72% Rejected by Feds ‘Asset Relief Loan Program’

An alarming number of borrowers are being rejected from a federal mortgage-assistance program that sets out to help make monthly mortgage payments more affordable so owners can remain in their homes, a federal watchdog report shows.

Seventy-two percent of struggling borrowers who apply to the Troubled Asset Relief Program are rejected from mortgage servicers.

“There is a massive lost opportunity for an emergency program designed to help home owners through the crisis if only 20 percent to 30 percent of families seeking help from HAMP actually get into HAMP,” says Christy Romero, special inspector general.

The report says the U.S. Treasury Department’s requirements for mortgage servicers fail to provide a “clear picture of why home owners were denied.”

Source: “72% of Struggling Borrowers Rejected From Federal Mortgage-assistance Program,” MarketWatch (July 29, 2015)

3 Banks Penalized for “Loan Modification Failings”

Three major banks have lost federal mortgage modification incentives in delivering a foreclosure relief program until they make big changes to improve their practices.

Obama administration officials have told Bank of America, JPMorgan Chase & Co., and Wells Fargo & Co. that they must make “substantial improvements” to the way they administer the Home Affordable Modification Program, and they will not receive any more federal money from the program until they do so. For example, officials noted that banks need substantial improvement in correctly evaluating borrowers’ incomes, which is a critical component for determining eligibility for the program. Some of the banks also need to improve how they identify and contact borrowers for the program.

Last month, the banks received $24 million in payments through HAMP, but no more payments will be made until servicers improve their performance, officials warned.

Full article at source: “3 Big Banks Lose Mortgage Modification Incentives,” Los Angeles Times (June 10, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

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Not Enough Gov’t Funds Went to Home Owners!

The federal bailout of the U.S. financial system, which was originally forecast to cost as much as $700 billion, is expected to cost far less than expected, according to a newly released congressional report.

The federal bailout, known as the Troubled Asset Relief Program (TARP), was launched by the Bush administration in response to the 2008 financial crisis and was to include aid to struggling home owners. But TARP is expected to now cost taxpayers about $25 billion because it did not accomplish all that envisioned to help home owners avoid foreclosure, a congressional panel said.

The Treasury Department allocated $45.6 billion for three major housing programs to help home owners, including the Home Affordable Modification Program (or HAMP), a refinancing program run by the Federal Housing Administration to aid underwater home owners, and a program designed to help hard-hit areas. But the Treasury Department only spent about $1 billion in TARP money for the foreclosure prevention effort, the panel noted.

Source: “TARP’s Lower Cost Reflects Troubles of Foreclosure Effort,” Dow Jones Business News (March 16, 2011) and “U.S. Senate Panel to Step TARP Oversight-Chairman,” Reuters News (March 17, 2011) 

Unfortunately this, along with restrictions from the Fed’s regarding loans in the Sacramento and Placerville, California regions continue to restrict economic recovery. Other related articles at: www.sierraproperties.com

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“No taxes” owed on funds from government programs

The Internal Revenue Service (IRS) has clarified that some homeowners who receive financial assistance from the federal government under the Home Affordable Modification Project (HAMP) will not be required to pay taxes on that support. Specifically, funds received from the U.S. Treasury Department’s Housing Finance Agency (HFA) Innovative Fund for the Hardest-Hit Housing Markets (The “HFA Hardest Hit Fund”) and the Department of Housing and Urban Development’s (HUD) Emergency Homeowners’ Loan Program are exempt from taxation.

These aid programs provide financial assistance to struggling homeowners, either by making payments on the homeowner’s mortgage loan or by providing financial support during an owner’s transition to lower-income housing. Since payments under these programs are not made in exchange for any service performed by the homeowner, they can be excluded from the homeowner’s gross income for tax purposes under the general welfare exclusion.

Homeowners and lenders also should not report any mortgage interest deductions or receipts for payments made by a government agency. Placerville, El Dorado County, California region homeowners need to know this and pass on this information!

Complete details at:  “Guidance on Tax Consequence of Distressed Homeowner Payments Provided (IRS Notice 2011-14) 

Information credit given to the first tuesday Journal Online; by first tuesday Realty Publications, Inc.

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GOP Bill Attempts to End Foreclosure Program!

House Republicans called the Obama administration’s foreclosure prevention program “a colossal failure” and have introduced a bill to end it.

Republicans are calling for the immediate end of the Home Affordable Modification Program. The program has been under attack from both Republicans and Democrats in recent weeks for the program’s failure to do enough to prevent foreclosures.

“It’s one more example of why government interference in the private sector doesn’t work and that’s why it should be repealed,” said Rep. Jim Jordan (R-Ohio), who introduced the bill, in a statement.

Administration officials have defended the bill, saying it has helped standardize industry practices and sparked more loan modifications in the private sector.

However, Republicans say that the program has been struck by low participation among home owners and has been far from reaching its goals. By the end of last month, about 522,000 home owners were enrolled in HAMP loan modifications. Yet, the program’s goal is 4 million home owners. The program has faced a high drop-out rate too: About 793,000 home owners who were once enrolled in HAMP have since left.

Source: “U.S. Republicans’ Bill Would End Obama Home-Foreclosure Program,” Dow Jones Business News (Jan. 28, 2011) 

Other articles relating to Placerville, California at: www.sierraproperties.com

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Lenders do not do homeowners any favors

The primary objective of a lender purporting to help a homeowner modify a loan is not to benefit the homeowner, but to keep the loan on their books at a loan balance that, in California, nearly always exceeds the value of the home. Lenders only reduce monthly payments below interest-only payments when they include a balloon payment in 3 to 5 years. The home is still upside down, now and then.

A simple mathematical calculation tells the lender if they will receive more money by foreclosing or through a loan modification. Their objective is to get the most net present value (NPV), or worth in “today’s” dollars, from each transaction. Homeowners are almost never aware that whether or not they qualify for a loan modification hinges on this NPV test.

A monthly payment reduction does nothing financially for homeowners who owe more than the fair market value (FMV) of their home.  Until lenders have to compete with bankruptcy judges to be the first to cram down loan balances, the only rational financial option available to negative equity homeowners is the strategic default. [For more information regarding HAMP, see the July 2010 first tuesday article, HAMP is losing participants; for more information regarding strategic default, see the April 2010 first tuesday article, The underwater homeowner, his future and his agent: a balance sheet reality check – Part II and the August 2010 first tuesday article, Fannie Mae, our government and strategic defaults.]

Real estate professionals are the gatekeepers for the multiple listing service (MLS) real estate, as well as the primary advisors to drowning homeowners. They need to inform the public, since the news media is not.

Re: “Surprise! Banks help more homeowners than Obama” from CNN Money

first tuesday take: By Kelli Galippo • Sep 8th, 2010 Copyright © 2010 by first tuesday Realty Publications, Inc. Readers are encouraged to reprint or distribute this information with credit given to the first tuesday Journal Online