Just as the foreclosure activity in the U.S. is climbing, so is the drop out rate from federal government's HAMP Loan Modification program. As per the latest report released by the U.S. Department of the Treasury, nearly 96,025 of the 1.3 million homeowners, who had applied for mortgage loan modification have dropped out up until June of this year. Only 37,000 homeowners received HAMP permanent modification in July. It's a drop in the bucket considering the government's intentions and message to consumer's to work directly with their lender in an effort to get their home loan modified. The unfortunate thing is so many homeowners are in foreclosure after going through "Loan Mod Hell" with their lender or hiring someone who did nothing but further jeopardized their home. It now is apparent that the HAMP program, originally started with the goal to bail out nearly 3 to 4 million financially-struggling homeowners, will only end up modifying loans with permanent modifications for a fraction of the homeowners of witch it was intended.
With the cancellations increasing, only 52% of the homeowners are left in the active trial mods or permanent modifications, compared to 59% in June. July figures show, the drop outs now stand at 616000 and heading the wrong direction. "New cancellations are expected to exceed the number of permanent loan modifications for the next few months as mortgage servicers clear their backlog of aged trial mods," stated the Treasury statement.
Administration Officials Defend the Program
Though the government's home rescue program has come under criticism for failing to help all the homeowners modify and refinance mortgages some officials believe that the program has achieved success and is “delivering real benefits to struggling homeowners in communities across the country" Apparently these officials are not struggling homeowners trying to get their mortgage servicer to modify their loan. Interestingly enough, the people who really need a loan modification and come to us to file emergency bankruptcy to avoid foreclosure all share the same story. They did everything their lender/servicer asked and end up with a Trustee Sale Date while the file is still under review. We see this all the time, homeowners who are given trial modifications only to end up being foreclosed on. And they say they're trying to help?
Explaining Cancellations
About the high drop out rate, the officials stated that initially many Americans applied for the program, but when the applications were reviewed, many were dropped out as they were not eligible for mortgage modification. This is why we see the new HAMP REST REPORT as a critical tool for homeowners trying to get a loan modification these days. The REST Report has the NPV calculation the lenders use to determine eligibility. It's more that just being over the 31% Debt To Income Ratio, the investor needs to see the loan modification will be more profitable than foreclosure or short sale. One of the main reasons mortgage servicers/investors say they declined loan modifications was that the debt was not too heavy, meaning that “the mortgage payments was already less than 31 percent of the homeowner’s income.” Simply not true! The new HAMP and HAFA guidelines are simple but yet confusing to say the least, when you consider the NPV calculation. Up until now you could use a simple calculator to see if you meet the 31% but this calculation does not take the NPV module into consideration.
The REST Report is the Key
The REST Report is the ONLY way you can know with any degree of certainty whether or not qualify for the Federal HAMP modification program. It uses the most up-to-date NPV and property valuation analytics. Additionally, up until now you sent the lender all your financial information and let them determine if you qualify or not. Only to find months later they decline you due to NPV. Now you can run a REST Report and see where you stand before hiring someone or ending up foreclosure. We're foreclosure defence and bankruptcy attorneys, while we don't do loan modifications we do support the REST Report and recommend it. While California is not a mediation state, arming yourself with a REST report determining HAMP eligibility is not a bad idea. If you do not qualify you can plan ahead for a Chapter 7 or Chapter 13 or short sale. If you see you pass the NPV then you can tell your lender something about them, rather then just sending them information about you. If you get declined then you have a detailed report showing you qualify under HAMP or HAFA guidelines and support for a cause of action against your lender. The REST Report will offer you the information necessary to make a well informed decision and plan ahead, rather than being the last to know.
Mediation States
While California may not a mediation state there are mandatory settlement hearings in the event of litigation. If you suspect, mortgage fraud, predatory lending, unfair business practices, or breech of contract you can use the REST Report accompanied by a forensic loan analysis to support your case. Information is a powerful tool while going up against your lender! If you live in a state that offers foreclosure mediation with your lender prior to the foreclosure date, the REST Report is a compelling way to bring your best case to the mediation hearing. Other than that you may walk in empty handed. Mediators search for ways to help homeowners facing foreclosure, until now only their lenders had documentation so there is very little to mediate. Homeowners say “please lower my mortgage payment so we can keep our home”, and lenders says “You don't meet HAMP or in-house modification guidelines”, so the Mediator has no choice but to accept the investor/lender’s decision. I mean, until now what evidence other than paychecks can you really bring to prove your case? With the REST Report that includes the NPV calculations, you will know exactly whether you qualify for HAMP, and the report may suggest up to three (3) other workout options available to you, as well as demonstrate the actual dollar value of your loan to the investor in both a modified state or as a foreclosure (Net Present Value or NPV). This NPV Test compares the Net Present Value of the cash flows expected from a modification to the net present value of cash flows expected in the absence of a modification. This report will provide your mediator detailed information to consider prior to a foreclosure.The REST Report may also offer you or your attorney something to consider in an effort to avoid bankruptcy or support a litigation case. It’s the best thing you can bring to mediation, a mandatory settlement conference or litigation next to your original loan docs if you're a victim of mortgage fraud or predatory lending!
Mediation states include:
- Indiana
- Maine
- Michigan
- Nevada
- New York
- Oregon
- Maryland
- New Hampshire
- State Court mandated
- New Jersey
- Ohio
- Delaware
- Wisconsin
Mandated Locally by Court/Local Governing Body:
- Pennsylvania
- Florida
- Kentucky
- Rhode Island
- Illinois
If you are struggling with your mortgage payments, facing foreclosure, or considering bankruptcy the California bankruptcy attorneys at the Law Offices of Zhou & Chini want to help. While the REST Report is not a guaranteed home saver it's a powerful tool that offers real information the the lenders don't want you to know about. Remember, the mortgage servicer's have a responsibility to the investor to do the right thing, and they're overwhelmed. Send them the REST Report and help them help you. Call us toll free at (800) 972-9600.
