Foreclosures Blog - Foreclosure Listings Nationwide

Efforts by FDIC Chairman Sheila C. Bair to persuade President George Bush’s administration to help homeowners in danger of foreclosure are finally getting results. Bair’s loan modification plan is said to be nearing approval at the White House of Management and Budget.

Bair’s scheme aims to help about 3 million homeowners who are likely to get foreclosure notices in 2009. Their mortgage loans would be modified using a model similar to what was successfully implemented by FDIC to help distressed borrowers at IndyMac. The program will generally target troubled borrowers who were enticed to take out mortgage loans with adjustable rate mortgage (ARM) options, Alternative-A mortgage options or with other clauses that they did not fully comprehend.

If approved, the program will be given a budget of about $40 to $50 billion, which will probably come from the second half of the $700 billion foreclosure prevention plan approved by national legislators in October 2008.

Bair’s plan asks the federal government to guarantee up to 50 percent of losses that would be incurred by mortgage servicers and investors in case borrowers who avail of loan modifications default again. Loan servicers would also be paid for their processing activities. To help ensure that borrowers will not become delinquent again, the scheme requires the loans to be modified so that monthly amortizations would drop to about 31 percent of gross monthly income.

Other possible ways to increase affordability and help prevent foreclosure are reduction of mortgage interest rates and extension of loan terms to up to 40 years.

According to Credit Suisse, over eight million foreclosures will be filed over the four-year period beginning 2009 if there is no intervention. Credit Suisse said that its foreclosure figure includes nearly 60 percent of all subprime mortgage loans and more than ten percent of adjustable rate mortgages, Alternative-A mortgages and prime mortgage loans.

In an effort to help its borrowers and loan servicers, Fannie Mae recently announced a series of actions to stop foreclosure.

The move by government-seized Fannie Mae (Federal National Mortgage Association) is part of the streamlined loan modification program for homeowners who are three full payments behind on their mortgage and are headed for foreclosure.

The adjusted program now has the following features to help distressed homeowners deal with their foreclosure problems:

• Prevention. Loan servicers can now start using Fannie Mae’s foreclosure prevention tools even when a borrower has not defaulted yet. As soon as the need becomes apparent, and a missed payment becomes possible, servicers can use the prevention tools.
• Early Workout program. Services can pre-negotiate a loan modification with a single document used for a trial period. The same document becomes a permanent agreement after some time. Before, homeowners facing foreclosure have to go through a more complicated process, signing a document for a trial period before signing another agreement to make the modification program permanent
• Double Maximum Forbearance. The maximum forbearance, or the period when payments are reduced or suspended, has been increased from six months to twelve. This option is available for borrowers who need a loan modification.
• Loan Flexibility. Servicers can now remove loans from mortgage-backed securities pools as soon as the loan is one month behind for the purpose of loan adjustment. This option applies to loan backing securities issued on or after January 2009

Fannie Mae, and its brother company, Freddie Mac (Federal Home Loan Mortgage Association) guarantee or own about half of $11.5 trillion in U.S. outstanding home loan debt. After acquiring control of the two companies, government has been injecting each with up to 100 billion.

In return, the government gets ownership stakes of almost 80 percent. The current move by Fannie Mae hopes to finally address foreclosure problems amidst criticism that the government and lenders are not doing enough to help distressed homeowners.

The increasing foreclosure rate has in part been blamed on the Bush Administration for failing to make the problem a top priority. Added to that, Treasury Secretary Henry Paulson refused to use a part of the $700 billion financial grant to help homeowners Avoid Foreclosure.

However, hope is being pinned on the coming administration of Barack Obama who said that lowering foreclosure rate is important in the country’s economic and financial recovery.

Federal Deposit Insurance Corp. Chairman Sheila C. Bair, in her testimony before the U.S. House Committee on Financial Services, said that lowering the number of homeowners who are facing the threat of losing their homes is important to the effort to stabilize the country’s economy and the global financial markets.

In line with this, the departments of Treasury and Federal Reserve have announced a rescue fund of $800 billion for the credit markets.

This includes $600 billion to purchase debt issued by the Federal Home Loan Bank and government-sponsored enterprises , Federal National Mortgage Association or Fannie Mae and Federal Home Loan Mortgage Corp. or Freddie Mac.

The announcement resulted to a 5.5 percent interest rate decline on a 30-year fixed-rate mortgage and the increase in the number of people who applied for loans in an attempt t buy homes or refinance mortgages.

Susan M. Wachter, a real estate professor at Wharton, believes that these developments are helping the housing market recover and stop the plummeting home prices.

Meanwhile, the private sector has also embarked on its own programs to help alleviate the foreclosure problem.

Both Citigroup and JP Morgan Chase have launched loan modification programs, focusing on loans that they own and not on mortgage-backed securities loans.

Other banks have announced a postponement on foreclosures on homeowners who may be behind their payments but have the capacity to continue paying if their loans will be modified.

Foreclosure rate in the US is continually rising to this date. More than 250 families are evicted from their homes every month. Although there is available assistance from different sectors of the society, most families fail to take advantage of them.

Before the real estate industry entered the period of foreclosure crisis, during the time when it was in a very flourishing condition, houses were high-priced, even plain, old-fashioned apartments.

Steve Preston had humble beginnings. The native from Janesville, Wisonsin, who is now tasked the humungous job to help stop foreclosures spent his childhood shuttling between small apartments and houses. It is from this experience that he now partly draws on as secretary of Department of Housing and Urban Development, an agency which […]

The Treasury Department seems unsatisfied with The Federal Deposit Insurance Corporation’s $ 24.4 billion plan to modify mortgage loans in an effort to stem the foreclosure crisis. Instead, Treasury Interim Assistant Secretary Neil Kashkari told panel members of the U.S. House of Representatives Oversight and Government Reform System last Friday that the Department is […]

To combat and somehow slow down the growing problem in the mortgage industry, a new foreclosure rescue plan was launched in Washington.

Desperate times call for more effective measures. Treasury Department Secretary Henry Paulson’s appeals for the private sector to willingly adjust loans of homeowners facing foreclosure only succeeded in modifying a little over 4 percent of troubled loans each month. Instead, billions of dollars are being showered on financial institutions instead of helping homeowners in a […]

Just how many troubled homeowners are being helped by their lenders in solving foreclosure problems? Estimates say that a mere 1 in every 5 homeowners in the Valley, one of the hardest hit areas, is receiving some sort of support from their mortgage companies or banks.