totally erased. Now, it is only required that the post-modification principal and interest payment be less than the pre-modification principal and interest payment, thus expanding the amount of homeowners eligible for HAMP Tier 2. In the past, many homeowners were ineligible because servicers could not reduce the principal and interest amount by the required percentage due to the default amount, monthly real estate taxes, property value, and other similar factors. Without a required percentage, servicers will have a much easier time reducing the post-modification principal and interest payment for more homeowners across the country.

However, it should be noted that servicers may require a minimum reduction as long as that reduction is not greater than ten percent. Servicers must include this minimum reduction in their written policy if they choose to do so.

Another important clarification is the modification of loans prior to the loss of good standing. If a homeowner would like to modify an already HAMP-Tier 1-modified loan and is not in default on that loan, he or she may be eligible for HAMP Tier 2 if it has been more than five years since the HAMP Tier 1 modification. Once a homeowner accepts a HAMP Tier 1 loan modification, he or she cannot obtain another one in the future if that loan goes into default again. HAMP Tier 2, however, would still be available to this homeowner as a loan modification option (even if the property is a primary residence) as long as it has been more than five years since the original HAMP Tier 1 modification date. Since the Home Affordable Modification Program is the federal program to help homeowners cure their default, it always has priority over Lender in-house modifications.

Also included in this Supplemental Directive are updated guidelines regarding post-modification counseling, assistance for homeowners with limited English proficiency, and notice of interest rate step-ups. Although these guidelines are important as well, it is crucial that real estate agents focus on the new HAMP Tier 2 guidelines, especially if their clients own rental properties that are in risk of default or are currently in default. The more knowledgeable you are able these guidelines, the more your clients will trust you in other aspects of real estate.

Again, these updated guidelines will be effective July 1, 2014, and it is important that you understand and prepare for these changes. 

Wednesday, February 26, 2014

Fannie Mae and Freddie Mac are Setting Records in Profits

Due to the housing bubble burst in 2008, the federal government took ownership of the mortgage giants, Fannie Mae and Freddie Mac, and bailed them out of financial ruin. Not only did this bailout cost $187.5 billion in taxpayer dollars, but it also took years for Fannie Mae and Freddie Mac to recover from their monumental losses and begin to profit again.

However, there is good news! Now that the mortgage giants are profitable again, they have more than repaid the government for their 2008 bailout by paying dividends to the U.S. Treasury of $192.5 billion. Fannie Mae alone broke records with its $84 billion profit in 2013, completely exceeding the government’s expectation of recovery.

Fannie Mae and Freddie Mac do not expect to make as huge a profit in 2014 as they did in 2013, but they are hopeful that they will remain profitable in the long run. The Obama Administration, however, still wants to overhaul the mortgage giants and take away their monopoly on the mortgage market. There is currently a bipartisan bill in the Senate called the Housing Finance Reform and Taxpayer Protection Act of 2013 that focuses on financial reform and will hopefully take center stage this year.

Brokers, keep in mind that the housing market may drastically change in the next 5 years as private lending replaces the government-sponsored enterprises. However, now that the mortgage giants are turning such huge profits, reform may experience some delays. It is difficult to enact reforms when times are good, even though another financial crisis always looms on the horizon. 

Wednesday, January 08, 2014

Supplemental Directive 13-09 to Take Effect in Two Days

The time has come! Supplemental Directive 13-09 to the Making Homes Affordable handbook will take effect in two days on January 10, 2014.

As discussed in a previous entry, this Supplemental Directive makes the loss mitigation process easier, clearer, and more efficient. It is an alignment with the final Consumer Finance Protection Bureau (CNPB) Mortgage Servicing Regulations, which prohibit high risk lending and will also take effect on January 10, 2014. 

Servicers must review documents and submit Incomplete Information Notices in tighter timeframes than ever before. This makes sense because most borrowers submit incomplete initial packets anyway and should be advised of missing documents immediately to move forward from the initial stage. By contacting the borrowers earlier and responding to them quicker, servicers are now able to maximize borrower protection in their review of loan modification applications.

The Department of the Treasury and the Department of Housing and Urban Development did not want to completely overhaul the Making Homes Affordable guidebook because they did not want to alter or destroy the integrity of the programs. All changes to the Making Homes Affordable handbook were kept to a minimum and in accordance with the final CFPB Mortgage Servicing Regulations. Remember, the CFPB regulations are the bare bones of requirements for servicers, so when servicers review borrowers for HAMP, they still must consider the Making Homes Affordable handbook and state laws as well.  

Also, HAMP still remains top priority even though CFPB regulations require borrowers to be considered for all loss mitigation options at the same time. If the servicer participates in the HAMP program and the borrower is eligible for HAMP, the borrower must be given HAMP over other in-house loan modifications.