HVCC appraisal issues are ruining a lot of purchase and refinance transactions.  All mortgage lenders are not subject to the quirks of Appraisal Management Companies though.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

We just had a purchase deal transferred to us from another lender after the appraisal they ordered through an AMC came in well under the purchase price.  What’s more, the loan originator’s efforts to dispute the low value were ignored.  They even tried to get a second appraisal, but weren’t allowed.

We took over the transaction and got the loan Clear-To-Close in 5 days, but couldn’t close it until the 7th day due to the new federal guidelines.

How were we able to get a better appraisal value?

Well, as a federally chartered bank, we’re allowed to have our own HVCC compliance process. 

We still have to randomly assign our appraisal orders, but we’re able to select the appraisers that are in the pool being assigned to.  The appraisers in that pool are some of the best in the area.  Also, to be compliant, no one that has anything to do with the origination or processing of the loan application can order or contact the appraiser. 

This allows us to avoid having to deal with out-of-area appraisers (as was the case in the deal we took over) and lazy appraisers that just want to use the first few comparables that pop up in their searches, quickly throw together an appraisal and don’t care about quality.

This edge in appraisals has been a huge benefit for our organization and its reputation.

Now, don’t misunderstand this and think we can bring in any value needed to make a deal happen.  The appraisers in our randomly assigned pool are very good – too good to put their licenses at risk by fluffing values.  We also have underwriters that as the situation warrants will require a second/review appraisal. 

So, we still have transactions, mostly refinances, that go nowhere because the property is not worth enough in today’s downtrodden real estate market.  That’s to be expected with close to 50% of the financed properties in southeastern Michigan being upside down.

But, if you’re tired or concerned about dealing with appraised values that are truly under market, perhaps we should have a conversation?

Another lukewarm attempt to help stabilize the housing market won’t do much.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

Yesterday, Edward DeMarco with the Federal Housing Finance Agency announced that the program that allows homeowners to refinance their upside down homes would be extended.

Big deal.

When Obama announced the program, it was touted to be able to help 4-5 million homeowners refinance into lower rates and therefore be less likely to walk-away from their homes.

Initially, the program allowed homeowners to refinance up to 105% of their home’s current value.

After dismal response, the program was expanded to allow refinances up to 125%.

Apparantly those in the White House consulting the President on this program are clueless to what happens in the real world.

Soon after the 125% expansion was announced, FNMA announced they would charge a lot more for the program.

Also, there are severe problems with homeowners who have PMI or second loans (or lines of credit) on their homes.  Trying to get a PMI company to reissue a new PMI certificate of getting a lender to resubordinate their second lien is a time consuming nightmare.

On top of that, in many hard hit states where upsde down homeowners could be helped the most, many homeowners owe more than 125% of their homes current value.

Come on President Obama, let’s see you step up and really do something to help upside down homeowners.

President Obama’s recently announced allocation won’t do much for the Housing Crisis, something he’s well aware of.  He’s just trying to quiet his critics.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

On February 19th in Nevada, Obama announced the $1.5 billion allocation to help the 5 states hit hardest by the Housing Crisis and with the highest percentage of upside down homes – Nevada (70%), Arizona (51%), Florida (48%), Michigan (39%) & California (35%).  Not only have these states suffered the sharpest drop in real estate values, all but Arizona are well above the nation’s unemployment average.

The $1.5 billion is coming from the infamous TARP bank bailout funds and will be distributed to housing agencies in the targeted states.  They’re being directed to use the money to assist jobless homeowners avoid foreclosure and those who are upside down in their homes.  Additionally, the money can be used to assist homeowners stymied on loan modification approval due to second mortgages.

The White House is pretty much leaving it up to each individual state on how they will use the money.  Florida, Arizona & Michigan weren’t even aware the money was coming and have no plans on how to use it yet.

What effect will this money really have on the Housing Crisis?

According to First American CoreLogic’s most recent report (for 3rd quarter 2009), released February 23rd, close to 25% of the nation’s mortgaged properties are upside down.  That’s an estimated 10.7 million homes.  What’s more, these upside down homeowners are in the negative by an average of $70,000.

So, Obama’s $1.5 billion would only help 21, 428 of the 10.7 million homeowners upside down.  That works out to be a whopping 0.2%.

Michigan alone has 513,278 upside down homeowners, so even if the full $1.5 billion came to Michigan, it would only help 4.2% of them.

Do you understand why this is just “hush money” and Obama’s just trying to pacify his critics?

This problem needs to be thrown back into the laps of the banks and Wall Street firms that created it in the first place through their greed.  The federal government basically bailed out the rich and stuck the middle class with the bill.

Make sure to tell your government what you think of this arrangement the next time you vote.

Fox Business reports the White House is considering additional laws to force lenders to act ethically on foreclosures and loan modifications.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

Michigan Loan Modifications may be getting easier and saner in the near future.

Fox Business broke a story over the weekend, based on a leaked document, that the White House may again get tougher on banks & lenders to force them to not only approve more Michigan Loan Modifications (and across the country), but to also do so more ethically.

Imagine that – after getting bailed out with TARP funds and being chastised for still paying out obscene bonuses, Wall Street bankers aren’t playing fair when it comes to loan modifications and foreclosing on the taxpayers that funded their bailouts.

Oh, by the way, for the free market capitalists out there who still insist that the federal government should just let foreclosures happen – practice what you preach.  Let’s turn back the clock and let all the banks that received TARP funds fail – then you can sit in your ivory towers and chastise down and out homeowners.

Here’s a breakdown of the proposal leaked out:

1.  Home loan servicing companies would be forced to offer Michigan Loan Modifications to delinquent borrowers before resorting to foreclosures.

2.  Bankers, lenders and servicing companies would all be prevented from foreclosing on borrowers being solicited for, responding, working on and during the loan modification process.

3.  Lenders would have to attempt to contact delinquent homeowners at least 4 times by phone and mail them two notices about the program, at least once by certified mail, within a 31 day period.

4.  Create a new 30 day “borrower response period” for homeowners turned down for a loan modification, during which the lender couldn’t complete a foreclosure.

5.  Require servicers to document in writing that a homeowner doesn’t qualify for a loan modification before proceeding with a foreclosure.

Why the need for the additional guidelines?

Foreclosures in 2009 were up 21% from 2008 to a record 2.8 million.  They’re expected to increase another 20%+ in 2010 to over 3 million.

When the Obama administration announced its “Making Home Affordable Program” in February of 2009, its stated goal was to help 3-4 million homeowners get modified loans.

So far, only 116,000 homeowners have gotten permanent loan modifications, obviously another failure for the Obama administration.

The new rules though, are another step in the right direction to help homeowners get Michigan Loan Modifications.

Currently, if your loan isn’t being serviced by a federally chartered bank, your lender doesn’t have to offer you a loan modification in accordance with federal guidelines.  Who are these servicers that don’t have to follow the rules?  Here’s some from the federal government’s own monthly report on loan modifications:

• American Home Mortgage Servicing
• Aurora Loan Servicing
• Bayview Loan Servicing
• Carrington Mortgage Services, LLC
• Green Tree Servicing
• HomeEq Servicing
• Litton Loan Servicing
• Ocwen Financial Corporation, Inc.
• Saxon Mortgage Services, Inc
• Select Portfolio Servicing

There are many horror stories from those trying for a Michigan Loan Modification of how they followed all the rules and thought they were working on a loan modification with one of these servicers – only to suddenly get a notice of Sheriff Sale.  Many got the Sheriff Sale notice before they got a letter rejecting them for the loan modification.

The cries from these abused homeowners must have risen to high enough numbers to finally reach the White House and force them to do something about it.

The part of the plan concerning forcing lenders to document that a homeowner doesn’t qualify for a loan modification will be the toughest to  enforce.

Who will be charged with policing this?  The banks themselves?

That hasn’t worked so far.  If you go to the government’s “Making Home Affordable” website, it tells homeowners,

“This site can help you determine if you are eligible, but only the servicer of your loan can tell you if you qualify.”

It also says,

“Beware of Foreclosure Rescue Scams – Help Is Free!”

The biggest foreclosure rescue scam is the government telling homeowners to call their loan servicers for “free” help.  If that was really working, and loan servicers were actually acting ethically – these proposed rules wouldn’t be needed.

If you’re considering applying for a loan modification, give me a call for a free 15 minute consultation.  If you decide I’m credible, we’ll discuss a retainer fee for expert assistance.

Less than 2% of eligible homeowners have received a permanent loan modification, despite serious pressure from the Whitehouse.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

Obviously, lenders are dragging their feet when it comes to approving loan modifications. 

It’s gotten so bad, the federal government has taken to publishing a monthly report on lender progress on loan modifications.  Numbers are slowly heading up, but not fast enough.

I was asked by Michigan state Senator John Pappageorge for some ideas on what the state government could do to alleviate the housing crisis for Michigan homeowners.

Below is a copy of the white paper I sent his office in January, 2010.

Is There a Better Course for Home Mortgage Debt Recourse?

To address the worse housing crisis in America since the Great Depression, the Michigan legislature instituted a 90 day foreclosure moratorium, effective July 6, 2009 (PA 29, 30 & 31).

The intent of the legislation was to encourage mortgage lenders to more aggressively offer loan modifications to Michigan homeowners, in line with the federal Home Affordable Modification Program (HAMP).

Although it’s too early to evaluate the effectiveness of this piece of legislation, statistics from the federal government show mortgage lenders are not embracing the HAMP program.

Every month, the federal government publishes a report on the Making Home Affordable program. The report details performance statistics on HAMP participating mortgage lenders. The statistics are demoralizing:

- Less than 35% of eligible homeowners have been offered a trial loan modification

- Only 27% of eligible homeowners have been approved for a trial modification

- Just 24% of eligible homeowners are in an active trial modification’

- A dismal 2% of eligible homeowners have been granted a permanent loan modification

Mortgage lenders claim they are doing their best and attempt to shift blame to homeowners not sending in their information. A quick Google search on loan modifications brings up too many instances of complaints against lenders to give any real credibility to these lender claims. In fact, Wells Fargo, to their credit, has a company sponsored blog that lists numerous customer complaints about their poor service on loan modifications: http://blog.wellsfargo.com/wachovia/2009/04/explaining_the_making_home_aff.html.

When a homeowner doesn’t get approved for a loan modification they qualify for, the end result is typically foreclosure. Not only is this an emotionally traumatic experience for a homeowner’s family, it also doesn’t end their potential nightmare.

Michigan currently allows mortgage lenders recourse against homeowners that default on their mortgage debt. To pursue homeowner debt after a foreclosure, a home must be worth less than the debt liens against it and the foreclosing lender must bid fair market value to create a deficiency amount. With close to 50% of financed homes in Michigan being upside down, this is a growing practice by lenders. Michigan statutes currently allow a lender up to 6 years to collect this debt. So, about the time a family believes it has recovered from foreclosure nightmare, they stand a strong chance of having to deal with collection attempts.

If the Michigan legislature was to pass temporary statute to suspend mortgage debt recourse and the resulting deficiency judgments, more encouragement could be brought to bear on mortgage lenders to improve their performance in approving Michigan homeowners for loan modifications. This would go a long way to addressing falling home values in the state and the implications that has for city property tax revenues.

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In addition to real estate lending, consulting and investing, Drew Sygit writes & speaks about the mortgage & real estate industries. He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor. He’s presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA’s, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications. For speaking engagements and questions he can be reached at dsygit@TheLendingEdge.com. He also publishes his own blog: http://DrewsMortgageNews.com.