More Loan-Modification Options for the ‘Underwater’

More Loan-Modification Options for the ‘Underwater’


STRUGGLING homeowners who owe more on their mortgages than their properties are worth have had few options to restructure their loans, but that may soon be changing for a few of them.

Six months after the Federal Housing Administration announced an $11 billion refinancing initiative for these “underwater” borrowers, nearly two dozen lenders have agreed to take part in a new loan modification program.

Two exceptions are Fannie Mae and Freddie Mac, the government buyers of loans, which will not allow loans that they still own to qualify for the program.

The F.H.A. program — called Short Refi — requires major concessions from lenders, which must agree to write off at least 10 percent of the principal balance, and from investors, who, if they own the mortgage, must also agree to the deal.

To qualify, homeowners must be current on their monthly mortgage payments and not already have an F.H.A. loan. The size of the new primary loan cannot be more than 97.75 percent of the current value of the property; refinanced loans for homeowners whose properties carry second liens cannot exceed 15 percent of the property value.

In late February, Wells Fargo and Ally Financial, formerly known as G.M.A.C., said that they had created test programs for the F.H.A. option. “We currently are conducting a small-scale pilot of the F.H.A. Short Refi program for loans in our owned portfolio,” said Tom Goyda, a Wells Fargo spokesman, in a statement, “to help us better understand which customers may benefit and qualify.”

Bank of America, Citibank and JPMorgan Chase are not participating in the program, according to spokesmen for them. “Without the participation of Fannie Mae and Freddie Mac,” said Terry H. Francisco of Bank of America, “we don’t believe the program can help a significant number of our borrowers.”

But Mark C. Rodgers, a spokesman for Citibank, said that his bank was “participating in a third-party pilot program along the same lines as the F.H.A. Short Refi program.” He declined to provide details.

The Department of Housing and Urban Development, which oversees the F.H.A., said this month that 23 lenders had signed on to the Short Refi program, though it will disclose only the names of the five lenders that have already restructured a total of 44 loans. They are: Wall Street Mortgage Bankers of Lake Success, N.Y.; 1st Alliance Lending of East Hartford, Conn.; Nationstar Mortgage of Lewisville, Tex.; E Mortgage Management of Haddon Township, N.J.; and Glacier Bank of Kalispell, Mont.

HUD estimated that 500,000 to 1.5 million borrowers could be eligible for the program.

Even so, it faces challenges in Congress; on Thursday, the House of Representatives voted to end it.

One mortgage expert, John Diiorio, the owner of 1st Alliance Lending, said that big banks were taking part behind the scenes, by referring homeowners to third-party lenders that could restructure their mortgages. He added that 1st Alliance had “several hundred F.H.A. Short Refi” loans in the pipeline.

Because the F.H.A. announced the program only last September, and because such loans take three to four months from start to finish, Mr. Diiorio said, the number of refinanced loans should increase in coming months. He said that, on average, 1st Alliance had negotiated a principal reduction of $86,000 on a $256,000 loan, a 33.5 percent cut, to $170,000.

But he said lenders and investors had agreed to reduce principal for only half of the loans he had worked on.

The refinanced borrower, Mr. Diiorio said, had to pay a slightly higher fixed rate, typically 6 or so percent. But he added that the financial impact was the same as a 5 percent rate on a higher-balance loan of $100,000, with less principal forgiven. “It seems counterintuitive,” he said, “but the economics work both for the consumer and for the lender.”

30 Responses

  1. Lisa, the Florida Supreme Court Administrative Order of 12/09 requires mediation before a lender may get a summary judgment of a foreclosure sale may be
    held. Here is a link with some info:

    There are also links and info there which demonstrate
    that a loan did not have to be delinquent to be considered for HAMP modification, as so many homeowners were led to believe. Or, you can go right to and start reading. Either place, there’s some info on HAFA, also.

  2. I live in South Florida and have tried to get out of the Countrywide contract on my little condo i bought in 2005 since 2007. I have numerous reasons to validate a lawsuit but have no money…….can anyone help me. I am current, never been late and way under water. BOA services….the loan for Bank of NY Mellon. Please help me…..I do not want to ruin my life at 49 for 7 years and I am being robbed. God bless~

  3. @cued2k
    Did the copy of the note they sent include endorsements allegedly on the back? If not, it’s likely just a copy of the note from the closing file, likely in the possession of the servicer. The real note, if it’s not toast, is held or should be held by the document custodian, theoretically for some trust. It’s my impression from looking at so many cases that many many of the necessary endorsements weren’t done in the madness of 2004 – 2007. Just close those suckers and ‘next’. It’s such an uphill battle for the homeowner, because if the orig note is not produced, one doesn’t know if the endorsements are on one’s note, or it’s a copy of the back of another note, or maybe just a separate piece of paper with endorsements having nothing to do with the subject note at all. Now that banksters are being made to produce notes, there is no trick they won’t use to get your house. That’s what I’ve seen, anyway.
    In one case, a bankster produced what it claims was the original note created on legal size paper. The copy given to the borrower at closing was created on
    letter size paper.

  4. first, the lender who claims to be your lender should have to prove that they are before negotiations begin. a MERS assignment shouldnt hold any weight. there is no way to prove that the MERS assignment came from anyone who could actually authorize MERS to assign the obligation. MERS makes it very clear that they only act as a nominee capacity in the county land records so lenders can buy and sell your obligation without having to pay the county in which you reside the required fees associated with the transfer. the word nominee is not defined in the mortgage contract so you have to rely on the definition they give themselves. second, allowing mods for people who are underwater but current on the loan sort of defeats the purpose of a mod. a mod, by design, is to reduce the payment to something the borrower can afford. if you cant afford it, odds are you are already behind. this is just another program designed to fail from its inception. why dont we all just face the obvious? every loan they cant prove ownership on or tried to fraudulantly claim ownership of needs to be written off and forgiven. thats the bottom line. you wanna see the economy recover? punish the bastards who did this by making the bogus loans unenforceable. theyve already been paid 2,3,4 and five times on the same debt anyway. forgive the debts and make them think twice about trying to screw over homeowners the next time they hatch a massive fraudulent scheme. thats the only way to make these jerks reconsider their actions, hit them hard in the pocketbook

  5. angry &NOT TAKING IT

    You actually say it much better — “anticipating that the assets are distressed “acquisitions “.. like new loans or re-fi that are PRE-distressed????”

    Problem is — these loans are NOT in the claimed “Pool.” Loan servicing reports are in question – and can be altered/changed at any time – by the servicer — and cannot back-track. .

    M. Soliman — do not take too much on its “face”.
    Keep looking – keep digging!!.

  6. “Reclassification and removal requirements to complete HAMP modifications for mortgage loans that are part of MBS pool:

    Many times, apparently, the servicer must first
    purchase the loan from the pool. And then FNMA won’t take it back. Someone else please read this document and comment because it is making me sick.! Why would a servicer do this? First of all, in order to ‘remove a loan’ from an MBS, isn’t a replacement required? That sounds like its own other mess. Thanks – the thanks is for reading this thing and commenting!

    Here is a link. also, to the original isms from FNMA regarding qualification for HAMP modification:

  7. A class action was filed in Massachusetts for failure to turn alleged trial loan modifications into permanent loan modifications. The banksters moved to dismiss the case, (of course), but the court refused. If you are one of the many who got messed around by banksters just taking your money and doing nothing ultimately, you should read this:

    I have also posted there the guidelines for qualifying for HAMP modification from FNMA, as well as updates and links to other HAMP missives from FNMA.

  8. M.Soliman
    and this…
    “The servicers manipulation of a loan [like telling Laurie or Ho to miss three payments. It is controlling an interest sold and done so to procure a discharge of the asset – ”
    your saying- Whom ever actually owns this asset is soliciting [illegally i’d guess] without saying as much “get this debt into default status on paper asap”so the owners of the asset get to collect whatever $$ this criminal enterprise conjures up like this???

  9. M.Soliman
    “basically can PURCHASE the Warehouse lines as an Asset / equity through accounting for Derecognition.”
    Are you saying….anticipating that the assets are distressed “acquisitions “.. like new loans or re-fi that are PRE-distressed????
    my tiny little brain is spinning!

  10. Federal Trade Commission Requests Loan Servicing Records from Ocwen
    please god add Litton Loan & Quality Loan – to the list of criminals to be investigated tried & sentenced to hang!

    and THESE unregulated clowns are admitting to their criminal actions “we’re just hoping we dont get caught”.
    so…..get a rope & string em up!
    Ocwen comments –
    The company went on to say, “Recent inquiries into servicer foreclosure processes could result in actions by state or federal governmental bodies, regulators, or the courts that could result in temporary moratoria on mortgage foreclosures or an extension of foreclosure timelines, which may be applicable generally to the servicing industry or to us in particular…. In addition, governmental bodies may impose regulatory fines or penalties as a result of our foreclosure processes.”

  11. mary, on March 13, 2011 at 3:40 pm said:

    Maybe you could tell me.I have a copy of the loan servicing composite report.

    No email necessary – it is a rating agencies detailed report for actual losses and anticipated losses sutained in the pool. Remeber – servicing agent SHOULD NOT BE IN POSSESSION OF THIS REPORT -NEITHER SHOULD YOU – Good Job. These loans remember are serviced by a “lock box” as they are isolated in a bankrupt remote entity .

    The servicers manipulation of a loan [like telling Laurie or Ho to miss three payments. It is controlling an interest sold and done so to procure a discharge of the asset – ENRON ] -whys nobody listening!

    I’m not for hire – so take this and do as you wish .


  12. It’s really all about a controversial debt for equity scheme approved under GAP and the FASB. Derecognition is debt for equity. BofA had a hand in a huge portion of this market share. Consider this while nearly every one of these loans originated as toxic assets.

    A warehouse line is a debt or obligation of the lender to a warehouse bank. The obligation used to originate loans is a receivable payable from Countrywide Home Loans or AWL to BofA, but with a “sucker” bank hiding in the shadows like Am Trust Bank. Now Am Trust is affiliated with the Bof A securitization and basically can PURCHASE the Warehouse lines as an Asset / equity through accounting for Derecognition. Countrywide debt owed to BofA for toxic assets are sold to another bank as common shares or trust commons at face value of the loans “Book Value”. The bank i.e. Am Trust actually pays the monthly cost of the line or replaces Countrywide ADS in order to beef up their own balance sheet . . . transferred in to equity.

    So the receivables get escalated by say – another 2% say from Am Trust as a cost of financing the shares and the loans are say 9% from Countrywide toxic waste and the cycle goes on and on for nearly 8 years. Remember Countrywide and BofA have as little as 5 % of their own cash involved here and to what – hold common stock in worthless loans. Sell the share as equity and and generate blue chip earnings from Am Trust now to replace Countrywide
    Billions in Cash Flow from this debt to equity scheme flows to BofA while trillions in bogus debt accumulates and leverages the sucker bank balance sheets’.

    When the market collapses the Am Trust and Wachovia of the world are bankrupt. The equity is deflated and BofA emerges with billions in accrued and compounded reserves from cash flow earned from selling CWHL DEBT. It’s so vicious the BofA even enforced its underwriting Buy Backs provisions on Countrywide putting their partner in crime out of business.
    Go back and read the Countrywide Chairman’s emails published by the SEC where he say’s “Why are we doing this…these loans make NO sense”.
    Please use discretion before publishing these types of comments as your own.


    [ Beware – Know what you’re reading about and how to substantiate the information. This is not auditor stuff – so if you intend to publish this as your own research…back it up. An expert opine like an analyst must back it up before being called into a US trustee office, AG investigation or court of law to testify. ]

  13. Kudos to Charles Ferguson and his killer movie Inside Job, and especially for his shout out when accepting the Oscar for bringing up the fact that not a single banker has gone to jail to date.

    And another very well done movie that will prove just how badly we’re being pimped by TPTB is Lifting the Veil, by Scott Noble. It’s a feature length film that he’s very generously offering for free viewing here:

    It’s my hope that all here at Mr. Garfield’s site will call and write everyone who you’ve ever been in contact with since birth to tell them to meet you at the Distric Fed banks on the 24th of March. We finally have a chance for our Egypt Moment. Our Tunisia moment. Our Selma, Apartheid, Berlin, whatever moment you want to compare it to, because the taking back of our land from the elite and their politicians that represent them is the most important single act any American can do since the 1st American Revolution.

    I consider the abolishment of the Fed and the taking back of the rule of law to be the 2nd American Revolution, and one worthy of any hardship that need be suffered to gain this end. Death to the Fed, and Death to Wall Street, for we can’t co-exist. It’s an impossibility.

    We need to let Bernanke, Geithner, Holder, and especially Obama know that we are mad as hell and not going to take it anymore. And that if they don’t start working for the people instead of their corporate masters, we aim to take back what is rightfully ours….the United States of America.

    Maybe we’ll keep Gitmo open just to house the politicians and bankers who resist the demands of the people. We can keep the waterboards as well. I’ll be happy to work full time at that operation. I need a job. And I can say without reservation that I’m positive that I will never have had a job that could possibly provide as much pleasure.

  14. E. Tolle I like your style.

    Who is Anonymous?

    Be Strong and Courageous

  15. Interesting, I wrote a sort of QWR some months ago to our new servicer transfered from Chase. Finally get a response 3 months later after a few letters from new servicer saying they need more time. This is a fannie mae loan, supposedly. They send us a copy of the original note, to my surprise. They send a copy of the letter from Chase stating Business Lender serv is our new servicer ( I specifically asked for contract saying Business Lender is the new servicer from creditor). But in their letter last paragraph they state our loan is “delinguent”. They don’t state in default which we are by 1 year now. Gotta watch them words. Funny, delinguent, not default, they state.

  16. E tolle, unbelievable crap. DITTO DITTO DITTO.

    At this point in time I call on on who are on the edge to default, who have been ripped off on high credit card (debt card) card interest rates , Helocs (home debt lines of credit) to default. En masse.

  17. One creative commentor discussing B of A’s little problem put it this way:






    ……..(‘(…´…´…. ¯~/’…’)


    ………..\………….. _.·´






    So check Anonymous out first thing Monday morning here:

  18. Anonymous, you’re most welcome.

    As to another Anonymous:

    Anonymous, a hacker group sympathetic to WikiLeaks, plans to release e-mails obtained from Bank of America Corp early Monday morning, according to posts on the group’s Twitter feed.

    The group, unrelated to the document leak website founded by Julian Assange, said it plans to release documents exposing “corruption and fraud” at the largest U.S. bank by assets.

    A Bank of America spokesman was not immediately available for comment.

    Bring it on! Toast those rat bastards! The word on the street is that they are admitting in emails to changing loan numbers for obfuscation….maybe for hiding the fact that the same loans were profited on many times? Speculation on my part, as well as wishful thinking.

  19. E. Tolle

    Thank you. Thank you.

  20. Here’s the opportunity to take a stand against the oppression and the criminality that has taken over our government, our finances, our very lives.


    WHO: YOU
    WHEN: MARCH 24+

    Demonstrations will take place at each of the 12 district banks and the Board of Governnors in Washington, DC:
    District 1: Boston: 600 Atlantic Avenue
    District 2: New York: 33 Liberty Street
    District 3: Philadelphia: Ten Independence Mall
    District 4: Cleveland: 1455 East Sixth Street
    District 5: Richmond, VA: 701 East Byrd Street
    District 6: Atlanta: 1000 Peachtree Street NE
    Distrcit 7: Chicago: 230 South LaSalle Street
    District 8: St Louis: One Federal Reserve Bank Plaza
    Broadway and Locust Streets
    District 9: Minneapolis:90 Hennepin Avenue
    District 10: Kansas City, MO: 1 Memorial Drive
    District 11: Dallas: 2200 North Pearl Street
    District 12: San Fransisco: 101 Market Street
    Board of Governors:
    20th Street and Constitution Avenue, NW
    Washington, DC 20551

  21. Mary

    Loan rights (rights to enforce loan) do not mean the creditor is being identified. This is a big distinction between court foreclosure actions and BK courts.

    Not sure what you are saying — provide your email.

  22. to ANONYMOUS:

    Maybe you could tell me.

    I have a copy of the loan servicing composite report. Alot of stuff covered. But there is a section where under the user name has the name of a person, whom I was speaking with at one point about my payments, blah, blah, blah,. Anyhow, in the comments it states **** ********* has ownership. Do you know what that possibly could mean?

    Also a year or so later, the attorney that filed this suit against me for foreclosure is also listed in the user name section .

    The notary on the alleged assignment is also listed in the user section, what does this mean?

    Do you happen to know?


  23. E. Tolle,

    And — let us also ask — why is it that certain banks did NOT sell qualifying mortgages to Freddie/Fannie??—given what you state.


  24. E. Tolle,

    You are onto something.

  25. I was speaking with my local credit union manager this week, he was bemoaning the fact that they are being squeezed by regulations and legilation that large banks are exempt from….and of course who would you suppose wrote the bills behind those pieces of legislation?

    He told me that it is a stiff requirement that they can only keep a small number of loans in house, that the majority need to be sold into securities. He went on to say that one of his clients, a large remodelor, told him that he could bring him client after client if he could assure them that their loans would stay in house.

    I take it that folks are starting to get hip to the fraud that is securitization. It’s just one big government sponsored Ponzi scheme, and Ponzi’s never end well.

  26. Linda is right – targets a limited number of homeowners. And, have to wonder who are THOSE homeowners??

    I posted somewhere else – article that state BofA is helping state lawmakers —

    “BofA Offers to Help Fix Mortgages…If You’re a State Legislator”

    And, lets examine a “short refinance” — which has been in existence BEFORE this program. In order to do such a refinance, the debt needs to first be purchased from the current creditor. If the debt can be purchased at a substantial discount — perhaps the FHA will consider it a viable option. Of course, the FHA cannot purchase it’s own loans — thus, loan cannot already be an FHA loan. Will the FHA divulge those details of the short refinance to you??? That is, from whom they are purchasing the debt — and at what price?? Will FHA correct all mortgage title flaws??

    Originally, hedge funds started the short-refinance business. FHA now joining — who is motivating the FHA???

    Very limited indeed.

  27. I must chuckle at the contradictory feature of the hybrid loan modification program.

    Whereas before I had to be behind in my mortgage payments by at least 60 days in order to qualify, now I would have to be current on my mortgage payments in order to qualify.

    That qualification virtually eliminates the first round of defaulters and anticipates the new wave of homeowners who are on the verge of missing payments and/or who are finally catching on to the bank fraud and are about ready to take legal action.

    They are targeting again a limited number of homeowners…500k to 1.5 million…a small piece of the principle pie that barely makes a dent in the economy. If you don’t fit into that, you are still foreclosed on. Be forewarned. In my opinion, this strategy keeps us all distracted and thinking the banks are finally doing good and solving problems, while all the while they continue to foreclose on our properties, break the laws, collect insurance, and take our land!

    Further, the “new deal” seems wont to come with the condition that the government resurrect Fannie and Freddie to facilitate the loans.

    Then you have the banks referring the homeowners to third-party lenders (new servicers?) to facilitate the making of new loans as arm’s-length transactions. Very clever. They are doing it all over again, folks! Re-forming the Ponzi scheme into trickle-down derivatives! They will just make sure to have proper assignments and signers now to perfect the process since we’ve caught onto their tricks.

    Do you think banks will redeem themselves after all or is this just another move to cover up their doo-doo and try to come out smelling clean? (wash their hands of it)

    The very intricacy of language and logic the banks use indicates they are completely out of touch with the public. They pay hoards of panels of employees to sit around and study these issues and hold meetings and show statistics and graphs Have you ever listened to one of these meetings? They’re preposterous. A lot of educated people collecting paychecks, I guess, to justify their student loans. By the time they present their findings and any decisions are made, banks are already behind the curve. Meanwhile the CEO’s and CFO’s are off in Never Never Land trying to figure out how to shield their bonuses. They can blame the problems now on their large size. That brings me to my next point.

    I think the banks’ strategy is to buy time to milk the public as much as possible. Perhaps in hopes they can wash away as much of the fraud as they can and minimize their “losses” and their punishment, and in hopes that the whole debacle will eventually blow over and fade into the sunset.

    You see, all these complicated systems the banks have created seems to require them to come up with complicated solutions. Any Midwest farmer, when presented with the facts, could come up with a common sense solution in nothing flat. And i mean that sincerely.

    We need to patronize the smaller banks and credit unions, like Niel says. If we have to sign “non-securitization” agreements or whatever. Or, we can find other, non-traditional, ways to get loans for homes and other products, that make more sense and better repayment terms…with more funds going to the principal pay-down so we are not stuck in this 30-year nightmare of slavery to the feudal lords of debt.


  28. I guess great for people who are current on thier loans,but as I see it just anoyher way to legal up the paper work once again.Notice how there’s no agenda to address people who have already been foreclosed on or are not current.Just another ripp off.Love the fact that Ally is trying to do the pilot program for mortgages currently in thier portfolio but not for the mortgages they service or have serviced.More coporate colored sunshine being blown to places that it can’t be blown too.WHATEVER!!!

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