Archive for August, 2009

Aug200931

Uppity Banker

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Banks Modify 9% Of Troubled Mortgage Loans? Cost: 50 BILLION!

bsflag“As of July, only 9 percent of eligible borrowers had seen their mortgage payments reduced with modified loans. And the first monthly progress report showed that 10 lenders had not changed a single mortgage.” Source: Yahoo Finance, Mortgage aid program helping fraction of borrowers

The report indicated that lenders such as Bank of America Corp. and Wells Fargo and Co. have lagged behind government expectations. Both banks received billions in federal bailout money. Bank of America modified just 4% percent of eligible loans, and Wells Fargo 6% percent. Wachovia Corp., which was taken over by Wells Fargo in December, modified only 2% percent.

There have been a total of 464,058 repossessions so far this year (through the end of July). And There were more than 360,000 properties with foreclosure filings — including default notices, scheduled auctions and bank repossessions — an increase of 7% from June and 32% from July 2008, according to RealtyTrac, an online marketer of foreclosed homes. In fact, one in every 355 U.S. homes had at least one filing during July.

So far, banks have extended only 400,000 offers among 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000 of those borrowers have enrolled in three-month trials.

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ist1_1847456-jumping-to-the-wrong-conclusionLet’s take a look at the reports numbers…. 235,000 on a 3 month trial /divided by 2,700,000 eligible borrowers. NOW THIS HOW THEY GET the 9% being helped figure.. …(actually 8.7% rounded Up to 9%!)

Lets examine WHAT actually is going on here. We have 235,000 borrowers are on a 3 month payment trial period. Those 235,000 borrower’s have received a letter from their BANK giving them a 3 month payment trial to prove they are worthy of a permanent Loan Payment Modification. AND what the BANK doesn’t TELL YOU is that after you have made those 3 trial payments your NEW Permanent Loan Modification Payment MAY be RAISED HIGHER than your 3 Month Trial Payment! That’s right they can RAISE your payment after you have successfully PASSED the TRIAL! So don’t be SHOCKED when you payment is increased at the end of the trial!

AND of those 235,000 borrowers on the trial NOT ALL will complete the trial! So the SUCCESS RATIO of 9% is somewhat Pre-Mature?

AND of those 235,000 loans being modified Only 20%-25% of will have their payments REDUCED! It’s MORE Common to find the payments raised! *

* The Following is from the a BOSTON FEDERAL RESERVE REPORT on Reducing Foreclosures.

* Pg 28…”The authors find that until the fourth quarter of 2008, modifications involving payment increases were more common than those involving payment decreases. In addition, they find that the average and median magnitudes of payment decreases have recently increased from approximately 10

Aug200924

Uppity Banker

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Banks Find Foreclosure More Efficient than Loan Modification?

The Boston Federal Reserve Bank had two of its Senior Economists write a policy paper concerning the Foreclosure Crisis. The following policy paper was written, titled Reducing Foreclosures by Christopher L. Foote, Paul S. Willen, along with Kristopher S. Gerardi and Lorenz Goette.

In this paper they search for the underlying reasons for the foreclosure crisis and WHAT should be done to stop it. What I find interesting is their comments concerning the reasons for the low number of Loan Modifications to date. And here they conclude…

“Regarding the small number of loan modifications to date,we show, both theoretically and empirically, that the efficiency of foreclosure for investors is a more plausible explanation for the low number of modificationsthan contract frictions related to securitization agreements between servicers and investors.”

So the Servicers excuses that their PSA’s (Pool Servicing Agreements) with the Investor’s were preventing them from modifying more home loans is apparently not true. The real reason for the low number of loan Modifications versus Foreclosures is apparently because it’s more efficient to Foreclose than to modify a Loan!

But WHAT does more efficient mean? Easier to Foreclose on a Home than to negotiate a loan Modification? It certainly isn’t MORE profitable for the Investor.

A.M. White in his paper Deleveraging the American Homeowner: The Failure of 2008 Voluntary Mortgage Contract Modifications, stated. “Servicers are incurring huge losses for investors by foreclosing. The average foreclosure loss on a first mortgage in November 2008 was $145,000 or about 55% of the average amount due. In comparison, for the modified loans with some amount of principal or interest written off, the average loss recognized was $23,610. This seven-to-one difference between foreclosure losses and modification write-offs is striking, and lies at the heart of the failure of the voluntary mortgage modification program.

So Why do Banks Foreclose when they can Modify a loan? Foote and Willen write:

“Estimates of the total gains to investors from modifying rather than foreclosing can run to $180 billion, more than 1 percent of GDP. It is natural to wonder why investors are leaving so many $500 bills on the sidewalk.”

So if the Investors are losing 7 to 1 more money in Foreclosure then WHY IN GOD’S NAME are they Foreclosing on Homes? It’s Insane! It makes NO SENSE, But logical thought in the Banking Business in my humble opinion is NOT RECOMMENDED!

What’s truly lacking in ALL of the Professor’s studies and papers on the Foreclosure Crisis is the LACK or ABSCENCE of compassion for the Borrower. Their studies are ALL numbers and percentages, graphs and formulas. Like some Military Generals acceptable collateral losses on the battlefield. But this crisis is about real people and families being destroyed and not just numbers for the Federal Reserve to study! What the studies really should be focusing on is what the process of a loan modification is really like and the way in which the Banks are presenting them. Until you uncover how they are being processed in the interests of the Bank first, Borrower last we’ll never improve the percentages of homes saved.

In reality the Banks really DON’T want to do Loan Modifications. They aren’t in the business of lowering payments and loan balances. They have Great PR and arrive to speak to the President over lunch on their efforts to help the Homeowner, but the numbers of those receiving help are well short of their promises. It will take a Herculean effort to change the Banks cultural attitude about this Foreclosure Crisis. Until the Government makes the Loan Modification programs mandatory and not voluntary the results in avoiding Foreclosure will be dismal. And millions will continue to lose their homes.

Uppitybanker

Aug200907

Uppity Banker

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Congress Clears Dodd and Conrad of Wrongdoing

Surprise! Surprise! Surprise!

gomer11

>>>WASHINGTON – Senate Banking Committee Chairman Christopher Dodd, D-Conn., was cleared by the Senate Ethics Committee from a year-long investigation about whether mortgages he obtained from Countrywide Financial violated the Senate’s rules on gifts. “While the committee finds no substantial credible evidence as required by committee rules that your Countrywide mortgage violated Senate ethics rules, the committee does believe that you should have exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a senator,” the report said<<<

And HOW did the Ethics Committee FIND this conclusion? “While the committee finds no substantial credible evidence as required by committee rules that your Countrywide mortgage violated Senate ethics rules…

Here are the committee rules: House and Senate rules bar members from knowingly receiving gifts worth $100 or more annually from companies that use registered lobbyists.

Countrywide allegedly gave cheap, sweetheart mortgages to Sen. Kent Conrad (D-ND) and Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking committee who reportedly saved $75,000 on his inside deals from Countrywide.

NO substantial credible evidence? Really

It’s absolutely IMPOSSIBLE for the Senator’s to NOT KNOW they were getting a deal. They had to have SIGNED the Loan Documents and HUD1 Closing Statement with all of the fees. Except THEIR FEES WERE MISSING! I’m Sorry but a SAVINGS of $75,000 in a Loan File EXCEEDS $100.00 gift restriction!

The Committee also found: “the committee does believe that you should have exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a senator,”

In Other Words: Don’t Get Caught Next Time…

And the U.S. Congress WONDERS WHY the Citizens of this Country are livid with the Bailouts for the Banks and the Payoffs to the members who approve the Bailouts!