Loan Modifications

Loan Modifications seem to be the next industry to boom. There are so many people that owe more than their house is valued and with the economy in a downward spiral some of these people are having a difficult time making their mortgage payments. Companies are starting to issue layoff notices and they have also cut down on bonuses and overtime. Most people I know depend on the overtime to survive. Banks have also frozen many home equity lines of credit (HELOC) in this credit crunch. We are a society that uses debt as leverage so that we can have the birthdays and holidays that we all feel we deserve. Well we've gotten a huge wake up call.

What do people do now? The federal government has given people a free pass to walk away from their mortgage obligations and not pay taxes on the amount of debt that is forgiven. This was done with the mortgage debt relief act but one problem is that the state of California has not conformed to that law. People are still facing a big state tax bill when they are foreclosed on or even short sell their home. Since the passage of this law foreclosures have risen and so have rents. People who leave their homes now are looking at expensive rentals plus paying rent does not provide you with a tax write-off like paying mortgage interest does. Loan modifications seem to be one of the best solutions out there. Last week the Federal Deposit Insurance Corporation (FDIC) Chairperson, Sheila Bair, proposed an initiative to set guidelines and standards for loan modifications. Today, October 29, it was announced that Sheila Bair's proposition to the banks and lenders is to modify more loans and for the government to guarantee those modifications. Peter Barnes also reported, on the Fox Business Network, that the government is encouraging mortgage servicers to modify loans and the government will guarantee these modified loans.

Well lenders were already starting to modify loans. Companies like Green Credit Solutions (GCS) have been doing it successfully for a couple of years now. Green Credit Solutions is a company that I refer people to because I've researched their track record and most importantly they work hand in hand with the Department of Real Estate (DRE). You can look them up at http://www.getgreencredit.com. They are an attorney assisted company that gets results. Borrowers do have the option of negotiating themselves or getting free counseling at places like http://www.hopenow.com. Just like everything else sometimes it is just better to pay someone to negotiate for you because it can be time consuming. I myself negotiated for a client successfully and didn't get anywhere for another client. It really depends on the bank but I would not try it on my own anymore. This is why I refer clients to GCS.

With the federal government guaranteeing these troubled loans, I am predicting that more mortgage servicers are going to be more flexible with loan modifications. This means that there is going to be a larger number of borrowers calling for help. For the average person getting through to the lender is going to be near impossible. If anyone would like to talk about their options please feel free to contact me via email at mvillagran@dovproperties.com or call me at (818) 416-7511. Why do I make myself available? The more people I help the more referrals I will get. It's that simple. "Ain't no such thing as a free lunch", well this is the closest that you are going to get.

NAR's Stimulus Plan

The National Associaton of Realtors (NAR), who I'm a member of, recently presented a stimulus plan to congress. Why shouldn't they since congress seems to be doing anything that they feel is going to boost confidence in the market. It is only tax money after all. Here it is and you can also read about it at http://www.mortgagenewsdaily.com/10222008_NAR_Four_Point_Plan.asp.

1. $7500 tax credit to all buyers without having to pay it back.
   
2. Urge congress to use some of the $700 billion to buy mortgage backed securities.
3. Extend credit to Main Street, making credit more accessible to consumers and businesses. Expediting the short sale and REO process.
   
4. Make permanent the prohibition of banks entering real estate brokerage and management.

I don't like to disagree with my association because they do mean well especially for the people in our industry. This is about principle for me and so I'm going to express myself and explain why I don't agree with these recommendations.

1. The tax credit I don't have much of an issue with because I think we are overtaxed anyways. As long as the credit is only applied against the federal taxes that have been paid in because otherwise the tax credit becomes a social welfare program.
2. I'm against the bailout plan and I'm against using tax money to buy bad investments. Why are we trying to fix prices. If someone fails then allow them to fail because another investor or corporation will come in and replace them and fulfill the demand for their services.
   
3. How do you force anyone to extend credit or force them to expedite short sales? This would be great because I know that there's many realtors and buyers that don't like short sales because dealing w/ the banks and lenders is a huge pain and not worth the effort. I really believe that lenders are getting paid by insurance companies and this is why they take forever to expedite a short sale if they expedite one.
4. Well NAR is trying to protect the careers of its membership. I welcome competition and especially competition from the banks. Realtors distinguish themselves from the competition because we build our relationships and hold our clients hands through the home selling or home buying process. After dealing with banks on some real estate transactions and hearing other Realtors' horror stories, I know that the banks would not be able to compete and they would make Realtors look that much better.

Prices will hit a bottom. We need to face the fact that the real estate bull market happened because of speculation and creative financing. A very liquid market put prices out of reach for many that some decided that the only way they would ever get into a home was with a negative amortization loan. Prices are dropping and rent continues to climb making buying a home an option for many that were priced out. Let the market take care of itself.

There are companies out there helping borrowers stay in their home. There are people everywhere that have hardships and I refer them to Green Credit Solutions, http://www.getgreencredit.com. They offer loss mitigation services and have been able to modify many loans and for those that can't be modified they negotiate the short sale or deed in lieu of foreclosure. I advise the client that they can always do these things on their own but like everything else, sometimes it pays to pay someone to work for you.