Loan modifications involving reductions in interest rates or unpaid principal balances (UPBs) increase in popularity among servicers

TO BE NOTED: From HousingWire:

"Delinquencies up 43% from 2008

Posted By DIANA GOLOBAY
May 27, 2009 8:44 am

On the heels of a [1] record quarter in home price declines, homeowners continue to slip underwater on their mortgages and fall increasingly delinquent on payments.

The trends are not stopping at Q109, with April recording steep delinquencies to start off Q209.

Total mortgage delinquencies rose slightly in April to 8.1%, according to [2] a monthly report published by Lender Processing Services ([3] LPS: 30.30 +0.76%). The figure represents a 2.8% increase from March and is up 43% from the same time last year.

New delinquencies rose again in April, while the volume of loans moving to a more delinquent status has increased in each category: current to 30-days delinquent, 60-days delinquent to 90-days delinquent, and 90-days delinquent to foreclosure. In April, the percentage of loans rolling from current to 30-days delinquent is higher than in the same month during the preceding four years.

The roll rate of loans moving through these delinquency categories is a key indicator of future foreclosure starts. LPS found that foreclosure inventories continue to climb in April as foreclosure moratoriums at the government-sponsored enterprises and private foreclosure freezes expire.

The month closed with a 2.7% foreclosure rate, experiencing a month-over-month increase of 7.3% and a year-over-year increase of 90.5%. Ginnie Mae foreclosure sales spiked in April to the highest level in six months. Vintage delinquency analysis shows loans originated in ‘09 are performing better in early payment stages than loans originated during the last five years performed during the same time frame.

Seven states — Delaware, Maine, New Mexico, North Carolina, North Dakota, New York and Washington — experienced an increase in foreclosure starts. Foreclosure starts in New York, which represents 4.5% of all loans in the US, increased by 12.5%. Nationwide, foreclosure starts have increased by 35% in the last 12 months, LPS found.

The high delinquency volumes and pending foreclosures likely inspired loss mitigation efforts like the Administration’s Making Home Affordable modification and refinance programs. But even these efforts do not solve all of the delinquency problems, as LPS found that nearly 50% of all modifications had re-defaulted after just six months.

Loan modifications involving reductions in interest rates or unpaid principal balances (UPBs) increase in popularity among servicers, as LPS found an influx in that type of modification. Although modifications involving a UPB reduction experience a recidivism rate 25% lower than other modifications six months post-modification, the percentage of balance reductions remains below 5%.

Write to [4] Diana Golobay."

“It’s the same people that joined the industry during the refinance boom"

More Fraud in the loan modification business:

"By JOHN LELAND

Published: January 14, 2009

As home values across the country continue to plummet, the authorities say a new breed of swindler is preying on the tens of thousands of homeowners desperate to avoid foreclosure.

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Amanda Rivkin for The New York Times

Carol McClelland turned to third parties that offered to renegotiate their mortgages but did nothing and was evicted.

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Heidi Schumann for The New York Times

One company told Maria Martinez that for $1,000, they would negotiate with her mortgage company to lower her interest rate.

Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as “foreclosure rescue companies” that charge upfront fees to modify loans but often do nothing to stave off foreclosure.( THE SAME PROBLEM )

The Federal Trade Commission brought lawsuits last year against five companies representing 20,000 customers, and state and local prosecutors have brought dozens more. In Florida, Attorney General Bill McCollum recently sued a company that he said had more than 600 victims.

“There’s no way for the consumer to sort out the legitimate companies( THE PROBLEM ),” said Mr. McCollum, who added that he had limited resources( THE PROBLEM ) to fight what he called “a sheer volume question.”

The companies under suspicion typically charge an upfront fee of up to $3,000 to help borrowers get lower rates on their mortgages from their lenders. But borrowers often cannot afford the fees, the service can be bogus and, in the worst cases, the homeowners lose their chance to renegotiate with their bank or to file for bankruptcy protection because of the time wasted.

There are companies that provide legitimate foreclosure services, but the industry is largely unregulated( WOULD THIS HELP? ), making it difficult for homeowners to separate the good from the bad. Some of the fraudulent( FRAUD ) companies — often run by former real estate agents or mortgage brokers — are local; others are national. Many have official-looking Web sites that suggest that the companies have government affiliations( THAT'S WHY I'M NOT SURE HAVING CERTIFICATION WOULD HELP ) and give homeowners a false sense of security.

“That’s all I’ve been doing for the last year( MORE RESOURCES NEEDED ),” said Angela Rosenau, a deputy attorney general in California, citing more than 300 complaints about fraudulent companies last year, not counting those made to local prosecutors.

Experiences like those of Maria Martinez, of Stockton, Calif., are playing out with greater frequency across the country, the authorities say. Ms. Martinez struggled to pay her mortgage last summer. She had no shortage of people offering to help. Fliers for rescue companies filled her mailbox.

At a seminar for troubled borrowers near her home, one company offered a service that promised just what Ms. Martinez needed: for $1,000, the company said it would negotiate with her mortgage company to lower her interest rate.

“I was desperate,” said Ms. Martinez, 57, a clerk at the San Joaquin County Jail. She made an initial payment of $500 and paid another $500 a few weeks later.

Now the house is in foreclosure, and Ms. Martinez is waiting for the sheriff to evict her. She cannot reach the man she paid to modify her loan.

In California and 20 other states, including New York, companies are prohibited from collecting payment until they have completed their services, something Ms. Martinez did not know. In Colorado, the attorney general’s office has closed( DID THEY FACE ANY CHARGES? ) 15 mortgage rescue companies that charged fees up front.

Carol McClelland, 46, fell into foreclosure on her Chicago home when she lost her job as a waitress in two restaurants. She received a call from a company called Foreclosure Solutions Experts, promising to stop the foreclosure and lower her mortgage payments to around $550 a month, from $1,056, Miss McClelland said.

“She showed me other clients’ files, and they were paying $650 a month,” she said. The charge for the service was $1,300, which Miss McClelland paid in installments, borrowing the money from friends and relatives.

When the loan servicer notified her that the house was still in foreclosure, Miss McClelland said, the representative from Foreclosure Solutions Experts told her that the matter had been taken care of.

“She told me everything was all settled; I don’t have to worry about anything,” Miss McClelland said. “All I had to worry about was getting the rest of the money to her.”

According to a suit brought by the Illinois attorney general in November, Foreclosure Solutions Experts does little or nothing to help consumers, and when it does take action, the result is often a repayment plan unsuited to the borrower’s ability to pay. The suit alleges that the company never contacted Miss McClelland’s lender, HSBC.

Illinois is one of the states that bans upfront payments to foreclosure rescue companies. The attorney general’s office has received “thousands”( YES ) of complaints about such companies, said Michelle Garcia, an assistant attorney general, and the suit against Foreclosure Solutions Experts is one of 22 filed by the state.

Stacy Strong, who runs Foreclosure Solutions Experts, did not return calls for comment.

Advocates say foreclosure rescue scams are particularly insidious because they prey on people’s desperation and because they victimize those who can least afford it( JUST LIKE IN THE ORIGINAL MORTGAGE ).

Borrowers seeking loan modification are often frustrated that they cannot reach the right people at their lender or that the lender insists on a repayment plan they cannot keep, said Ira Rheingold, executive director of the National Association of Consumer Advocates.

“When you’re desperate, that’s when the crooks come out,” Mr. Rheingold said. “You’ve tried everything, and a guy calls you up on the phone or there’s an ad on TV, and you have no other options, what do you do? You go to those guys.

“People probably know in their heart of hearts that they may be getting ripped off, just like most people understood on their mortgages that they were getting in too deep( TOO TRUE ), but bankers said yes, so it must be O.K ( THAT'S IT ). It’s the same thing. The real problem is that we continue to fail to have systems in place that help people( TRUE ).”

Ms. Rosenau, the California prosecutor, said that even when she told people that they had been swindled, “they don’t believe it, because they want it not to be true( TRUE ).”

“And any money they had to possibly work with the lender is now gone to the scam,” she said.

In Baltimore, where neighborhoods have been buffeted by successive waves of mortgage scams, Ann Norton, director of foreclosure prevention at the nonprofit St. Ambrose Housing Aid Center, said companies promising loan modifications started to multiply last summer.

“It’s the same people( ABSOLUTELY ) that joined the industry during the refinance boom, and now they’re making fees for submitting loan remediation forms,” said Ms. Norton, whose agency provides free help to borrowers.

Although Maryland was among the first states to enact legislation defining mortgage rescue fraud( FRAUD ), Ms. Norton said, “it’s a growing industry, and it’s under the radar( IT WAS ENTIRELY PREDICTABLE IF YOU THOUGHT THAT FRAUD WAS ONE OF THE MAIN SOURCES OF OUR CRISIS. ).”

Often the scammers represent themselves as having connections to government groups, or copy the name and typography of the Hope Now program( THIS IS WHY CERTIFICATION WILL BE NO PANACEA ), an alliance of nonprofit, government and lending agencies, said Marietta Rodriguez, director of national homeownership programs at NeighborWorks America, a nonprofit group that provides free government-certified foreclosure counseling through 235 local organizations.

“Several took the Hope Now Web site and just reskinned it with their own information, or they use government seals,” Ms. Rodriguez said. “They’re very crafty, and their marketing strategies are aggressive.”

Peggy L. Twohig, associate director of the financial practices division at the Federal Trade Commission, said consumers should be wary of companies that promise results, charge upfront fees or tell them not to contact their lender on their own. Ms. Twohig said consumers could get the same help free from nonprofit housing counselors.

“Our advice to consumers is to contact their loan servicers directly or to call Hope Now or HUD-approved housing counselors,” she said.

Last year, Congress approved $180 million in grants to nonprofit housing counselors( A VERY DECENT MOVE ).

As Ms. Martinez awaits eviction, the temptation to try another foreclosure rescue specialist remains. “There’s other agencies that say they can help,” she said, “but I’m scared that I can’t trust them.

“One man said, ‘You have to be persistent,’ ” she said. “But I’m scared to get someone else, because they probably won’t help me, or can’t.”

This is a result of not taking Fraud, Negligence, Fiduciary Mismanagement, and Collusion seriously. If we don't find and prosecute these criminals, then we will find ourselves in this situation again. How much evidence do people need that this was the second most important cause of our crisis? How many subprime mortgages were just plain fraud? Do people even know or care? We need the resources to police crime. What happened to the law and order types? Do they just worry about the asinine drug war?

My only guess must be that many people have no sympathy for these victims. Buyer Beware! Fine. It's a callous and short-sighted view, but, hey, we're getting to be experts in that, aren't we? Just don't pretend ignorance when the next S & L Crisis, Tech Bubble, Subprime Crisis comes calling at your door. You were warned, and you'll deserve no more sympathy than you gave, but you'll get it anyway from decent people.

"They are acting worse now with respect to mortgage mods than during the bubble years with exotic loans. "

Mr. Mortgage doesn't like what he sees in Mortgage Modifications:

"WaMu’s New $1 million 5-year 1% Balloon Loan (mod) - $878 Per Month!( THAT SEEMS LOW )

Posted on January 7th, 2009 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

WaMu takes the game of re-leveraging the home owner in order to avoid a default, foreclosure and subsequent credit loss to the next level. Banks can not be left to modify trash mortgages on their own - they do not have enough of a sense of responsibility. ( THIS SEEMS TRUE, IF WE EXPECT SOME SOCIAL LARGESS ON THEIR PART. )

They are acting worse now with respect to mortgage mods than during the bubble years with exotic loans. I have seen many mortgage mods over the past year but nothing I have ever seen is as irresponsible as this mod WaMu recently authorized…Bank of America came close (see link below).

• Countrywide/BofA - A Direct Threat to Borrowers & Shareholders (109)
  Posted on September 3, 2008 1:32 PM

DISASTER OF EPIC PROPORTIONS

Mortgage modifications have turned into a disaster of epic proportions. Every where you look, mortgage mod firms are promising things that I do not believe can be attained. Back in the good old days of nine months ago when I became hot and heavy on private sector loan mods, the banks and servicers were actually looking at the entire picture and reducing principal balances when necessary. The home owner or mod company would present a ‘present’ and ‘proposed’ solution to the note holder of which one of the choices was a principal reduction — and many times it was granted.

As you know, I am a big proponent of mortgage modifications done the right way. I have swung completely over to this side of the fence as regulators, law makers and banks have rolled out their harmful, boiler-plate loan modification initiatives that leave many underwater, over-leveraged renters for life.

It is obvious that these loan modification plans have been born as a result of panic and the need to protect the bank’s balance sheets( TRUE ) rather than doing what is beneficial for the home owner and broader housing market. Fannie/Freddie and FDIC ‘mod in a box’ examples below.

• Fannie/Freddie - Come Get Your Loan Mod & Pay For Life (81)
  Posted on December 17, 2008 1:52 PM
• Mr Mortgage: Actual IndyMac (Exotic) Loan Modification (63)
  Posted on December 3, 2008 2:13 PM

MORTGAGE MODS DONE RIGHT

A mortgage mod done right is a ‘mortgage banking model’ mod where the borrower is fully re-underwritten using present income and debt levels, prudent 28/36 debt-to-income ratios and current market rates — similar to a cram-down. ( SOUNDS GOOD )

This immediately de-levers the home owner enabling them to freely sell, refi, save money, shop etc. Typically a principal balance reduction is needed to bring these home owners in line, but it is the only permanent solution( I AGREE ). It is also the only solution that can prevent the broader housing market from being a dead asset class with zombie homeowners for two decades. ( I AGREE )

• Mr Mortgage: My Case FOR Mortgage Principal Reductions (124)
  Posted on December 14, 2008 1:49 PM

Given the push by regulators, law makers and banks into ‘modifications in a box’, I now have my doubts that private mortgage modification firms will have the types of successes we saw earlier in the year. Most modifications I am being told about coming out of loan mod firms around the nation are identical to the FDIC, Fannie/Freddie, Bank of America and WaMu examples herein.

These I do not endorse in most cases - specifically if they do nothing more than offer a term teaser-rate, extend the term, defer interest or principal, come with large balloon payments etc. These do nothing more than kick the can down the road and in the case of large deferred interest or principal balances make the home owner a trapped, underwater, over-leveraged renter for years, if not life. ( A GOOD POINT )

NEW WAMU LOAN MOD - THE 5-YEAR BULLET!

Below is an actual example of a recent WaMu loan mod with a 5-year $1 million bullet payment. This mod takes exotic lending to level I have never witnessed in my 20-years of mortgage banking. This makes a Pay Option ARM looks safe and cozy — and puh-lease do not tell me this is great because it frees him up to spend money into the economy.

Banks offering and borrowers actively accepting this style loan mod will guaranty that the housing crisis stays will us for a long time to come. This borrower will lose his home in 5-years, I have no doubt. That is of course unless his house price goes up 100% AND great, low rate super jumbo money returns to the market so he can refi out of it - then again, many lenders won’t even refi a loan that has had a previous loan mod done.

Property Value: $800k

Note amount: $1 million plus deferred interest

New Mod amount: $1.053 million

First TWO years rate/payment: 1% and $878

Third year rate/payment: 3% and $2633

Forth year rate/payment: 5% and $4389

FIFTH YEAR PAYMENT - THE BULLET: ALL OUTSTANDING BALANCE DUE AND PAYABLE

All rights to future predatory lending claims waived.

There are some very good points here. First, a Mortgage Modification must lower the principal as well as monthly payments. I liked the idea of giving the lender some of the principal when the house is sold, but Felix Salmon says the lenders don't like this idea. Second, the lenders are dealing in their own best interest as they see it, just as the banks are doing with TARP. That's how the system works, but then we shouldn't expect any social largess on their part. The lenders are , in essence, pushing foreclosures down the line in the hope of stabilizing home prices. They're trying to have it both ways. At first, of course, the lenders were hoping to be made whole by government intervention. One McCain proposal did just that. Now, barring some government plan, they're just deferring their foreclosing actions until a better time in the future. Thirdly, to the extent that fraud and other abuses occurred in the mortgage business, it doesn't look like the lenders have any fear of this being seriously pursued. If Mr. Mortgage is correct, the lenders have simply found a new way of selling dodgy loans, under the pretext of doing social good. Loans that have no real chance of working out are not kosher.

Earlier, I said that the government would have to impose a deal on the lenders in order for the plan to work, but that I didn't agree with that since it was essentially seizing private property. Without that, it's hard to see how many mortgage modifications will actually last, although some undoubtedly will. Obviously, there will be differences in the modifications depending upon how seriously each lender deals with this problem.

"charging distressed homeowners for help negotiating better loan terms -- a service provided for free or for a nominal fee by many nonprofits. "

From the Washington Post:

"By Renae Merle

Washington Post Staff Writer
Friday, December 26, 2008; A01

A growing industry has emerged to take advantage of the unprecedented wave of foreclosures, charging distressed homeowners for help negotiating better loan terms -- a service provided for free or for a nominal fee by many nonprofits( TOO SAD ).

Such companies charge $500 to $2,500 or more and are drawing the ire of consumer advocates, regulators and lenders, who say many are just the latest version of foreclosure rescue scams and can make it more difficult for homeowners to get help( MORE OF THE SAME GRAFT I SAY HAS LED US INTO THIS MESS ).

"You don't need to go out and hire someone to help you," said Michael Gross, managing director of mortgage servicing for Bank of America. "It is very, at times, frustrating to find a homeowner who has paid a for-profit company $3,000 to $5,000 in an upfront fee, when they could have gotten the same or better assistance free."( TERRIBLE )

Loan modification firms say they are taking up the slack left by unresponsive lenders and overwhelmed nonprofit groups. "Nonprofits are not as efficient( RUBBISH ) as the regular market," said Moose M. Scheib, the head of Michigan-based LoanMod.com, a loan modification firm that charges homeowners $1,500 to help renegotiate their mortgages. "I think the difference is probably more attention( BS ) you get from us."

There do not appear to be federal laws that prohibit charging for this service, several law-enforcement officials and law professors said. Instead the practice is governed by a hodgepodge of state and local laws. Virginia does not appear to restrict its practice, according to the state's consumer services department. Officials with the District's Department of Insurance, Securities and Banking said these companies would fall under statutes covering credit counseling services, and therefore must be registered( ARE THEY ? ).

Maryland has received several complaints and issued an alert in September warning that under its existing laws, loan modification firms cannot charge an upfront fee( GOOD ).

Maryland's Department of Labor, Licensing and Regulation has helped recover at least $10,000 for homeowners who say they were misled( FRAUD ), according to the agency. But the state says the problem is bigger than the fees.

"Once a borrower pays an unscrupulous loss-mitigation consultant and time is wasted, the damage has been done," said Sarah Bloom Raskin, Maryland's commissioner of financial regulation. "While we may be able to recover fees, we can never recover the lost time -- time that the borrower could have used to work out a bona fide loan modification( YET THEY'RE HELPING )."

"We are extremely concerned about the huge proliferation of for-profit companies making a buck on these people," said Laurie Maggiano, senior policy adviser at HUD's Office of Housing. The department has certified 2,300 nonprofit housing counseling agencies across the country, which are required have at least one year of experience( GOOD ) administering a housing counseling program, Maggiano said.

Legal Services of Northern Virginia, a nonprofit group, investigated a case involving U.S. Homeowners Assistance of Irvine, Calif., after a client paid the firm $2,500 for help modifying the loan for her Alexandria home. After receiving the money, the company did not return her calls( IT'S EXTREMELY EFFICIENT ), said Kristi Cahoon, a lawyer with the nonprofit group.

By the time the homeowner, a 75-year-old retired nurse, realized no help was forthcoming, she had fallen behind in her payments and was facing foreclosure, Cahoon said.

U.S. Homeowners Assistance said in an e-mailed statement that the borrower's money could be returned if she requested a refund and a review of her file was conducted.

Clayton Sampson, founder of U.S. Housing Assist of Nevada, which launched in July, said nonprofits provide a great service, but added, "We have a lot of clients that need us."

Sampson said he spent five years at a mortgage brokerage and his contacts have enabled him to customize workout plans for a homeowner's lender. His firm charges a minimum of $2,500, but he said he would return the money if he was unable to help the homeowner.

The pitch companies make varies. But one approach includes paying a company to challenge the legality of a loan -- a process housing experts say can be long and complicated.

Vienna-based Mortgage Analysis and Consulting, for example, charges $150 for a consultation and $250 to $500 for a preliminary audit. If the audit finds problems with the loan document, Mortgage Analysis will refer the borrower to a lawyer( THIS SEEMS BETTER ), who may charge an additional $2,000 retainer. If the lawyer requests a more in-depth audit, Mortgage Analysis charges up to $1,750, which clients can pay in installments.

In several cases, the introduction of a lawyer( THIS COULD WORK ) has helped spur the lender to agree to a better loan modification, said Jose Semidey, the firm's founder.

Semidey, a former real estate broker, said he planned to open a nonprofit firm earlier this year to help homeowners. But, he said, he quickly found himself inundated with distressed homeowners willing to pay for his service.

"I am not in this for the money or to get rich. I see it as a mission and a duty," he said. "And yes, we are a for-profit company, but that only makes [us] do a better job."

Virginia's State Bar is investigating a complaint that Semidey has illegally practiced law( THAT IS A PROBLEM IF YOU'RE GIVING LEGAL ADVICE ). Semidey said he makes clear he is not a lawyer and refers clients to a list of lawyers he has compiled.

One of Semidey's former clients, Edwin Monge, said he became concerned that he would no longer be able to afford the payments on his Woodbridge townhouse after the adjustable interest rate rose and the payments increased. The home's value had tumbled, making it impossible for him to refinance. Monge said he met Semidey through a friend and eventually paid him $7,000, some of which was to be used to pay a lawyer.

"I was blind," Monge said. "I wasted my money, and they lied to me and they didn't tell about the community groups( THAT'S NEGLIGENCE )."

Some of the money eventually was returned. And in the end, with the help of a nonprofit legal group, Monge was able to get into a new loan -- at no cost -- through a Federal Housing Administration program.

Semidey said the process did not work out because Monge could not find a local lawyer to represent him and a large portion of the money was spent on an outside auditor. "He came to our office 10 or 15 times," he said. "We translated for him. We sat with him. . . . You cannot make everyone happy."

He said, "We did not profit from the interaction."

The bottom line is that a lawyer could help in some cases, but they usually give a free consultation on their own. I don't see the need for a middleman. Also, if free services are available, a decent and honest person would say so. See, some things are more important than money.

"the disparity of available help between subprime and prime borrowers continues to grow"

Paul Jackson on Housingwire:

"New data released this week by the HOPE NOW( GO HERE ) coalition of servicers, lenders and investors shows clearly that while the nation’s foreclosures decreased during November, the disparity of available help between subprime and prime borrowers continues to grow. According to the group, just 69,075 foreclosures were completed during November nationwide, down 13.9 percent from Oct.’s totals; the drop reflects a strong push to enact voluntary and involuntary foreclosure moratoriums in key housing states."

Here's a definition of loan modification:

"A Loan Modification is a permanent change in one or more of the terms of a mortgagor's loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford."

The post continues:

With the extra time, it’s clear that servicers are working to modify more loans for troubled subprime borrowers, too. HOPE NOW’s data shows that despite the sharp monthly drop in foreclosure volume, the number of modified subprime mortgages actually rose slightly in November, from 73,211 in Oct. to 73,592 in Nov. The number of subprime borrowers receiving repayment plans fell sharply, however, dropping 19.8 percent."

Here, from AFS:

"Repayment Plan

The most common way of resolving a loan default is to work out a plan (Repayment Plan) which will let you repay part of the delinquency each month, along with you regular monthly installment.

Most of our clients will be eligible for a Repayment Plan for the amount they are delinquent if their financial circumstances have stabilized. Most of our clients have realized a short term financial hardship that has caused them to become delinquent. They are now financially back on their feet and need help getting caught up. If this is your case we will negotiate with your lender to distribute your past-due amount over a set period of time, usually 18-24 months, depending on your circumstances. Your lender will usually ask for 25-50% of the arrearage down and the remainder will be paid out over a period of months. You will need to provide financial information to prove that you are now capable of making this responsibility. Remember, this monthly amount is in addition to your usual mortgage payment.

This type of solution to your mortgage foreclosure is generally accepted very well by lenders. We will complete a detailed financial portfolio of your income vs. your expenses to show the lender what payment that will work with your current income along with what down payment that you can afford. This will bring your account up to date immediately and keep you secure in your home.

Here are some examples of Repayment Plan documents from actual client cases. These are only a sampling of the Repayment Plans we have received. These documents are on the mortgage company letterhead for authentication. You can see the actual reinstatement amount versus how much they had to come up with is a down payment.

Since we are obtaining new workouts daily it is very hard to keep this page up to date. Please visit our Mortgage Resource Center to get up to date plans that we have received from each Mortgage Company.

Litton Repayment Plan - click to download or print

Ocwen Repayment Plan - click to download or print

First Franklin Repayment Plan - click to download or print

Select Portfolio Repayment Plan - click to download or print

AMC Repayment Plan - click to download or print

Chase Repayment Plan - click to download or print

HomEq Servicing Repayment Plan - click to download or print

Option One Repayment Plan - click to download or print"

The post continues:

"As has been the case throughout the evolving mortgage mess, however, an increased focus on the needs of troubled subprime borrowers appears to have left prime-credit borrowers out in the cold. While the number of subprime loan modifications rose slightly, the number of prime loan modifications fell dramatically during Nov., dropping 15.2 percent; the drop shows that the disparity in available help options is clearly tilted towards subprime borrowers.

Does a single servicer matter?

Such a reported disparity, however, may have more to do with how a single servicer can influence the HOPE NOW data set, rather than reflecting a real difference market-wide in available help for prime and subprime borrowers. In particular, the apparent rise in industry-wide modifications among subprime borrowers could be an artifact of recent efforts by Ocwen Financial Corp. ([1] OCN: 8.16 -0.12%) and a few other key servicers — Litton and Nationstar among them — to modify the subprime loans in their respective portfolios. Such an effort may be skewing HOPE NOW’s numbers, although the coalition generally does no discuss the reliability or variability of its data between individual servicers.

A recent report by Credit Suisse’s Rod Dubitsky notes that the the servicer variation in the use of loan modifications among subprime borrowers can be dramatic: some servicers are employing loan mods to a much greater extent than others, with the three servicers above clearly dominating the loan modification push thus far among subprime borrowers.

Equally variable is the rate at which servicers have ramped up their modification efforts throughout the year, with Ocwen leading the charge; the Credit Suisse report notes that Ocwen more than quintupled modifications between Q1 and Q2 of this year, a trend that HousingWire’s sources suggest has continued unabated into the back half of this year.

All modifications are not created equal

Beyond the raw effort to modify loans, it’s often the type of modifications that matter, as well. HOPE NOW doesn’t specify aggregated numbers for different classes of loan modifications — and the press (along with consumer groups) have since picked up on the meme, espoused here very early last year, that loan modifications are generally better than repayment plans for troubled borrowers. Which remains generally true. The particulars here, however, are far more nuanced than most realize.

Dubitsky notes, for example, that more than 70 percent of the entire mortgage industry’s principal-reduction modifications to-date have been performed by Ocwen — which underscores the fact that not all modifications are created equal. Doubly so when you consider that the recidivism rate on principal-reduction mods is vastly different from other forms of modification, or that 1/3 of modifications actually increase borrower’s payments (and there are valid reasons for doing this, as well).

The point here is that by lumping everything into loan modifications, and then comparing that to raw repayment plans, there is only so much market trending that can be seen — while we’ve been among the media outlets that used that tool as a rough hammer to pick out trends, at some point, even that sort of comparison begins to take on a black-and-white distinction that makes its use increasingly problematic.

As Dubitsky notes: “There can be too much of a good thing, and some servicers could modify too much, while other servicers could be doing far too few mods.”

The difference remains

Regardless of what caused the disparity, however, the difference between modifications for prime and subprime borrowers is very real in the aggregate sense: the ratio of repayment plans to modifications for prime borrowers during November was 2.39 percent, while for subprime borrowers that ratio was 0.61 percent. What we don’t know is why this is the case: is it because a few subprime servicers, looking to save their own skin and recoup advances, are modifying loans are an amazing clip? Or is it because prime servicers are more comfortable using repayment plans as a front door to a workout, even if it means booking a loan as delinquent?

There are other considerations here, as well, for much of the reported data: if servicers focusing on prime loans are indeed more likely to rely on repayment plans — for whatever reason — does that help explain why so many prime loans appear to be going bad so quickly? Does a strong modification focus by subprime servicers, in comparison, help explain why reported delinquencies in the sector aren’t rising as fast?

Regardless, expect to see loan modification efforts increase dramatically next year, HOPE NOW executive director Faith Schwartz said. She said that the group expects to see the number of loan modifications double their 2008 totals next year, largely as servicers look to implement bulk loan-mod processing programs — programs that are, ostensibly, not limited to one credit sector or the other.

Frankly, getting to that level of loan mods could be done by pushing the ratio of prime loan modifications to the same level we’re already seeing in the subprime space, although HOPE NOW didn’t comment on any planned strategy by servicers for modifications going forward.

Schwartz also said the group intends to roll out “significantly enhanced loan-level data that will help the industry further analyze trends and make necessary adjustments,” as well. At HousingWire, our wish list for that data would include aggregate information on what type of loan modifications are being executed, as well as recidivism rates. It is Christmas-time, after all.

Write to Paul Jackson at [2] paul.jackson@housingwire.com."

Another Free Market Approach

Luigi Zingales with a free market approach. I like it, in the same way I liked Mankiw's plan and Randazzo's plan:

"Tomorrow is too late

The United States (and possibly the world) is facing the biggest financial crisis since the Great Depression. There is a strong quest for the government to intervene to rescue us, but how? Thus far, the Treasury seems to have been following the advice of Wall Street, which consists in throwing public money at the problems. However, the cost is quickly escalating. If we do not stop, we will leave an unbearable burden of debt to our children.

Time has come for the Treasury secretary to listen to some economists. By understanding the causes of the current crisis, we can help solve it without relying on public money. Thus, I feel it is my duty as an economist to provide an alternative: a market-based solution, which does not waste public money and uses the force of the government only to speed up the restructuring. It may not be perfect, but it is a viable avenue that should be explored before acquiescing to the perceived inevitability of Paulson’s proposals."

You need to read the post which is quite detailed. Here's a part with a good explanation:

"Suppose that you bought a house in California in 2006. You paid $400,000 with only 5% down. Unfortunately, during the last two years the value of your house dropped by 30%; thus, you now find yourself with a mortgage worth $380,000 and a house worth $280,000. Even if you can afford your monthly payment (and you probably cannot), why should you struggle to pay the mortgage when walking away will save you $100,000, more than most people can save in a lifetime? However, when the homeowner walks away, the mortgage holder does not recover $280,000. The foreclosure process takes some time during which the house is not properly maintained and further deteriorates in value. The recovery rate in standard mortgage foreclosures (which will not take place in the middle of the worst crisis since the Great Depression) is 50 cents per dollar of the mortgage. I am generous in estimating that under the current conditions it might recover 50 cents per dollar of the appraised value of the house; right now, it is only 37 cents per dollar of the mortgage, which given a house appraised at $280,000 equals only $140,000 for the mortgage holder. In other words, foreclosing is costly for both the borrower and the lender. The mortgage holder gains only half of what is lost by the homeowners, due to what we economists call underinvestment: the failure to maintain the house."

Please read on.

My problem with these approaches is that they are simply not going to be considered. Nothing less than total government intervention is going to work this time, because of the assumptions that have been made prior to this crisis. Since, again, Zingales knows more than I do, I hope that I am wrong.