1) Be underwater
2) Be 60 days late in payments
3) Loan payments are more than 1/4 of household income

You could end up saving 30% on your monthly payments if this plan goes through. This is going to cut steeply into BofA’s profits, though I’m sure with some creative “banking” they’ll find a tidy way to recoup their losses. Though the $11 billion loss they’re predicting is a steep price.

Do you think this is fair? Do you think this is a good solution? Or do you think this is skirting the real issue? Or not going far enough?

I really want to see some dialogue from you guys. Where do you stand on principal reduction? Let’s hear from the people out there doing the work, trying their best, and leave the hype and misdirection to Washington and the bank.

Expert after “expert” has been testifying that some things would make the program work better:

- letting a new servicer compete for the refinancing or loan mod

- letting non-Freddie or Fannie backed mortgages be eligible

- dropping the loan-to-value requirements for qualifying

Now I understand that the government would be interested in changing the rules of a publicly embarassing program to try to improve things but it doesn’t seem to me that any of these suggestions addresses the real issue. In a nutshell:

If it’s not worth it for a bank to particpate in the program, then what good will it do to allow more banks in? Now you’ve just got more banks who are eligible but don’t want in.

And make more loans eligible? I believe those loans would be known as the “riskier” loans which could set the whole recovery back if they default again.

So what’s this really going to accomplish? How is this going to finally convince banks to make a solid effort at renegotiating bad loans? I’m pretty sure it won’t, but let me know what you think.

Well, $25 billion is the amount of the enormous mortgage servicing settlement that bought the banks out of trouble and will eventually find its way into someone’s hands. The question now is, whose? Because they’ve found the man to give it out – Joseph Smith, former banking commissioner.

Thing he says he wants to accomplish in this role:

- deal with the mortgage servicers
- maintain integrity
- give out tons o’ cash

I like that list, it seems like fun. He’s got to navigate the bizarre and twisted world of banking, figure who was corrupt, who was improperly evicted/fined/embarrassed, and decide where the money is supposed to go. And if the banks don’t cooperate, then all bets are off and he can start suing the pants off them.

So while I think the settlement was barely even a slap on the wrist for the worst offenses we’ve seen committed in this country in a long time, it’s at least going to be interesting to see how far down this money trickles. I sincerely hope that the people who were most hurt by these awful tactics get compensated, and I hope the guy in charge of this doesn’t turn out to be as corrupt as the banks.

Think that’s not possible? Think this whole exercise is a big waste of time? Whatever you think, let me know by leaving a comment.

Now, don’t get me wrong, I certainly encourage short sales and I’m happy Fannie and Freddie have gotten off their horses. But at the same time I think it’s pretty funny timing from organizations getting pounded from all sides to suddenly switch the focus of the discussion. But anyway, back to the topic.

So they’ve decided to force all lenders and mortgage servicers to render a decision on a short sale offer within 30-60 days. Response time is always a major concern. Now, they have 30 days to respond, and if they need up to 60 days they need to give the agent and homeowner weekly status updates.

This is a nice step in the right direction. If for nothing else, it will encourage people to try a short sale who ordinarily would think the process to slow. So I’m interested to see how the market reacts to this news (and how the lenders get around it!). Fannie and Freddie did a combined 125,000 short sales last year, so let’s see those numbers continue to jump.

What’s your take on this news? Think it’ll have any impact? Leave your thoughts below.

Basically the only way such a program would be effective (notice I said effective, not good or helpful or useful) is if the GSEs participate. They control 59% of all mortgages and $100 billion of negative equity. So the government is really pushing hard (read: bribing) Fannie Mae and Freddie Mac to get on board. They’ve not doubled, but actually tripled the incentives to principal reduction. For every dollar they reduce the principal they get between 18 and 63 cents back.

So a reduction of $100 billion would end up totaling $60 billion. In other words, a net cost to the taxpayer of $40 billion. Ouch!

But don’t worry, they’re considering a program called shared appreciation. Basically what this means is that the lenders will get a slice of any future appreciation in value of the home. So it’ll cost them in the short term but when housing prices rebound they’ll make some money.

Note: it doesn’t sound like the taxpayer is being offered a slice of the pie, but that’s old news already.

Either way just about everyone is desperate to avoid another slew of foreclosures this year. I’m not that concerned yet, considering that 93.1% of the GSE’s underwater homes are still current on their payments. But hey, if you smell smoke . . . move?

- Mortgage

- Car loan

- Credit cards

The answer overwhelmingly for Americans has been for the last 4 years car payments first, then credit cards, then mortgage.

It’s a sad truth but let’s think about it for a second. If you don’t have a car you may not be able to get to your job. If you don’t have a credit card you may not be able to put food on your table. If you lose your home . . . well, there’s no denying it’s an unbelievably bleak prospect and filled with heartache, but there are options. Short sales, for one. Plus loads of rentals and other arrangements.

I don’t envy anyone that has to make such a choice. But it’s true across the country and is a grim reminder of how the country is hurting. But I’m a little comforted knowing that me, my students, my associates, and extended RE investors, are making a difference. We’re helping get people squared away, be able to prioritize, and make good choices that help them invest wisely.

We’re helping, bit by bit, to dig ourselves out of this hole. Every month brings good news to some people, and we’re hoping the trend continues and extends to everyone who needs help. Spring is a great time to throw open the windows, dig yourself out of the snow, and breath some new air. Give it a try!

Basically the firm charged up front fees (which is illegal in California) and claimed they had “dirt” on what the lenders had done illegally (probably not hard to find) and said they could leverage this info to secure better mod rates.

But as you might expect it turned out to be one big scam. The law firm never did anything and, through heavy advertising, suckered in loads of homeowners. In one extreme case they had a homeowner reject an existing loan mod offer and promised they’d get an even better one. Four months later the poor guy lost his home.

These stories hint at the dark underside of this financial crisis. There will always be people who try to take advantage of a situation. I’m all for making money legally, ethically, and morally. But I always put being a servant first, using my skills and knowledge to serve. I encourage all of my students and friends to do the same – to provide value for money, to work hard, and to make a fortune by putting in an honest day’s work.

If you’ve got stories of the bright side of the real estate crash, something to balance the negativity, please share it. We could all use some inspiration.

Basically, it’s become clear that lenders have very little interest in adhering to the program. They stand to gain much more by scamming the system and abusing the powers that they have. So when the Treasury comes out with statistics on how servicers are doing in the program it’s a bit of a joke. But the joke is actually on them.

Not one servicer was shown to be doing well. Not even one.

The best rating that anyone got was “needs minor improvement.” And that was OneWest Bank and Select Portfolio Servicing, not exactly the biggest hitters in the industry. All of the big ones were listed as needing moderate improvement meaning they’re lacking in

- contacting homeowners

- assisting homeowners

- and managing homeowners

It’s not really that surprising. But I’m sure they’re all doing well when it comes to contacting their underwriters, assisting themselves in taking advantage of the system, and managing to turn a profit at others’ expense.

I don’t think I need to fake sounding bitter – it’s really hurtful to see how many people are pulled into HAMP without realizing what the real goals of the program are.

But anyway, try and keep your heads (and homes) above water, explore your short sale options first, and reach out to those who can really help you.

How’s that for a super incredible opening line?? What, it didn’t grip you instantly? Well, let me try another one:

So what if the banks wrongfully kicked you out of your home – HUD doesn’t care!

Admit it, that one was a bit more scandalous. So here’s the middle-of-the-road story.

The HUD Secretary was questioned by the Senate about how many people had their homes stolen by banks and mortgage servicers. His answer, “Very Few.” Um, yeah, I don’t think I’ll swallow that, thanks. He did manage to admit that the entire system has very “significant and pervasive” errors that have serious impacts on real people. But if you didn’t actually have your home foreclosed on he’s comfortable with that.

So what’s the point of discussing things we already know. Well, the usual reason is to pass the blame to someone else. But the blame has gone around the block so many times it’s finally about to land on someone with a big wallet. The Borrower Payment Fund is going to begin making payments to people who were “inconvenienced” by lender misconduct. The payout should be around $2,000 which they might end up delivering to your cardboard box in the alley.

Or they could just charge you a fee to pick it up. Neither option would surprise me at this point.

But let’s not get carried away yet. I’m sure there are going to be lots more discussions, like what color the checks should be, what watermark (if any) they should have, and who should get to decide the humiliation you need to go through to actually get something.

I think they’re taking suggestions now.

A realty company has just announced the findings of their study. Basically they have proven scientifically that everyone benefits from a Short Sale. Not just that – they’ve managed to put a number on it.

24%

Yep, a Short Sale brings returns that are 24% greater than a foreclosure. And that means if a bank is stubborn enough to go through with a foreclosure they are losing, on average, $43,000 more than if they’d done a short sale.

Not only that, but all the usual costs add up and hurt many people, the homeowner not least of all. And yet, though this is obvious to everyone, banks are consistently going through with (usually illegal) foreclosures.

The reason why is obvious, I guess – they’re lining their pockets in other ways and hurting the economy is just an added bonus in their minds. Such a shame really since me, my associates, my colleagues, we’re all out there making Short Sales the go-to option for distressed homeowners. But there will always be people who want to stand in our way.

Luckily, we’ve got you. Dedicated Short Sale enthusiasts who spread the good word and make a fortune doing it. So keep it up, keep strong, and know that there’s money to be made which helps everyone.