Mortgage Modification and Kentucky Foreclosure

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HAMP mortgage modifications are bad long term deals and aren’t effective in stopping foreclosure. The figures on HAMP show that less than 5% of the people that apply for a mortgage modification get one. These statistics are from the Congressional Oversight Panel report and websites which outline problems with mortgage modifications. Many homeowners try HAMP or HARP instead of Chapter 13 bankruptcy to cure a defaulted mortgages.

Foreclosure Failures in Louisville, KY

In 2010 4% of homeowners were served with foreclosure. 250,000 foreclosures were started each month but only 100,000 went to sale.  The other 150,000 were allowed to slip further into default, increasing mortgage arrearages, collection and attorney fees charged. Fees are guaranteed by mortgage insurance and it is the way business is done by servicers to make money from default.

HAMP stopped less than 10% of the foreclosures. Banks and servicers don’t make deals that won’t increase profits. The facts from congress show:

  1. Servicers, make more money from collection and foreclosure than modification;
  2. Mortgage companies and government pay for modification processing but servicers are not held accountable when modification applications are lost, or reprocessed (and application processing fees are paid again).

A third of trial modifications became permanent peaking in October 2009 at 160,000 and dipping to 23,000 in December 2010. The first year after modification 21% of permanently modified mortgages default. Defaults are predicted to grow to 40% in five years (2015) years, then interest rates increase insuring default later allowing servicers to bill twice. Successful modifications reduce interest from a median 6.63% to 2.0%. 57% extend the length of mortgages, 30% defer principal to balloon payments, just 3% reduce principal. 95% of permanently modified mortgages have less equity than before modification and most decrease the rate equity increases in property.

Success ratios are Wachovia’s 89%, HomeEq 95%, Bank of America (which took over Countrywide) 30%. The more predatory loan programs were, the worse performance is. 30% of trial modifications were canceled due to incomplete documents. Many were probably lost intentionally because foreclosure is more profitable and actual figures may be worse than what is reported. 21% of trial modifications go into default, 8% are canceled with no reason.

HARP is a new program that replaces HAMP in 2013. Hamp ends 12-30-2012.  The are the Hamp Mortgage ModificationFDIC Foreclosure Modification program and 2010 HAMP guidelines. HAMP or HARP modifications can be done during bankruptcy but homeowners in foreclosure need to make a choice to either:

  • Save the home by filing a Chapter 13 to catch up the mortgage arrears or
  • Defend foreclosures to have the time to find another home and explore alternatives.

HAMP mortgage modifications normally fail after modification. Not filing a Chapter 13 early, increases monthly payments in Chapter 13 sometimes making Chapter 13 unaffordable and insuring home loss. Loan servicers (collectors) make fees from servicing (billing) mortgage company loans. It is not in the best interest of servicers for mortgages to be current. The longer you are in default the more fees mortgage servicers, and foreclosure attorneys charge.

mortgage loan modificationTypes of Mortgage Modifications

Here is a brief explanation of the different types of mortgage modification, workouts, short sale and foreclosure prevention programs. We suggest that you see an attorney to talk about the individual advantages and problems with each program. These programs do not normally delay the foreclosure attorney from selling your home. You must defend the foreclosure while negotiating with the lender.

Real Estate workouts are when you contact your lender and explain to them that you have simply suffered a temporary problem and attempt to negotiate with them to allow you to pay the missed Real Estate payments at the end of your contract. Other solutions are possible, such as, lowering interest rates for a short period of time, making partial payments or catching up by making increased payments.

The collection department may not negotiate with you if they see that they will collect most of their funds from a sale and applying for a workout doesn’t stop a real estate foreclosure. Only a court order or dismissal will stop the process. It can be very expensive to a mortgage company to file a foreclosure in a Kentucky Court if you fight it. Workouts are a good option for both the mortgage company and the home owner to avoid the costs of foreclosure. However, if a real estate workout is not possible, a Chapter 7 or 13 bankruptcy is an alternative to save the home. If you are in a foreclosure see us.