HD's Blog - Real Estate & Foreclosure Updates

The Government’s new proposed Making Homes Affordable (MHA is a program being managed by the Treasury & Fannie Mae, it covers more than 85% of mortgage loans) guidelines has built-in incentives for borrowers.  Borrowers are eligible for incentive compensation from TARP (Troubled Asset Relief Program) funds to assist with relocation expenses of $1500.00 following the successful closing of a Short Sale or recording of a Deed-in-Lieu (DIL).  Furthermore, investors may, at their discretion and utilizing their own funds, offer additional incentives to borrowers or servicers to secure a successful Short Sale or DIL. 

            Under the MHA plan, servicers must follow an algorithm when a loan is in default (or imminent default).  If attempted refinancing or loan modification does not work then and only then will a servicer consider the possibility of a Short Sale.  

            Servicers who participate in the MHA must offer a Short Sale or DIL to a Borrower who meets the MHA eligibility criteria.  This criteria requires a hardship, a debt to income (DTI) ratio greater than 31% and one of the following:

a)     Was not offered a trial modification because the loan has a negative NPV (net present value formula that determines if the lender/investor will net more from a Short Sale than a Foreclosure);

b)     Was offered a trial modification but determined that the terms were still unaffordable;

c)     Failed the Trial Period Plan;

d)     Became 90 or more days delinquent on a MHA modification.

There are some exceptions: 

a)     Short Sale or DIL will not be available if the option is specifically prohibited by the investor;

b)     At the Servicer’s discretion, a short sale or DIL may not be available if the Foreclosure sale date is already set.

The homeowner should be very careful once the lender/investor agrees to do a Short Sale.  The Servicer, not the homeowner, will customize a Short Sale agreement. One of the many agreement requirements is that the property be listed by a licensed real estate agent experienced in selling properties in the area.  In my opinion, if a homeowner hires someone who does not understand the proposed MHA program and Short Sale process, then they may be putting themselves back into distress. 

Howard “HD” DeRias, Broker Associate – Sellstate Innovative Realty, LLC in NJ has helped many distressed homeowners understand their options.  He specializes in the marketing and sale of distressed property. If you have questions about this article or would like to find out more about short sales, visit www.njforeclosureexpert.com , email HD at howard@hdsells.com, or call him directly at (609) 333-2045.  The information in this blog has been provided for informational & educational purposes only and is not intended to provide legal advice. For legal advice on this or any other topic, contact a qualified attorney.

Come join us at the Shore Mall on
April 16, 2009 from 1-7PM for the
Save The Home You Own Expo. 
Look for The HD Team booth to get your questions answered about the Alternatives to Foreclosure, the Obama Housing Plan, Short Sales and so much more!  

This Expo is being hosted by, Dennis Levinson, The Atlantic County Sheriff's Department & REAL (Realty Experts Aligned) Help. 
Expo Location: In the Shore Mall across from
the Department of Motor Vehicles.

A Broker’s View - NJ Foreclosure Programs
Court Mediation: Could It Be The Ticket To Save Your Home?
By Howard “HD” DeRias

Mediation: to achieve a solution, settlement, or agreement by working with both sides in a dispute.

New Jersey has recently adopted a new program, NJ Judiciary Foreclosure Mediation Program, which gives certain homeowners the chance to save their homes. Foreclosure mediation is a process where a neutral mediator assists lenders (mortgagees) and borrowers (mortgagors) in trying to reach a voluntary and mutual agreement to resolve a loan delinquency.

New Jersey Judiciary Office of Communications and Community Relations states this about the mediation program:

New Jersey faces an unprecedented increase in mortgage foreclosures. The high incidence of foreclosures has had negative financial and social effect on many of New Jersey’s communities, with social dislocation, declining housing values, neighborhood blight, homelessness, and a general decline in neighborhood morale and safety.

Court-referred mediation is one important method to foster an open and effective channel of communication between homeowners and lenders. Foreclosure mediation introduces a neutral third party to assist lenders and defaulting homeowners in reaching a satisfactory resolution to their dispute.

Mediation can result in homeowner-mortgagors staying in their homes and affords lenders the opportunity to avoid foreclosure costs and carrying charges and reduce the number of non-performing loans in their portfolio.

The New Jersey Superior Court’s Foreclosure Mediation Program is focused on encouraging homeowners to get professional help.

Court-sponsored foreclosure mediation is limited to homeowners whose principal residence (1 to 3 family) is the subject of a foreclosure action. The homeowner must be the borrower and not currently in bankruptcy. If the homeowner meets these eligibility conditions, then they can take advantage of this free mediation program. Yes, I said FREE!

To participate in foreclosure mediation: a homeowner can either apply on their own by completing a Foreclosure Mediation Financial Worksheet and a Mediation Request Statement along with supporting documents to the Administrative Office of the Courts (AOC) or you can reach out to a Department of Housing & Urban Development (HUD)/New Jersey Housing & Mortgage Finance Agency (NJHMFA) certified housing counselor for help.

There are a number of possible solutions that a borrower and their lender can explore. The solution will depend upon what the borrower can afford (based on their income & expenses), what other resources they have, what type of loan they have, the amount owed in arrearages and other factors that will be discussed during mediation. Each lender has a slightly different loan mitigation program. However, every lender will require that a borrower exhibit a reasonable ability to repay the modified monthly mortgage loan payment. If the borrower cannot show the ability to pay, then the lender has no incentive to do a workout.

A request for foreclosure mediation does not stay or otherwise delay the foreclosure action. However, the sheriff’s sale can be stayed if mediation is pending.

With New Jersey being the first state to institute a statewide foreclosure mediation program, there may be some challenges along the way. Hopefully this program will overcome those challenges and become a model for the nation.

To get more information on this program go to www.njforeclosuremediation.org or call 1-888-989-5277, the Foreclosure Mediation Hotline is open from 8 a.m. to 6 p.m. Monday through Friday. If the hotline is busy due to heavy call volume, homeowners can

visit www.lsnjlaw.org/foreclosure and complete the online form.

Source: NJSBA Daily Briefing

PRESS RELEASE:  A Broker’s View

You Can’t Fight a Forest Fire with a Garden Hose

By Howard “HD” DeRias

There has been a lot of talk on capital hill as to how we can help the current foreclosure and housing problem. There have been many programs, government and/or private, which simply haven’t been able to contain this out of control problem. I will discuss some of the past programs that haven’t faired so well, a new program that has promise and a proposed plan that may be the answer.

Hope Now was rolled out on Oct 10^th 2007, it is a private sector alliance. This partnership alliance started out with eleven of the largest mortgage servicers representing 60% of the mortgages in America, several leading mortgage counselors, investors and large trade organizations. Its goal was to provide free foreclosure prevention assistance to all that reached out to them.

FHA Secure is a Bush Administration Initiative that was unveiled September 13, 2007. It is a refinance option from FHA that primarily targets homeowners who are delinquent because their adjustable rate mortgages have adjusted. Some of the qualifying guidelines are that the property must be owner occupied. The borrower must have at least 3% in equity in the home or must have 3% in cash. The borrower must have a stable and sustained history of employment for the last two years. Finally, the borrower must show punctual mortgage payments before the rates adjusted and have proof that the reason they have fallen behind is specifically because of the mortgage adjusting. This program uses no taxpayer’s money and the borrowers pay an FHA Mortgage Insurance. To date, this program has only helped 4000 homeowners.

Project Lifeline, instituted February 12, 2008, was a program put together by six of the largest financial institutions which serviced almost 50% of the nation’s mortgages. These lenders contacted homeowners who were 90 or more days late on their mortgage payments. They would put the foreclosure process on pause for 30 days while the lenders tried to make the mortgage more affordable.

The $300 Billion Hope For Homeowners (H4H), went into effect on Oct 1, 2008, is part of the housing-rescue package that was passed in July 2008. It allows banks to move borrowers into government loans that are insured by the FHA, if the lenders agree to write down a portion of the principal. Originally the Congressional Budget Office had hopes of helping 400,000 homeowners, but after further review, now expects only 20,000 to even apply. After 30 days they have received less than 100 applications and because these applications take about 60 days to process, no loans have been approved. Why has this been such a colossal failure? The program is unattractive and costly to both the lenders/servicers and the distressed homeowners. The lenders would have to accept 90% of the appraised property value (I have gotten word that they are going to increase this percentage) and the FHA insurance is not valid if the borrower misses the first payment. The homeowner does not like it because they must share future equity with the lender/investor and the FHA insurance would cost them three times more (1.5% of the loan balance) than traditional FHA insurance.

Recently the Hope Now Alliance has announced that it is working with the United States Treasury, the Federal Housing Finance Agency, Fannie Mae, Freddie Mae and several other major servicers to make it easier and faster for at-risk homeowners (90 days or more late) to modify their mortgages. This “new” program is called the Streamlined Modification Plan (SMP) and will begin on December 15, 2008. The lenders will look at the homeowner’s information and use a simple process to reduce the homeowner’s monthly payment to no more than 38% of their monthly income. Lenders will accomplish this by extending the number of years on the loan, reducing the interest rate, and/or forbearing principal. And if this doesn’t get the payment to an affordable level, the loan will be reviewed to include all other options to avoid foreclosure. Some feel that 38% is a very high Debt to Income Ratio (DTI) and will create re-defaults down the road. But Faith Schwartz, Hope Now’s executive director believes that, “SMP will help stabilize the housing market.” I personally think it is a step in the right direction because it creates a systematic and uniform approach that lenders can follow to do loan modifications. This program would provide incentive to servicers and pay them $800 for each completed loan modification. At the end of the day, this program is too small and currently has the potential to only help approximately 20% of the distressed homeowners.

The proposed Federal Deposit Insurance Corporation (FDIC) Loan Modification Guarantee Plan also has the streamline mechanism in it and proposes to use part of the government’s $700 Billion to help delinquent homeowners (an estimated $24.4 Billion would be needed). Delinquent borrowers would have to be 60 or more days late and their payments would be reduced to 31% of their gross monthly income. This would get done by setting mortgage rates as low as 3% for five years before increasing at an annual rate of 1% until they hit the prevailing market rate, extending loan terms up to 40 years and/or forbearing part of the principal (part of the principal would be deferred free of interest to the end of the loan). To encourage lenders/investors to participate, the program would not call for principal write downs and the government would share up to 50% of the losses if a borrower re-defaults. The re-default risk has been the sticking point for many lenders to voluntarily participate in a systematic modification plan. The FDIC would also provide incentive to servicers and pay them $1000 for each completed loan modification. This FDIC program is expected to keep 1.5 million borrowers in their homes. The FDIC is currently using this model to modify 30,000 loans for the federally taken over Indymac Bank. This program could be the national solution for the national foreclosure problem.

In conclusion, the American people are footing the Bill for the 700 Billion Dollar Emergency Economic Stabilization Act of 2008 (EESA) and has given the Secretary of Treasury the authority to take aggressive action to fight foreclosure. The EESA also requires that some of the money be spent to help distressed homeowners. The FDIC Program is only asking for about 4% of the Troubled Asset Relief Program (TARP) money. One must understand, you can’t do loan modifications one by one, it’s impossible. The FDIC – Indymac model could prevent many unnecessary foreclosures. Its streamlined process can be used by most servicers under their existing legal arrangements and it could just be the fire hose that we have needed. It may be in the servicers, lenders and investors best interest to pick up this fire hose while it is still available because the President Elect may pull out the bankruptcy bazooka.

The Treasury has proposed to throw a heap of taxpayer money (700 Billion) to solve the Wall Street Crisis. I don't know if I believe in thier ability to get us out of this mess. One of the senators made a great point, why isn't there any provisions in the proposal to help families in Foreclosure. I know some people put some of the blame on the homeowners, but these foreclosures are a result of another government failed housing plan. The Government wanted to increase home ownership to more Americans, and as a result loose lending practices ensued. Now we are forced to turn this Government made issue, back over to the Government. This has really gotten out of hand.

I just wish they would give us a concrete algorithm for how they are going to tackle this problem. Please feel free to comment

The FORECLOSURE Scare!

Foreclosures have been a hot topic everywhere lately. The knowledge that so many of these arm loans are getting ready to adjust has many people running scared! Many finanically savvy companies & individuals, especially those in the stock market & US Fed have keyed on this very event.

If you are in the position of not being able to afford your mortgage (no matter what the reason) you need to know your options!  I have a tremendous amount of knowledge in this area and can explain those options to you. 

Don't be like the ostrich! Pull your head out of the sand and take a proactive approach towards your issue!  Time is of the essence and I want to help YOU!

Howard "HD" DeRias - Cell: (609) 517-1929

Realtor / Listing & Foreclosure Specialist / Short Sale Pro

Sellstate Innovative Realty, LLC