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Posts Tagged ‘mortgage modifications’

Fraudulent ‘Flopping’ of Homes

Posted by Larry Doyle on June 10th, 2010 11:21 AM |

As day follows night, financial fraud follows economic distress. God forbid people try to make an honest living as opposed to seizing opportunities to make a dishonest buck. This financial artifice is on display in the short sales of homes throughout our country.

Bloomberg highlights this fraudulent activity in reporting, Banks Face Short-Sale Fraud as Home ‘Flopping’ Schemes Spread:

Two Connecticut real estate agents found a way to profit in the U.S. housing bust: Buy low, sell fast. Their tactic was also illegal. (more…)

More Mortgage Lying

Posted by Larry Doyle on December 17th, 2009 11:36 AM |

When lying is not properly addressed and punished it will perpetuate.

We witness that dynamic in almost all corners of our economic and political landscape. In the world of finance, no market segment seems to have fostered more lying than the mortgage business. It continues. Let’s navigate.

A strong and vibrant mortgage market is vitally necessary in order for our country to regain its economic health. Regrettably, the mortgage business has a bad reputation given the preponderance of lying. Far too many people took out oversized mortgages based upon inflated incomes. Those ‘liar loans’ have defaulted at exceptionally high rates.

Let’s turn the page as many mortgages are attempting to be modified. What do we learn? People are once again lying about their incomes, this time understating income in an attempt to have their mortgages modified to a lower level.

Thanks to 12th Street Capital for sharing a release from Making Home Affordable: (more…)

Mortgage Modification Applications Decline in November

Posted by Larry Doyle on December 14th, 2009 4:01 PM |

If you don’t buy a ticket, you can’t get into the game.

The Obama administration’s attempt to stabilize the housing market has been an abysmal failure.  That fact has been widely broadcast here at Sense on Cents and increasingly at other outlets. While the administration is now attempting to revive this initiative, the fact is the trend in this program is declining. What trend? How is that defined?

Just as a student won’t gain admission to a school without having applied, similarly homeowners will not gain the benefits of a mortgage modification without processing an application. Thank you to our friends at 12th Street Capital for sharing a recent report produced by Bank of America highlighting a number of trends in mortgage modifications, including applications. Let’s navigate. Bank of America reports:

Last month we said that we expected the focus of the HAMP program to shift from outreach and initiation of new trial modifications to completion of modifications and much of this has been confirmed now. The number of trial modifications started over the last month was the lowest yet at about 77k. This represents more than a 50% drop from the prior month. Also, the number of offers given over the last month was at all time lows dropping 30% from the previous month. This month’s report also disclosed permanent modifications for the first time. So far, 31k trial modifications have been successfully converted to permanent modifications. This represents only 4% of started trial modifications. Furthermore, an equal number have failed and are no longer active.

What are the actual figures for mortgage modification applications since this program was launched last spring? BofA reports:

May: 50,130
June: 93,146
July: 110,397
Aug: 133,192
Sept: 100,216
Oct: 163,913
Nov: 77,414,

While Uncle Sam will try to make a go of saving this program, the fact is it’s a pea shooter in the midst of a sandstorm. What would be the heavy artillery? Principal reduction via mortgage cram-downs.

Although Congress has shot down that plan twice, look for a return engagement in 2010.

For those interested in reviewing the Bank of America Mortgage Modification Monitor, click on the image below to access the entire pdf document:


UPDATE: Mortgage Modifications Leading to Mortgage Cram-Downs

Posted by Larry Doyle on December 11th, 2009 11:38 AM |

Despite overwhelming efforts on the part of Uncle Sam, the simple fact of the matter is the program to successfully and permanently modify mortgages has not gained truly meaningful traction. Public pressure on mortgage servicers specifically and the mortgage modification program at large have generated a slight, but hardly significant, increase in permanent modifications over the last month. Let’s review the statistics provided by Uncle Sam’s Making Home Affordable Program:

Obama Administration Ready to Admit Failure of Mortgage Modification Program

Posted by Larry Doyle on December 8th, 2009 11:19 AM |

Throwing good money after bad is not a practice that generates long term success and prosperity. In fact, the unintended consequences and costs of dysfunctional government programs should never be discounted. While intentions of certain programs may be noble, the practicality of Uncle Sam’s attempt to manipulate a market is not easily achieved. I am writing about the results of the Obama administration’s mortgage modification program.

I highlighted the state of this program in October in writing, “Mortgage Modifications: Statistically Insignificant”:

Status of Efforts
• 63 servicers had signed participation agreements for the first-lien modification program;
• More than 1.3 million solicitation letters for HAMP loan modifications to borrowers;
• More than 328,000 HAMP trial modification offers to borrowers;
• More than 209,000 HAMP trial modifications had started;

. . . and of the 209,000 mortgage modifications (.3% of total homeowners) started in the country, how are we doing?

• 1,080 borrowers had successfully completed the trial period and received HAMP modifications.

Yep. A whopping 1,080 borrowers have successfully completed the trial period and received modifications. A full .5% of those modifications that had started. Yes, a full 1,080 homeowners. I am sure there are plenty of homeowners still in the trial period, but even 209,000 homeowners as a percentage of the overall housing market is hardly significant.

What have we learned about housing over the last few months? Servicers have little interest in this program. Homeowners who are more than 30 days past due also have little interest in this program. The number 1,080 is clear evidence of that and, in my opinion, renders the entire mortgage modification program statistically insignificant.

Today we learn the Obama administration will release details later this week indicating that 6% of those mortgages in the modification process have now or will ultimately be successfully and permanently modified. (more…)

Obama Administration Won’t Release Mortgage Modification Figures; Sense on Cents Already Did

Posted by Larry Doyle on November 11th, 2009 2:50 PM |

No news is good news, right?

Well, that may work in raising teenagers but when it comes to public policy in general and housing policy specifically the American public deserves to know what is going on. Why? American taxpayers are picking up the tab, that’s why.

Regrettably, our wizards in Washington are often reluctant to provide the transparency the American public deserves.

I witness this dynamic again today in reviewing a story on the mortgage modification program. The Wall Street Journal puts a positive spin on developments in the mortgage modification process by writing, Mortgage Program Gathers Steam After Slow Start:

The Obama administration said Tuesday that its mortgage-modification program has enrolled one in five eligible homeowners, a sign the effort is gathering momentum after a slow start. But so far few of those trial modifications are turning into permanent fixes.

The Making Home Affordable program has begun trial modifications for more than 650,000 borrowers since it was launched in February, according to data released Tuesday by the Treasury Department. That amounts to 20% of those eligible for the program. More than 217,000 trial modifications, or roughly one-third, were under way in just two states: California and Florida.

The program provides financial incentives to mortgage companies and investors to reduce loan payments to affordable levels. The Treasury Department said the program was on track to meet its goal of offering help to between 3 million and 4 million borrowers over the next several years. Those who are 60 days or more delinquent on their mortgages or at risk of imminent default are eligible.

Whether the program will ultimately be judged a success will depend upon how many trial modifications become permanent. To receive a permanent fix, borrowers must be current on their payments in the trial program after three months and submit a hardship affidavit and other documents.

The administration won’t release figures on completed modifications until December…

Won’t release figures on completed modifications until December? Why not? What’s up with that? (more…)

Mortgage Modifications: Statistically Insignificant

Posted by Larry Doyle on October 29th, 2009 4:16 PM |

How meaningful is the mortgage modification program? What have we gotten for the billions committed to this initiative? Are you sitting down?

For frame of reference, the U.S. Census Housing Data indicates there were 110.3 million occupied housing units in the country in 2007. Of that number, 68.1% were owner-occupied. Simple math tells us 75.1 million people owned their home at that point.

Various studies indicate that approximately one of every three homeowners are now ‘underwater’ (mortgage balance exceeds home value). Many analysts believe that number is headed higher. A Deutsche Bank analyst projects one of every two homeowners will ultimately be ‘underwater.’

Simple math indicates that approximately 25 million homeowners are underwater. What is being done to support these homeowners? Uncle Sam’s primary program to support this growing problem is the ‘mortgage modification’ program. This program is supposed to be driven by mortgage servicers. How is it working? Let’s navigate. (more…)

Is Housing Tax Credit Coming to an End?

Posted by Larry Doyle on October 26th, 2009 2:02 PM |

Is the clock about to strike midnight for the Federal tax credit to support housing?

Uncle Sam has implemented a wide array of programs to support the domestic housing market. These programs include:

1. Mortgage modifications.

2. Massive funding support for Freddie Mac, Fannie Mae, and the Federal Housing Administration.

3. Increasing the loan limits on mortgages eligible for purchase by Freddie and Fannie in certain regions of the country.

4. Capital injections into a number of large banks and mortgage originators via the TARP.

5. An $8k tax credit for new home purchases.

Of all of these programs, most analysts believe the tax credit has had the largest positive impact. Why has that happened? In my opinion, the tax credit directly impacts the buyer while the other programs are an attempt to support housing but are as much or more supportive of the financial organizations than the homebuyers. (more…)

Full Throttle

Posted by Larry Doyle on May 27th, 2009 11:28 AM |

To say that we are in the economic fight of our lives would be a gross understatement. While we are feeding ammo into all our weaponry on the main deck, are we remiss in keeping a close eye on what is happening “in the engine room”?

Let’s go into the control room on the main deck and scope things out. On one wing, we see the plans to combat the problems in the commercial real estate market have suffered a setback. Bloomberg reconnaissance provides details: Top Rated Commercial Mortgage Debt May Face Cuts:    

The highest-graded bonds backed by commercial mortgages may be cut by Standard & Poor’s, potentially rendering the securities ineligible for a $1 trillion U.S. program to jumpstart lending. 

As much as 90 percent of so-called super senior commercial- mortgage backed bonds sold in 2007 may be affected as the ratings firm changes how it assesses the debt, New York-based S&P said today in a report. About 25 percent of the bonds sold in 2005, and 60 percent of those sold in 2006 may be cut.

“We believe these transactions are characterized by increasingly more aggressive underwriting than prior vintages,” S&P said. “Furthermore, recent-vintage CMBS, particularly those issued since 2006, were originated during a time of peak rents and values,” and may be more affected by falling rents.

Cutting the ratings would exclude the securities from the Federal Reserve’s program to bolster credit markets by financing the purchase of older commercial real-estate debt. To be eligible for the program, collateral can’t carry a rating below AAA from any rating firm.

This development is a MAJOR setback in our economic battle. An overhang of office space and underperforming real estate properties will be a significant drag not only on earnings for holders of the loans but also on the economies where these properties are located. (more…)

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