For one, the interest rate you are securing will most likely be at a higher amount.  For example, if you are shopping for a home and have determined that you will need a loan amount between $625,500 and $729,950 that loan will now be secured at a higher interest rate.  As of this article, a jumbo loan rate is about ½% higher than a conforming 30 year fixed rate according to Bankrate.com.

Another impact is that a loan over the $625,500 mark will require a down payment of at least 20%.  The option to put less than 20% down for loans between $625,500 and $729,950 will be no longer.

Both factors could mean weaker demand for homes in the high cost markets.  This eventually could lead to downward pressure on prices.

Are you using a legit loan modification company?

Here’s a big news flash for consumers.  Did you know that as of January 1, 2011 all companies performing Loan Modifications must have a Mortgage Loan Originator (MLO) endorsement in order to legally operate?  Prior to this, only a Real Estate Broker’s license was required to operate a loan modification business.  This MLO license endorsement is part of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”). This federal law gave states one year to pass legislation requiring the licensure of mortgage loan originators according to national standards and the participation of state agencies in the Nationwide Mortgage Licensing System and Registry (NMLS&R).

The SAFE Act is designed to enhance consumer protection and reduce fraud through the setting of minimum standards for the licensing and registration of state-licensed mortgage loan originators. Senate Bill 36 (SB 36), which was signed into law in October 2009, was enacted in order to bring California into compliance with the SAFE Act. SB 36 requires all Department of Real Estate (DRE) real estate licensees who conduct residential loan origination and loan modifications, as outlined in the SAFE Act, to meet specific requirements to qualify for a MLO real estate license endorsement.

The SAFE Act requires loan modification companies to pass a written qualified test which covers federal and state law, to complete pre-licensure education courses, and to take annual continuing education courses. The SAFE Act also requires these entities to submit fingerprints to the NMLS&R for submission to the FBI for a criminal background check, and authorization for the NMLS&R to obtain an independent credit report.

At Loan Mitigation Advocates, we are proud to let you know that our entire company has met all the requirements and has received the MLO endorsement.  It has been our pleasure helping numerous homeowners receive loan modifications and we look forward to helping many others preserve their home ownership.

Bankrate.com 

• 30 Year Fixed Rate: 4.62 percent
• 15 Year Fixed Rate: 4.02 percent
• 5/1 ARM (Adjustable): 3.71 percent 

According to the Mortgage Bankers Association:

For borrowers, the road to obtaining a loan modification can be an exhausting one.  On average, loan modifications take an excruciatingly long time from start to finish with some modifications taking over a year to complete. 

The kicker is that once a trial period modification is secured it does not guarantee that you will be given a permanent modification.  We are not talking about those cases where the borrower does not follow through with the “rules” instituted by the lender.  This can include the borrower missing or being late on payments during the three month period.  Also, if the borrower’s situation changes drastically (ie significant increase/decrease in income or debt) can be cause for denial of a permanent modification.

Unfortunately, the situation that we are talking about doesn’t even involve negligence on the part of the borrower.  Even if the borrower does everything correctly and follows through on their three month trial plan, we have seen many cases where the lender is so “backlogged” that they are unable to produce a final modification at the end of the trial period.  If this happens, many lenders suggest continuing to make the trial period payments.  Unfortunately, for these clients there is no timetable that is given for completion by the lenders. This is just unacceptable.

Bankrate.com 

• 30 Year Fixed Rate: 4.63 percent
• 30 Year Fixed Rate Jumbo: 5.26 percent
• 15 Year Fixed Rate: 4.11 percent
• 5/1 ARM (Adjustable): 3.95 percent
• 1 Year ARM (Adjustable): 4.80 percent 

According to the Mortgage Bankers Association:

• Mortgage applications rose 13 percent when compared to a week earlier
• Refinance applications shot up 17.1 percent when compared to a week earlier
• Applications for new purchases fell 3.4 percent

From our experience, this number is just too low, and the time it takes to complete a loan modification is still shocking.  Clearly, there is not enough being done by the lenders to expedite the process of loan modifications. However, at Loan Modification Advocates, we are doing everything in our power to put you, the homeowner, in the best particular situation to obtain a loan modification.

When you become a client of Loan Modification Advocates, we perform a detailed analysis on your particular situation.  Our goal is to determine your likelihood of obtaining a loan modification based on our experience with past clients and our knowledge of the guidelines established by the lenders for determining whether a homeowner “qualifies” for a loan modification. Before turning in your file, we work with you to execute a strategy that maximizes the completeness of your file.  Once we believe your file is in the best shape possible, the file is turned in. One would assume that submitting a well-analyzed and guideline-specific file would result in a fast and efficient turnaround by the lender.  Unfortunately, in some situations that is not the case.

Here are some of the scenarios that we battle everyday:

• The lender receives the package and incorrectly enters the information into their system. This most typically occurs with the income portion of the file.  For example, some analysts do not understand how to read the income from self-employed homeowners.  The incorrect input results in a rejection by the system.
• The file is sent in and goes immediately into a stack of files.  Time passes and all the information becomes stale.  Once the file is picked up to process, all new updating is needed.
• The lender changes their criteria/policies mid-stream in the process and does not let the homeowner or third parties know of the changes.  This results in a further delay in the process.

In the lender’s defense, the problems do not only exist with the banks.  Homeowners also have contributed to the number of homeowners dropping out of the Obama administration’s main mortgage assistance plan.  In order to complete the program, borrowers must make at least three trial payments on time. In many cases, homeowners are delinquent with their payment or do not pay the full modified amount – both result in being let go from the program. The Treasury Department also reports that about 277,000 homeowners, or 23 percent of those enrolled, have dropped out during this trial phase. 

Another problem is that, initially, borrowers were able to state their income verbally and then provide proof of their income later. This delay in providing a complete set of documents at the beginning of the process resulted in a bottle neck in the system.  This gives credence to why we at Loan Modification Advocates take steps to fully prepare the file before submittal.

Bankrate.com

• 30 Year Fixed Rate: 5.12 percent
• 30 Year Fixed Rate Jumbo: 5.94 percent
• 15 Year Fixed Rate: 4.49 percent
• 5/1 ARM (Adjustable): 4.31 percent
• 1 Year ARM (Adjustable): 4.91 percent 

Mortgage applications rose.

Applications for new purchases jumped.

Refinancing activity slipped.

Pending home sales rose.

Short sales and foreclosures are happening due to the combination of falling home prices and a borrower’s unforeseen circumstances (ie unemployment, reduction of hours, medical condition, etc,). Borrowers who can’t obtain a loan modification and are having difficulty maintaining their payments have to sell their homes for what they owe. As a result, they are being forced to short sell or foreclose.  Unfortunately, these homeowners who head down the path of short sale or foreclosure are unfamiliar with the pitfalls that may follow.  Besides credit implications, possible deficiency judgments could occur long after the homeowner has concluded their transaction.

In a recent article, Les Christie describes two scenarios where homeowners were forced into involuntary homeowner monetary contributions after the completion of their transaction – one related to short sales and the other related to foreclosure. We recommend that you read this entire article by clicking on the link above to further understand these potential consequences. 

Also, to get further educated on your particular situation you can contact Greg Jewell at 925.463.6164.  Greg specializes in short sale coordination and has direct experience with numerous short sale transactions.  Contacting a real estate attorney, bankruptcy attorney or a tax consultant is also important to clearly understand the types of loans you have – recourse vs. non-recourse and the possible implications involved.

Bankrate.com

• 30 Year Fixed Rate: 5.15 percent
• 30 Year Fixed Rate Jumbo: 5.93 percent
• 15 Year Fixed Rate: 4.56 percent
• 5/1 ARM (Adjustable): 4.63 percent
• 1 Year ARM (Adjustable): 4.92 percent 

Mortgage applications rose compared to a week earlier, according to the Mortgage Bankers Association.

Refinancing activity surged and applications for new home purchases increased.

In a recent Associated Press article on this matter, Treasury Department officials said they will step up pressure on all the companies participating in the government’s $75 billion effort to stem the foreclosure crisis. At Loan Mitigation Advocates, we feel that it is about time. Despite having completed numerous successful loan modifications, we have been frustrated at the inability of lenders to turn around loan modifications in an effective and efficient manner.  Unfortunately, we don’t see this changing unless the lenders are more heavily scrutinized for their lack of effort and thus held accountable with direct consequences.

To turn the lenders around, it appears the government will start by sending a three person team to monitor the eight largest companies’ work and then that team will send twice-daily reports on their progress. Also, the Treasury Department will publish a list of the mortgage companies that are lagging.

“In our judgment, servicers to date have not done a good enough job” of making the modifications permanent, said Michael Barr, an assistant Treasury secretary. Companies, he said, “that don’t meet their obligations under the program are going to suffer consequences.”