California Loans News

The foreclosure crisis is being seen in different classes, due to the joblessness rates that are continuing to rise. According to Realy Trac, a foreclosure data researcher company, that there will be more or less than 3.4 million homes projected to enter foreclosure before the year ends. This is due to the unemployment streak of 6.5 months per person. Rick Sharga, the senior vice president of Realy Trac said that there is a new wave of foreclosure crisis to come because of these conditions.

Rick Sharga went on to explain, “The first wave of foreclosures was caused by bad loan products, while the second will be driven by unemployment. As of right now, we are at the beginning of wave two.  So virtually there will be no more foreclosures due to subprime lending. The demographics have changed and is now affecting people who are blue collar and entry to midlevel white collar. The foreclosure properties that we are now seeing are with higher loan values.”

He has further stated that perhaps the “best predictor” of locations to be hit hardest in the next wave would be those where unemployment rates are increasing. There will also be a third wave which would involve borrowers who had adjustable rate loans. These types of loans are going to default with “ridiculous rates.” The wave would be pursued by the middle of 2010 until 2011. Which means, that more middle-class people are expected to lose their residential properties.

He also stated that there has been a significant shift of the foreclosure crisis seen in other places besides California, Nevada, Florida and Arizona, which are the topmost locations in the foreclosure trend. What is happening now is that you are seeing places like Michigan and Ohio which were devastated by unemployment show an increase. These foreclosures will much harder to salvage because there is no income for these people.

Sharga also commented on the Obama administration’s move on assisting troubled homeowners via trial loan modification work. “Just by sheer volume alone, the Obama administration’s plan is really having a minimal effect. This loan modification program won’t have any success with the types of foreclosure you see now, because if you are unemployed, you don’t qualify for a loan modification.”

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Spokesperson Norm Magnuson from the group representing credit bureaus said that the first day of November presents a better outlook for troubled borrowers.  November 1^st was to have a new more benign way to report loan modifications sponsored by the government. Through the guidelines of the Consumer Data Industry Association, lenders are to report the loan modifications as “loan modified under a federal government plan.”

According to Craig Watts from FICO, explained that analysts prefer to have a least a year’s worth of performance data before making any changes to its credit-scoring formula. Once there is sufficient data documented from people who went through a federal modification, they will be able to access the accumulated data and determine how predictive it is.

Norm Magnuson further stated that under the association’s guidelines, “If a person is current with his mortgage payments before and during a trial modification period, this typically is about three months, the lender is supposed to report it as current. Once the modification is approved after the trial period, the lender will add a comment that it was modified under a federal plan instead of the dreaded partial payment.”

However, the new designation may still hurt the borrower if FICO decides to treat the modification as a risk factor. But, the prospective lender would still see on the applicant’s credit report the worked up loans and then decide how to treat the information. Magnuson also explained that the new guidelines won’t help those whose loans have already been modified, upon the lender’s discretion that they could apply the rules retroactively.

Tom Kelly spokesman for JP Morgan Chase & Co. said, “In the past we have looked beyond a credit score to someone’s full credit history and we will continue to do that.”

However these reporting guidelines are not applicable to loans that have already been refinanced, been put under forbearance or modified outside of the government programs. These would have another set of reporting guidelines.

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With millions of homeowners who have faced or are facing uncertainty about their ability to continue to be able to pay their mortgages, had had California mortgage modifications in the news for the last several months.

Many California homeowners have been saved by getting a mortgage modification and most likely many more will do so also. This is all due to the nose-diving home values, the skyrocketing unemployment, higher taxes and the ballooning payments which led many homeowners to possible foreclosure or bankruptcy. But is a mortgage modification your only option?

Before deciding if a California mortgage modification is right for you, you need to consider both your short-term and long-term goals before making any major financial and legal decision. Other options to consider if they are right for you are: foreclosure defense, bankruptcy, deed in lieu of foreclosure, refinance, reverse mortgage or a short sale.

For some homeowners you may have a legitimate foreclosure defense, or you may find that your best course of action is to sign the deed of your home over to the lender instead of trying to fight a foreclosure or you may seek a mortgage modification.  Whatever you decide to do, you need a licensed attorney in California who can explain these options and review the pros and cons to both your short-term and long-term goals.

Now depending upon your short-term and long-term goals, a bankruptcy may be a viable option.  For seniors a reverse mortgage may be a better option where you can start taking equity out of your home instead of trying to make payments for it.  If you decide on a short sale, which is when the bank agrees to let you sell the property for less than its value and then wipes out the rest of the debt owed.

Lenders will not tell you what your full options are because their primary object is do what is best for the bank, not for you. So it is very important that you know all of the options that are available.  So the only other person that will look out for your interests, besides yourself, is your attorney.

So please if you have any questions or want to know what the alternatives are to a California mortgage modification, you need to find a licensed attorney in California.

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The California real estate market has been hit very hard in recent years and it is going to get worse because many of the adjustable rate mortgages are ready to readjust between the 4^th Quarter of 2009 and the 1^st Quarter of 2010. The California loan modifications have exceeded the number of home loan modifications in all other states.

Homeowners went for the adjustable rate mortgage with a very low inductor rate with the hopes that their home value would increase or that their income would be higher which would allow them to refinance before the rate changed.

So now California homeowners because of their homes losing value and their incomes not increasing will face another devastation blow as hundreds of thousands will now be faced with a drastic increase in their monthly payments.

So while some homeowners will attempt to get a loan modification before their payment starts ballooning, many others will be caught off-guard.  A loan modification is negotiated with the lender to help both parties. The homeowner will get a monthly payment that they can afford, and the bank does not run the risk of the home going into foreclosure. Lenders are working hard to get loan modifications completed, because they are already holding the tiles to many foreclosed homes that are worth a fraction of what is owned on them now.

Legislation was recently passed in that aims at protecting homeowners trying to eliminate the scam artists and the fraudulent companies that are in the industry. It is very important for anyone who is considering a California loan modification to make sure that the company they are considering is registered with the Better Business Bureau and that they are licensed within the State of California.

You need to ask the law firm if they are in compliance with the new legislation and that they are using escrow accounts for fees, the legislation carved out these rules for any law firms that are helping to negotiate a loan modification.

You need to make sure that you do your homework, whether you have a conventional or an adjustable rate mortgage and you need assistance in getting a loan modification, to make sure you choose a reputable company and that they are licensed in California to do California modifications.

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The foreclosure crisis is seen to be spreading into different classes. This is due to the joblessness rates continuing to rise. According to foreclosure data researcher company Realty Trac, there have been more or less 3.4 million homes projected to enter foreclosure before this year ends. And this event occurred due to the unemployment streak of 6.5 months per person. Realty Trac senior vice president Rick Sharga said that there is a new wave of foreclosure crisis because of the said conditions.

Sharga explained, “The first wave was caused by bad loan products, while the second will be driven by unemployment. Right now, we’re at the beginning of wave two. There are virtually no more foreclosures that are the result of subprime lending. The demographics of the foreclosure crisis are changing and affecting people who were blue collar and entry to midlevel white collar. We’re now seeing foreclosures on properties with higher loan values.”

He further said that perhaps the “best predictor” of locations to be hit hardest in the next wave would be those where unemployment rates are increasing. The third wave would also involve borrowers who had adjustable rate loans. The loans of this kind are going to default with “ridiculous rates.” The wave would be pursued by the middle of 2010 until 2011. All these then reflect that more middle-class people are expected to lose their residential properties.

Sharga also said that there is a significant shift of the foreclosure crisis seen in locations other than California, Nevada, Florida and Arizona – the topmost locations in the foreclosure trends. “What’s happening now is that you’re seeing places like Michigan and Ohio that were devastated by unemployment have an increase. Those foreclosures are much harder to salvage because those people have no income.”

He also commented on the Obama administration’s move on assisting troubled homeowners via trial loan modification work. “By sheer volume, the Obama administration’s plan is really having a minimal effect. The administration’s loan modification program won’t have any success with the types of foreclosure you see now. If you’re unemployed, you don’t qualify for a loan modifcation.”

The first day of November presents a better outlook for troubled borrowers. This day commenced that lenders would have a new, more benign way to report loan modifications sponsored by the government.” Through the guidelines of the Consumer Data Industry Association, lenders should report the loan modifications as “loan modified under a federal government plan, said spokesperson Norm Magnuson for the said group representing credit bureaus.

“Once there is enough documented performance for people who went through (a federal modification), we will be able to assess the accumulated data to determine how predictive it is. The analysts prefer having at least a year’s worth of performance data before making any changes to its credit-scoring formula,” spokesman Craig Watts for FICO explained.

Magnuson further said that under the association’s guidelines, “If a person is current with his mortgage payments before and during a trial modification period (typically three months), the lender is supposed to report it as current. If the modification is approved after the trial period, the lender adds a comment that it was modified under a federal plan instead of the dreaded partial payment.”

On the other hand, the new designation may still hurt the borrower if FICO decides to treat the modification as a risk factor. But then again, the prospective lender would still see on the applicant’s credit report the worked up loans and then decide for themselves how to treat the information. Magnuson explained that the new guidelines won’t help those whose loans have already been modified, but depending on the lender’s discretion that they could apply the rules retroactively.

JP Morgan Chase & Co. spokesman Tom Kelly said, “We have in the past looked beyond a credit score at someone’s full credit history and we will continue to do that.”

The reporting guidelines are not applicable to loans that have been refinanced, put under forbearance or modified outside government programs. These have another set of reporting guidelines.

NeighborWorks America, a Washington-based national housing nonprofit organization, has launched an educational campaign in Southern California to “combat scams targeting homeowners in peril of foreclosure.”  This campaign was also participated by federal agencies like the Federal Trade Commission (FTC).

Chief operating officer of the NeighborWorks America Eileen Fitzgerald said, “Loan modification fraud is on the rise, costing troubled homeowners thousands of dollars up front for mediation and counseling services that are provided free by federally approved nonprofits.” She added that with better educated borrowers, the problem could be solved easier. “If you can stop people from going, then you don’t need to worry about enforcement,” she said.

Assistant director of the FTC Western Region said that the educational campaign would make a greater awareness against scamming even than law enforcement “because when law enforcement steps in, the money is gone.”

Fitzgerald further explained that troubled borrowers usually pay fees equivalent to amounts from $1,500 to $3,000 seeking assistance to possibly reduce their mortgage payments. “The companies, in turn, promise to negotiate with their lenders on their behalf. In some cases the companies promise that loan amounts will be modified, a result that is difficult and rare.”

She added that the homeowners doubly have to handle difficulties of gathering the fees only to face foreclosure due to non-performance of the expected tasks to their chosen servicer. “Those facing foreclosure can lose precious months that could be better spent with federally approved nonprofit counselors who don’t charge for their services.” Fitzgerald then referred to loan modification workers like attorneys, mortgage brokers or real estate agents extensively advertising on radio, television and print to be “very good marketers” but  unfortunately do not carry out what is expected of them.

The educational campaign targets the audiences composed mainly of senior citizens, Latinos, African Americans and Asian Americans who “have been particularly victimized.” The state’s office of attorney general has already received more than 2,500 complaints of loan modification fraud only from October 14 of this year. This is a very big leap from only 163 filed complaints last year.

For the next three weeks, the organization’s volunteers and community organizers together with their local affiliates from the Los Angeles Neighborhood Housing Services would distribute educational marketing materials. These would contain vital information that would warn people against loan modification fraud. The campaign’s first stop was the WorkSource center in Sun Valley.

In the coming weeks, the campaign would also be pursued in other foreclosure hard-hit areas like Miami, Florida and Columbus, Ohio.

According to California-based data researcher company Interthinx, mortgage frauds related to property valuation has increased to 46 percent compared to a year ago. The company’s study showed that there have been a noticeable number of schemes made against short sales, REO inventories and refinancing by borrowers whose equity was damaged due to the declining real estate values.

Generally, the Interthinx Mortgage Fraud Risk Index poured more than 11 percent from the earlier quarter. This covers the common types of mortgage fraud including property valuation. This data indicated that fraud and its perpetrators have intensely worked up their way in these times of economic and real estate crises.

The data company further stated that “the highest levels mortgage fraud risk correspond closely to the states with the highest levels of foreclosure activity.” And what is more alarming is that over the past year, there has been an increase in geographic concentration of mortgage fraud risk. The company explained, “Despite relatively small variations on the national scale, the range from the lowest to the highest risk state has widened considerably.”

Nevada was reportedly to have the highest risk. On the other hand, DSNews reported that in early October, the state has already launched an “all-out offensive to absolve that title.” Another known foreclosure hotbed is California, which has 7 out of 10 riskiest metro areas in terms of potentiality to these kinds of fraudulent activities. The state’s fraud index represented the largest one-year increase in all states. Interthinx noted that “the highest risk counties were previously confined to the state’s inland region but the risk has now spread to many coastal counties as well.” Arizona and Florida rank 3rd and 4th, respectively, in the Interthinx’s riskiest list. These two locations are also included in the areas deeply affected with high foreclosure trends.

The fraud risk list also included the areas of Charleston, South Carolina, Portland and Bend, Oregon, Minneapolis-St.Paul, Minnesota and Washington, D.C.

Meanwhile, the company’s Occupancy Fraud Risk Index has shown a 30 percent decline compared from a year ago. This index is closely related to schemes concerning speculative investments. This drop was explained to occur because of the consumers’ reduced economic circumstances and the depressed market for residential investment and rental properties. However, the company said, “A very slight increase over the last quarter – the first since the fourth quarter of 2006 – suggests that occupancy fraud risk may be poised for a rebound.”

Another decline in risk of fraud is in terms of employment and income claims, down 35 percent. This may be attributed to the decrease lenders’ growing use of Internal Revenue Service data in income verification. Also, the Interthinx said that the decrease may be because of a reduced need for misrepresentation of income as housing is slowly becoming more affordable.

Analysts of the company still expect that fraud risk may continue to increase in the next three years. This may be due to the wave of adjustable rate mortgage loans (ARMs) to be reset between the remaining weeks of this year and the first quarter of 2012.

The mortgage insurer company Genworth Financial has reported a net income of $45 million during the third quarter this year, compared to the company’s net loss of $258 million in last year’s same time frame. Despite the overall earnings, the company also revealed a $116 million worth of net operating losses of its U.S. Mortgage Insurance (US MI) segment, compared to its losses of $121 million during the same period last 2008.

The earnings report of Genworth exposed that the company changed its underwriting guidelines in order to create growth for the future. Genworth has also restricted coverage in 199 metropolitan statistical areas (MSAs) to 90 percent loan-to-value (LTV) mortgages basing on the conditions of specific housing markets. But during the third quarter of 2009, it has reopened coverage to 95 percent of LTV mortgages. On the other hand, the company’s guidelines were limited to the states of California, Florida, Arizona, Nevada and Michigan – the territories considered to be hotbeds of the foreclosure crisis.

Genworth’s US MI segment also has higher loss mitigation savings and lower losses. There has been a reported $224 million savings, equaling to $557 million worth of savings for the whole year. The report also projected the company to “save between $775 million to $825 million in loss mitigation through additional execution, resources and rising intensity loan modifications.”

As Home Affordable Modification Program (HAMP) servicers increase modification works so should their savings could be. During last month, HAMP servicers have already reached the 00,000 trial modification targeted limit, which was claimed by the Obama Administration to be a month ahead of plan. According to reports from Government Sponsored Enterprises (GSEs) and other loan modification servicers, Genworth estimated 11,500 delinquent loans within HAMP. The U.S. Treasury Department allocates incentives to participating loan servicers to the program.

Genworth chief executive officer Michael Fraizer said, “We are encouraged by the multiple signs of stabilization and improvement in our served markets which combined with our focused growth strategies, engaged distribution relationships and risk reduction efforts position us well for improved as we move ahead.”

The U.S. Congress passed a congressional resolution last November 1 extending the conforming loan limits through the year 2010. This stated that the current conforming loan limits of $417,000 for most locations in the country and $729,750 for high-cost areas like California would be extended. President Obama was expected to sign the resolution within two days as part of budgetary legislation preventing government shutdown.

The California Association of Realtors (CAR) and the National Association of Realtors (NAR) have been outspoken advocates of making higher conforming loan limits higher. The two groups have also contributed efforts for the provision of the Housing and Economic Recovery Act of 2008. This included the temporary raising of conforming loan limits from $625,500 in high-cost areas to the said amount above. The limits have also been extended until this year. In addition, the recent resolution has paved the way to extending the higher conforming loan limits for Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) loans until the next year.

CAR president James Liptak said, “There is no doubt that higher loan limits and the federal tax credits for first-time homebuyers have helped stabilize California’s housing market over the last year. CAR applauds our congressional representatives for their actions to extend the higher loan limits through 2010. They now should focus on making higher loan limits permanent.”

The conforming loan limit establishes the capacity of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. This also refers to the maximum size of a mortgage the said GSEs would be allowed to purchase. Non-conforming or “jumbo loans” on the other hand are those that usually carry higher mortgage interest rates. These have increasing monthly payments which may hinder families in California to buy residential properties that have been made less affordable through such loans.