Imminent default becomes more realistic for mortgage modifications
The Federal Housing Administration announced this past Friday that distressed homeowners did not need to be behind in their mortage payments to apply and be eligible for a mortgage modification under the Home Affordable Mortgage Plan, or HAMP. One more piece of proof that the federal government gets it. It may take months or a year or so to get it, but here is one step closer.
For almost a year now the banks have been getting away with telling distressed homeowners that they had to miss a few monthly mortgage payments to demonstrate ‘imminent default’ in qualifying for a mortgage modification. This has given lenders free reign to then have their foreclosure departments not communicate with their loss mitigation departments and foreclose on distressed homeowners while in mortgage modification negotiations.
Those of us in the mortgage modification business sincerely hope this new FHA development brings a halt to this heart-breaking and all-too-often occurence. The nebulus’imminent default’ standard in qualifying for a mortgage modification has been a huge sticking point since the passage and implementation of the Home Affordable Mortgage Plan, or HAMP, since last March.
The federal mortgage modification plan has always been designed to assist distressed mortgage holders to lower their monthly mortgage payments to 31 percent of their new monthly income. But banks have been allowed to use their own definition of ‘imminent default’ to lure these distressed homeowners into ‘imminent foreclosure.’
FHA Commissioner David Stevens specifically identifies mortgage loan servicers, who, as we all know, are the specific entities that benefit the most from foreclosures over mortgage modification and short sales.
The article quotes a housing counselor who is obviously well aquainted with the resistance on the part of banks to modify mortgages in a good faith manner. This free HUD counselor cites the ever-prevalent lack of transparency, read: obfuscation, of the lenders in processing mortgage modification applications. The combination of this ‘lack of transparency’ and lack of success of HUD counselors in getting mortgage modifications negotiated is a telling comment on the lenders’ reluctance and resistance in granting permanent mortgage modifications with a performance rate above the dismal one percent of accomplishment.
It is only the banks that see HAMP as a ‘last resort.’ Congress and the U. S. Dept. of the Treasury certainly did not see HAMP that way.
Debt-to-income ratios seem to be a significant problem in qualifying distressed homeowners for a mortgage modification. This is news to me. I have never had a prospective client not qualify because of debt-to-income.
Stay tuned.
Read it here
