There has been a lot of talk about the new $20 billion bail out to address robo-signing and bank practices of the years before the market fell out from under us. This most recently off the press:
Foreclosure Settlement Imminent Bank Sources Say
Foreclosure Settlement Imminent Bank Sources Say
Will we be able to make a deal with the banks regarding their errors in making loans that could not be paid? Banks are not talking, but it is likely that the money will be caught up in a bureacratic nightmare. The thought has been that this money would provide mortgage relief to struggling homeowners by allowing more relaxed loan modification for people who need mortgage relief because their homes are underwater (they owe more than the home is worth.)
Only problem is case in point: someone lost their job - they would qualify for a loan modification -- that is what might be considered a hardship. In fact the program then denies the loan modification if the individual got their job back? What is wrong with that picture? I would think that's exactly the type of person who would need mortgage relief because they actually can and have the ability to reinstate their status and payments if they are given some kind of help. The individual is still at risk despite the systems approach to the problem.
In a seminar with Wells Fargo/Wachovia recently the reps stated that they are taking each individual on a personal basis and the talk was promising. They even mentioned 90 day lates would be considered but definitely the time to approach the bank would be before a late payment is made. HAMP/HAFA ruling and law states that you must receive a written denial for a loan modification from the bank before your home can be foreclosed. After foreclosure the ability to reinstate seems likely to be an expensive and near impossible prospect for a displaced homeowner or one that is going that way.
So what problems are homeowners still facing?
The difficulty in making their payments: health issues, lost jobs, balloon payments coming due and the past inappropriate lending practices (they never should have gotten the home in the first place), pulled cash out and overspeculated are still in place. No one thinks the goose with the golden egg has flown in.
What about the people who are underwater with two loans where they took money out and speculated on a business or maybe a motor boat and vacation. Are these cases separate or lumped together? After all the motor boat isn't worth what they bought if for, the vacation money is spent and the business went under. Should both homeowners be rewarded for bad business planning? SB 458 -- the new law that says that banks can not go after the borrower for the principal of the second loan after they grant a short sale. That stopped a short sale I had in progress with Chase bank for about a month costing my buyers very ethical loan agent several thousand dollars to extend the loan lock. It was a hiccup that we got through and the bank allowed the short sale to proceed. It was a win win situation where family helped relocate the seller and the buyers are happy with their new home but it took experience and persistence. But what about the seller's future taxes? It is possible that the seller will see tax bills for the second she took out for her business since the loan WAS a refinanced, recourse loan.
Last there is discussion of reversing the tax benefits for mortgage interest. For investment homes its likely a change is necessary to improve our economic portfolio. For primary home owners struggling to make payments it spells disaster.
One thing I am sure -- its not fair. Ok well is life ever fair? Probably not but what is the bail out really about that's what I want to know. Is it possible that it will just move forward denial of loan modifcations and allow the banks to more rapidly repossess the homes?
Inquiring minds want to know. Stay tuned for future discussions on resolution to these problems.
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