Articles posted in both the Wall Street Journal and the Washington Post confirmed that, despite government efforts to keep people in their homes, banks have resumed their ramp up in foreclosures. The spike in foreclosures hit hardest in March as banks let moratoriums on foreclosures expire. According to RealityTrac, an Irvine, Ca. company that compiles statistics on and lists foreclosed properties, there were 341,180 filings across the country, an increase of 46 percent from March and 17% from April of 2008. The numbers represent the highest monthly total since RealityTrac began collecting foreclosure data in 2005. The filings can range in severity from default notices being sent to families being removed from their homes due to bank repossessions.
Foreclosures in the first quarter of 2009 increased by 9% over the last quarter of 2008 and by 24% over the same January through March period of 2008. Daren Blomquist, a RealtyTrac spokesman confirmed that "many of the latest filings represented lenders starting the foreclosure process on delinquent homeowners". Many banks let their self-imposed foreclosure moratoriums expire once the details from the Obama administration's "Homeowner Affordability and Stability Program" (HASP) were announced. With the details of the program in hand, the lenders could accurately calculate the foreclosure risks and determine whether struggling borrowers would be able to consistently make their mortgage payments after modifying their loans according to the guidelines of the HASP initiative. It's likely that a high percentage of the most recent foreclosures were targeted at the homeowners perceived as the highest foreclosure risks, even under best case scenarios of a potential modification or refinance.
J.P. Morgan Chase & Co., Wells Fargo, Fannie Mae and Freddie Mac all said that they have increased foreclosure activity in recent weeks but declined to go into the specifics of their decision making processes. It is very likely that the recent studies showing default rates approaching 50% on modified loans after just six months are a major consideration when lenders do decide to start the process to repossess a home.
The jump in foreclosures comes just as the implementation of the Obama administration's foreclosure prevention program is gaining some traction. Several of the major banking institutions across the country, including J.P. Morgan Chase & Co., Wells Fargo, and CitiMortgage, announced today that they will start offering refi's and loan modifications that adhere to the HASP guidelines. Generally speaking, lenders' participation in the HASP initiative is voluntary. These announcements of participation, however, come as no surprise because as recipients of FSA/TARP (bank bailout) funds the listed banks would have been forced in to the federal program whether they liked it or not.
The administration has said it expects HASP to be able to help between 4 and 5 million homeowners under the new initiative but the steep spike in new foreclosure activity, if it continues at this kind of pace, could reduce their estimates drastically. It could still take months for the program to have a significant impact while banks study their options. If current trends persist, the number of homeowners facing foreclosure will continue to rise. Like the banks, it would be wise for these homeowners to start learning about their options as well.
Thursday, June 25, 2009
Feldman Law Center
In an announcement made on tax filing day, the U.S. Treasury Dept. announced that it was ready to deliver billions of dollars to six major mortgage lenders as they announced their participation in the Obama administration's "Homeowners Affordability and Stability Plan". The program's lofty goal is to save 4 to 5 million at risk homes from foreclosure but separate announcements today detailing a rapid rise in foreclosures during the first quarter of the year could be telling a different story.
The irony here is that two of the banks, namely J.P. Morgan Chase & Co. and Wells Fargo, are supposedly collecting billions to help homeowners avoid foreclosure. These are the same banks that said, along with FNMA and FHLMC, that they have increased foreclosure activity in recent weeks as they let self-imposed foreclosure moratoriums expire.
In addition to J.P. Morgan Chase & Co. and Wells Fargo, the other recipients are CitiMortgage Inc., GMAC Mortgage Inc., Saxon Mortgage Services Inc. and Select Portfolio Servicing. The total to be divided among the six lenders is $9.9 billion. These six institutions have already received over $125 billion from the FSA/TARP initiatives so their participation in the HASP initiative is mandatory. The $9.9 billion is divided as follows: Chase will receive $3.6 billion, Wells Fargo has been allotted $2.87 billion, and CitiMortgage $2.07 billion. GMAC could get as much as $633 million, Saxon $407 million and Select Portfolio $376 million. All figures are related to the size of each institution's mortgage portfolio according to a senior Treasury official interviewed by the Wall Street Journal.
The billions from HASP are the first payments from the administration's $75 billion program to try to prevent foreclosures by providing options for homeowners the option to either refinance or seek loan modifications on their current mortgages. Funds allocated to the lenders will be utilized in three ways. The majority of allocated funds will be used to match costs of interest-rate reductions as a part of the loan modifications to bring payments down to 31% of a borrower's income. The program will also pay lenders a $1,000 one-time fee for modifying a mortgage down to a 38% payment-to-income ratio for five years. Additionally, if borrowers can stay current on their modified mortgages, funds would also be allocated to the banks at a rate of $1,000 per year for up to three years.
What will be interesting, and of obvious concern to housing industry watchers, is how aggressively the institutions receiving billions of taxpayers' money will pursue foreclosures on homeowners that are delinquent on their payments. Chase and Wells Fargo, if recent actions are any indication, look like they are perfectly willing to accept government funds while accelerating their foreclosures and pushing homeowners out of their homes. Another concern, as seen and documented with FSA/TARP funds, will be the banks' accountability for the funds they are receiving. The base intention of the program is for the funds to be used for loan modifications and refi's that keep families in their homes, not bonuses, retreats, and perks for bank executives. One can only hope at this point that it works out that way. Visit us at The Feldman Law Center
Legal Disclaimer The information contained herein is provided for general information and advertising purposes only and is not intended to convey a legal option nor legal advice for any particular case or situation. Nothing in this article shall create an attorney-client relationship. Nothing sent to this law office via e-mail shall constitute an attorney-client relationship. Nothing contained in this article shall be construed to be a guarantee or prediction of result. Prior results are provided for general information purposes only and do not guaranty, warranty or predict a similar outcome with respect to any future matter. Results achieved depend on individual circumstances and not everyone will qualify or be successful in restructuring their mortgage loan.
The irony here is that two of the banks, namely J.P. Morgan Chase & Co. and Wells Fargo, are supposedly collecting billions to help homeowners avoid foreclosure. These are the same banks that said, along with FNMA and FHLMC, that they have increased foreclosure activity in recent weeks as they let self-imposed foreclosure moratoriums expire.
In addition to J.P. Morgan Chase & Co. and Wells Fargo, the other recipients are CitiMortgage Inc., GMAC Mortgage Inc., Saxon Mortgage Services Inc. and Select Portfolio Servicing. The total to be divided among the six lenders is $9.9 billion. These six institutions have already received over $125 billion from the FSA/TARP initiatives so their participation in the HASP initiative is mandatory. The $9.9 billion is divided as follows: Chase will receive $3.6 billion, Wells Fargo has been allotted $2.87 billion, and CitiMortgage $2.07 billion. GMAC could get as much as $633 million, Saxon $407 million and Select Portfolio $376 million. All figures are related to the size of each institution's mortgage portfolio according to a senior Treasury official interviewed by the Wall Street Journal.
The billions from HASP are the first payments from the administration's $75 billion program to try to prevent foreclosures by providing options for homeowners the option to either refinance or seek loan modifications on their current mortgages. Funds allocated to the lenders will be utilized in three ways. The majority of allocated funds will be used to match costs of interest-rate reductions as a part of the loan modifications to bring payments down to 31% of a borrower's income. The program will also pay lenders a $1,000 one-time fee for modifying a mortgage down to a 38% payment-to-income ratio for five years. Additionally, if borrowers can stay current on their modified mortgages, funds would also be allocated to the banks at a rate of $1,000 per year for up to three years.
What will be interesting, and of obvious concern to housing industry watchers, is how aggressively the institutions receiving billions of taxpayers' money will pursue foreclosures on homeowners that are delinquent on their payments. Chase and Wells Fargo, if recent actions are any indication, look like they are perfectly willing to accept government funds while accelerating their foreclosures and pushing homeowners out of their homes. Another concern, as seen and documented with FSA/TARP funds, will be the banks' accountability for the funds they are receiving. The base intention of the program is for the funds to be used for loan modifications and refi's that keep families in their homes, not bonuses, retreats, and perks for bank executives. One can only hope at this point that it works out that way. Visit us at The Feldman Law Center
Legal Disclaimer The information contained herein is provided for general information and advertising purposes only and is not intended to convey a legal option nor legal advice for any particular case or situation. Nothing in this article shall create an attorney-client relationship. Nothing sent to this law office via e-mail shall constitute an attorney-client relationship. Nothing contained in this article shall be construed to be a guarantee or prediction of result. Prior results are provided for general information purposes only and do not guaranty, warranty or predict a similar outcome with respect to any future matter. Results achieved depend on individual circumstances and not everyone will qualify or be successful in restructuring their mortgage loan.
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