LIEB BLOG

Legal Analysts

Showing posts with label Mortgage Trouble. Show all posts
Showing posts with label Mortgage Trouble. Show all posts

Wednesday, January 22, 2014

Case Escalations: Power to the Homeowner

Have you applied for a loan modification and felt that your servicer did not properly review you for HAMP and other Making Home Affordable programs? Perhaps your servicer lost your documents or failed to provide you with the proper update on your file? Well, what are you waiting for? Escalate your case today and demand your servicer to be in accordance with the MHA guidelines!

Homeowners may contact the MHA Hotline at 888-995-HOPE to request assistance in the escalation of their cases. The MHA Support Center, acting as an intermediary between the homeowner and servicer, ensures that the servicer is complying with the MHA guidelines and is reviewing homeowners’ case escalations in a timely fashion. However, homeowners may also contact their servicers directly or authorize their attorneys to go through the HAMP Solution Center (HSC) to seek resolution. No matter what route is taken, it may take up to 30 or more days for an escalated case to be reviewed and resolved, so homeowners should act immediately if they believe to have been wrongly denied a MHA Program.

Case escalations give power to the homeowner and keep disorganized servicers in check. Please go here if you would like to know how to escalate your case today!


Thursday, December 12, 2013

Mortgage Changes less than a Month Away – What to expect on January 10, 2014

A whole new world of getting a mortgage is coming in the beginning of 2014. You should get familiar now!!!

To remind you, in the years before 2008, financial institutions were subject to little regulation in the United States. Many lenders did not even bother to verify income or debt before handing over adjustable-rate mortgages (ARMs) to consumers who could not afford them. High risk lending was the norm and mortgage fraud was rampant. These practices caused the subprime mortgage crisis and the worst recession that the country has experienced since the 1930s. Thousands of homes were foreclosed on and over one hundred mortgage lenders went bankrupt as more and more people could no longer afford their monthly mortgage payments.

As a result, The Consumer Financial Protection Bureau is issuing a final rule that prohibits high risk lending and implements the Truth in Lending Act and sections 1411, 1412, and 1414 of the Dodd-Frank Act. This rule will take effect on January 10, 2014, and will require mortgage lenders to verify consumers’ income and debt. Prepayment penalties that punish borrowers if they sell or refinance their home within a certain time frame are now generally prohibited. Qualified mortgages, which are less likely to end up in default, are defined in great detail and cannot have terms longer than 30 years or fees exceeding 3% of the total loan amount.  Lender are also encouraged to refinance adjustable-rate mortgages (ARMs) and must maintain documentation of compliance for three years after the loan is given to the consumer.


To remain in the real estate game, you must understand these rules and what a qualified mortgage is as that will drive the industry. Please read the rule for yourself!

Will We See an Extension of the Mortgage Forgiveness Debt Relief Act through 2014?

The Mortgage Forgiveness Debt Relief Act of 2007 has provided relief to thousands of borrowers who have completed short sales or obtained loan modifications with mortgage principal reductions. Before this law was enacted, any forgiven mortgage debt was taxable by the government. For example, if a lender reduced a borrower’s principal balance by $100,000.00, then the borrower would have to report that forgiven debt as ordinary income and pay taxes on it.  This was, of course, impractical and unreasonable for borrowers who were already experiencing financial hardship and were relying on modifications or short sales to save them from foreclosure. Most borrowers could not afford their tax bills and were stuck in the same situation as they were in before they had requested help from their lenders.

Under The Mortgage Forgiveness Debt Relief Act of 2007, borrowers do not have to pay taxes on cancelled mortgage debt as a result of a modification or foreclosure of their primary residence. This act was originally supposed to end at the end of 2012, but it was granted an extension through 2013 on the third day of the new year.

An extension may be granted through 2014, but it is unlikely. Both H.R. 2788 and H.R. 2994 are bills that will extend The Mortgage Forgiveness Debt Relief Act for at least another year, but they were each referred to committee over the summer and have received no attention since. There are 44 cosponsors for H.R. 2994, but it is already now the middle of December and time is running out. In order for this bill to be enacted, it still needs to pass the House and Senate and it must get signed by the President before December 31, 2013. It is improbable that an extension will be granted, but not impossible; especially with the economy rebounding and many forgetting the plight of those left behind. It’s important to not forget these individuals that still need relief and who have often spent years trying to get a modification or a short sale approved only to now be taxed when they finally get the relief that they have hoped for.


So for them, please tell your local representative how important it is that these Bills are passed and The Mortgage Forgiveness Debt Relief Act of 2007 is extended for another year.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Thursday, October 24, 2013

Supplemental Directive 13-09 to the Making Homes Affordable Handbook will speed up the loss mitigation process

Are you sick of the unnecessarily long HAMP application process? Do you have countless loss mitigation initial packages sitting on your desk at home? Well, good news! Supplemental Directive 13-09 to the Making Homes Affordable Handbook, issued on October 18th, 2013, makes the loss mitigation process more efficient.

Under Section 2.2.2 of Chapter II of the Making Homes Affordable Handbook, “Right Party Contact” is established when the Lender successfully communicates with the borrower regarding loss mitigation options. After these options are discussed and the borrower decides to apply for the Home Affordable Modification Program (HAMP), the servicer must submit to the borrower an initial loss mitigation package that would allow the borrower to apply for HAMP. This package, at a minimum, must include the Request for Mortgage Assistance form, which asks the borrower to outline his income, expenses, assets, real estate, and reason for delinquency.  The package, however, can also include documents such as 4506-T, which grants the servicer access to the borrower’s tax returns, and the Dodd-Frank Certification form, which requires that a person is ineligible for any MHA program if that person has been convicted of felony, larceny, theft, fraud, forgery, money laundering, or tax evasion in the last ten years.

Before Supplemental Directive 13-09 was issued, if the borrower did not at least complete and submit the Request for Mortgage Assistance, the servicer had to re-submit the entire initial package to the borrower.
However, under Supplemental Directive 13-09, if the borrower submits any documents of an initial package, such as the 4506-T, RMA, or Dodd-Frank Certification, the servicer must now confirm receipt of the documents and submit an “Incomplete Information Notice.” No longer does the servicer need to re-submit the entire initial package if the borrower only completes a 4506-T.  An Incomplete Information Notice is sufficient. The only time the servicer must re-submit the initial package is when the borrower does not submit any documents whatsoever.

In Section 4.5 of Chapter II of the MHA Handbook, before Supplemental Directive 13-09 was issued, servicers confirmed receipt of initial package within 10 business days and had to make a decision regarding the borrower’s request for HAMP within 30 days. The servicer was not required to respond immediately to requests and this was one of the biggest problems when applying for HAMP or other loss mitigation options. The process dragged on and the borrower sometimes had to wait an entire month before hearing from his or her servicer regarding the loan modification application.

However, under Supplemental Directive 13-09, the servicers must now confirm receipt of the initial package within 5, not 10, business days and must also inform the borrowers at this time whether or not additional documents are needed to complete the loan modification application. This amendment to the MHA Handbook will speed up with loan modification application process. Servicers must confirm receipt of documents and inform of additional document requests within 5 business days.

Also, under the Supplemental Directive 13-09, if the application remains incomplete for a long period of time and the servicer has diligently attempted to obtain the requested documents from the borrowers, then the borrower can be deemed as ineligible for HAMP. If this happens, the servicer must submit to the borrower a “Non-Approval Notice” that informs the borrower why he or she is ineligible for HAMP at this time. This does not mean, however, that the borrower will be forever ineligible for HAMP. If there is a change in circumstances, for example, a new application for HAMP may be submitted to the servicer.


Once a complete loan modification application is submitted to the servicer, the review process begins and takes up to thirty (30) days.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Wednesday, October 16, 2013

Cracking Down on Strategic Defaulters

Do you know someone who purposely defaulted on his mortgage even though he had the ability to pay it? Perhaps this person did not want to waste his hard-earned income on mortgage payments but instead saved up for a cruise to the Bahamas. Or maybe this person owed more than he originally paid for the home and did not want to continue paying it any longer. Whatever the reason, this person is not alone. There are thousands of these “strategic defaulters” in the United States, many of whom get away with not paying deficiencies because Fannie Mae and Freddie Mac have been lax in pursuing them.

Fannie Mae and Freddie Mac are supposed to evaluate every defaulter’s ability to repay the past due amount on their mortgages. Even after foreclosure, these two government-sponsored enterprises and many other lenders can still go after borrowers with deficiency judgments.

However, according to the recent report from the Office of the Inspector General at the Federal Housing Finance Agency (FHFA), Freddie Mac did not evaluate nearly 58,000 foreclosures for deficiency collectability. That is $4.6 billion that went unchecked and could have at least partially been recovered by Freddie Mac. Thousands of strategic defaulters were set free of the past due amounts that they owed on their mortgages.

The Office of the Inspector General is rightfully horrified by these numbers and is fiercely recommending the FHFA to oversee Freddie Mac’s deficiency recovery strategies to ensure that these strategies become efficient and effective in the near future. The fact that so many have gotten away with this practice in the past few years only encourages more to do so.

No longer should strategic defaulters get away with robbery.

In a separate recent report, the Office of the Inspector General recommends the FHFA to closely oversee Fannie Mae’s deficiency recovery strategies as well. From January 2010 to June 2012, Fannie Mae did not pursue deficiencies in 29,692 foreclosures because the states’ statutes of limitation for pursuing these deficiencies had expired or were about to expire. Fannie Mae is in a better position than Freddie Mac in terms of collecting on deficient judgments, but it can still drastically improve its methods so that it can obtain deficiencies even in states with short deadlines for filing claims.


If you have a loan insured by Fannie Mae or Freddie Mac and you strategically defaulted on your mortgage, watch out. The two enterprises will not be lax any longer.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information.