Some more good News involving modifying your loan or working it out even before you have been delinquent. With so many borrowers out there that have sacrificed to not be late, but yet are in need of modifying there loan this opens the door for them.

“Fannie Mae, the largest provider of funding for U.S. home mortgages, on Monday said it has established new guidelines to help speed modifications on home loans even before a borrower goes into default.

Fannie Mae (FNM.P: Quote, Profile, Research, Stock Buzz) said its “early workout program” will allow mortgage servicers to negotiate a loan modification if a borrower is still making payments, but a default is foreseen. Foreclosure prevention efforts were previously only available after a delinquency has occurred, it said.

Mortgage servicing companies now also have the right to remove loans from mortgage-backed securities after just one month of delinquency for the purpose of a modification, it said.

Servicers in general have had to wait for at least four months of delinquent payments to strip loans from MBS, which must be done before a modification can be completed.

Fannie Mae and Freddie Mac, under guidance from their regulator, have recently stepped up efforts to modify, or permanently change, mortgage contracts to easier terms as a way to halt record foreclosures that have put housing in a downward spiral.”

Reuters.com complete article.

“A new government report released yesterday underscored the limited success of industry efforts to reduce foreclosures by modifying mortgage loans, offering fuel for both sides in the debate over whether modification efforts should be redoubled or abandoned.

Mortgage companies modified loan terms during the first half of 2008 for more than 200,000 borrowers who had struggled to make their monthly payments. The majority of those borrowers have since missed at least one more payment, putting them at renewed risk of foreclosure, according to the report from the Office of the Comptroller of the Currency.” Washingtonpost.com

As we are all in unfamiliar territory, and this is one of the first reports to come out about stats invloving Loan modification. A bit of bad news for Banks and maybe for the FDIC as more data becomes more available. The Government might drag there feet even more about helping homeowners with the bailout money.

“More than half of delinquent homeowners whose mortgages were modified earlier this year ended up redefaulting within six months, a top bank regulator said Monday.

Some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing conference.

The report, which will be released in full next week, covers nearly 35 million loans worth a total of $6 trillion — or 60% of all primary mortgages in the United States.

The high redefault rate raises concerns about the long-term effectiveness of loan modifications, which many are pushing as a key solution to the nation’s financial crisis.” according to Money.cnn.com

It looks like More and More Politicians are getting behind Bair’s stance that a portion of the 700 billion dollars set aside for the bailout needs to be appropriated to help with loan modifications. Another saga in the debate that we will continue to watch here.

“Frank also told reporters that he would push lawmakers not to approve granting the Treasury Department the second half of the $700 billion bank bailout package without a provision that would require some of that capital be used for loan modification.
Senate Banking Committee Chairman Chris Dodd, D-Conn., also urged more loan modification. “More mitigation, what Shiela Bair is talking about, needs to be done,” Dodd said to reporters following a hearing on U.S. automakers’ request for federal assistance.
Democratic lawmakers have endorsed a proposal introduced by Federal Deposit Insurance Corp. chairwoman Bair that would use $24.4 billion of the bailout funds to modify mortgages. Bair estimated that her proposal, which so far has been rejected by Paulson, would avert 1.5 million mortgage foreclosures.
“At the very least he would have to agree that some of that money was put to use to foreclosure relief,” Frank said.
It’s unclear whether President-elect Barack Obama will keep Bair as FDIC chairwoman, despite her efforts to support struggling homeowners. A report Thursday indicated that incoming Treasury Secretary Timothy Geithner may want to replace Bair.
Frank said Bair has support in Congress. “I think she should stay on and I think she should be given a broader role on formulating policy on mortgage foreclosures,” Frank said. End of Story”
Thanks to the Article in Marketwatch.com

“According to Bair, the nation’s financial system would be in much better condition today if earlier warnings she made about mortgage modification had been heeded.

Bair began sounding the alarm more than two years ago, warning that lenders had to shore up capital reserves to offset non-performing loans. In October 2007, she told lenders that they should start modifying more at-risk mortgages so borrowers could afford to stay in their homes.

Meanwhile the mortgage mess has ballooned, expanding beyond the housing market into the entire financial sector and the overall economy.

Both the government and the banking industry have tried to slow the mortgage meltdown. Hope Now, the Bush-administration led coalition of banks, loan servicers and community advocacy groups created to tackle the foreclosure problem, says it has has helped 2.7 million homeowners keep their homes since July 2007.” according to money.cnn.com

“Two investors in mortgage-backed securities sued Bank of America Corp.’s (BAC) Countrywide Financial Corp. on Monday over plans to make up to $8.4 billion in loan modifications as part of a settlement with 15 state attorneys general.

The lawsuit, filed in New York State Supreme Court in Manhattan, alleges most of the loans at issue aren’t owned by Countrywide, but were instead sold to trusts that securitized them.

The complaint claims Countrywide has no plans to absorb the reduction in loan payments, but pass that along to the trusts that purchased the loans.

“If the trusts are forced to absorb the reduction in payments occasioned by Countrywide’s settlement of the allegations against it, then the value of the securities that those trusts sold to investors will decline,” the lawsuit said.

The complaint is seeking a declaration, under the pooling and servicing agreements, that Countrywide is required to purchase any loan where it agrees to reduce payments. The lawsuit was reported by Businessweek.com on Monday.

The lawsuit, which is seeking class-action status, was filed by Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC, two Connecticut limited liability companies that purchased the securities. It relates to 374 securitizations in two series known as CWL and CWALT.

Greenwich Financial Services LLC specializes in arranging and structuring asset-backed and mortgage-backed securities, according to the firm’s Web site.”
According to cnntoday.com.

“4 major banks are making a push to stave off foreclosure by mobilizing there workforce and adapting new programs.

JPMorgan Chase & Co., for example, said it was boosting its ranks of housing counselors 14 percent to 2,500 and dedicating 150 people to review each of its mortgages before foreclosure.

Citigroup Inc. this month shifted 600 people who normally deal with new customers to a loan-modification department.

Residential Capital L.L.C., of Fort Washington, a subsidiary of GMAC L.L.C., is cross-training its call-center employees so all can handle loan modifications. As it is, Residential Capital said it worked out loans for four times as many borrowers in October as it did a year ago.

The most common aid to delinquent borrowers is a repayment plan that allows them to catch up through installment payments.

Beyond that, servicers may fix rates on adjustable-rate mortgages, drop interest rates, extend the duration of loans, or tack the arrears on to the end of the loans – meaning some borrowers end up owning more after the loan modification than before.”

“JP Morgan in late October became the latest large lender to launch an aggressive loan modification plan, saying it would look to implement a “mass mod” program while voluntarily enacting a foreclosure moratorium on loans it owns in an effort to qualify existing troubled borrowers for the new, expanded program. The expansion of its existing modification efforts came after JP Morgan acquired failed thrift Washington Mutual Inc. – and all of its struggling borrowers. From Housingwire.com.

The government continues to bailout banks, and there has been great debate about whether it lead to help for homeowners as well as the bank itself. The next coming months will shape how and if the bailout is able to slow the foreclosures and stabilize the housing market. Time will tell and ill be here posting relevant links. Enjoy

FDIC Loan Modification Plan May Strengthen Citi’s Homeowner Help Efforts

Citigroup owns roughly 1.5 million home loans and services another 5 million mortgages.

Through its subsidiary CitiMortgage, the firm already has at least two programs in place to assist homeowners in trouble — a new program targeting some 500,000 homeowners who are at risk for falling behind on their mortgage payments, and another intended to help homeowners who are already delinquent on their loans. The latter, Citi officials say, was already modeled on the FDIC’s IndyMac plan.

Abc News link

Here is an example question

Question 9: Can a mortgagee qualify an asset for the Loan Modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?

Answer: Based upon this scenario, the mortgagee should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the mortgagee should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.

Hud.gov