Borrowers of Bank of America May Have Something to Smile About

Customers of Bank of America may have something to smile about finally as 200,000 delinquent Borrowers to Receive Principal Write-Down Offers. Bank of America is wasting little time in getting one of the most popular terms of its recent settlement with the federal government underway. Bank of America sent out more than 200,000 letters this week to delinquent borrowers who where “thought to be eligible for principal-reducing modifications.” The requirements are simply that the homeowner owe more on the mortgage than the property is worth and have been at least 60 days behind on payments at the end of January 2012. If monthly housing costs turn out to be more than a quarter of the homeowner’s gross household income, then they could qualify for savings of 30 percent according to Bank of America estimates. The lender has been working since March on trial modifications that hold the potential to forgive more than $700 million in mortgage debt. However, the trial modifications require three “timely trial payments” before a modification is eligible to become permanent. This has become customary in the industry anyway, so it is not much of a hurdle. There is one major caveat to this initiative, however: if your loan is serviced by Bank of America but held by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), or the Veterans Administration (VA), then it is not eligible for a write-down under the terms of the foreclosure fraud settlement. That represents a lot of loans, but this is still good news for many borrowers. I have several clients in the program, so we will see what happens. Bank of America committed to forgiving $11 billion in total mortgage debt under that settlement, but if all homeowners who receive these letters – and others like them in Q3 2012 – were to receive permanent loan modifications, the actual number might be closer to $30 billion. We can all believe it when we see it!! Paddy Deighan J.D. Ph.D http://www.homesavers.pro

Reverse mortgage Update..Now Bank of America and Wells Fargo Terminate Programs

Several days ago I mentioned that Wells Fargo pulled out of the reverse mortgage market. They will continue to service existing loans, but no longer source new loans. Wells Fargo represented about 25% of the reverse mortgage market.
Bank of America very quietly pulled out of the reverse mortgage market the prior week. Together, Wells Fargo and Bank of America represented a significant 43% of the reverse mortgage market.
Reverse mortgages allow seniors 62 years of age and older to tap into their home equity by allowing the bank to make payments on their home and pay them a monthly stipend. The homeowner is still responsible for property taxes and homeowner’s insurance. However, since lenders cannot assess homeowners’ ability to maintain these two obligations and with property taxes on the rise even as property values fall, BofA and Wells have decided that the gamble is too risky for the banks. Currently between 4 and 5 percent of active reverse mortgages are in technical default, which means they have failed to pay property taxes, insurance or both.
Additionally, when the lender does gain possession of the property upon the death of the homeowner (which usually happens, although the estate does usually get a grace period in which they can pay off the loan), there is no guarantee that the lender will be able to sell the property and recoup the money loaned out – much less make a profit. Greg Gwizdz, a national home sales manager for Wells, cites difficulties gauging home values as a major part of the decision to exit the market.
It is uncertain whether other lenders will follow this trend and terminate their reverse mortgage programs. Logically, Bank of America and Wells Fargo have created an opportunity for other lenders to capitalize on their departure. It is clear that reverse mortgages are viewed as a problem area for lenders and this is unfortunate for those that would benefit by the programs.

New Jersey Appoints a Foreclosure Overseer

Last week, a New Jersey judge created a special position for an individual to oversee foreclosure proceedings. Superior Court Judge Richard Williams has been appointed “Foreclosure Overseer,” meaning that he will oversee foreclosure matters in the state and “safeguard the foreclosure process.” The move follows state Supreme Court Chief Justice Stuart Rabner’s December order in which he demanded that major lenders in the state demonstrate why their foreclosure activity in the state should not be suspended in light of “irregular activities” and alleged robo-signing incidents.

The lenders in question – OneWest Bank, BAC Home Loan Servicing, JP Morgan Chase (Chase Home Finance), Wells Fargo Financial New Jersey and CitiResidential Living – all objected to the order. They insisted that they had already reviewed procedures and made improvements before Rabner made his demands. The role of the foreclosure overseer will not be to examine individual cases, but rather to supervise the process itself, looking “at the source of the document creation and ensure that these documents were created by a process that conforms to the law.”

As with every governmental attempt to fix a problem that the private sector is better equipped to handle, some feel that this measure does not go far enough while others believe that it is more governmental intrusion into the private business sector.