Stop Foreclosure Answer

I just need to vent today. I am really frustrated with some of the articles I am seeing in the news media.

On May 26, there was an article in the Wall Street Journal. The title of it was “Mortgage Modifying Fails to Halt Defaults.” The article commented on a Fitch Ratings report which is scheduled to be released during the week.

The Fitch report takes a look at loan modifications. Its primary focus was subprime mortgages which were modified. The report projected that 65 to 75% of those loans which were modified will become 60 days or more delinquent within 12 months after the loan is modified. That means that the people will be facing foreclosure again.

The article went on to say that although loan modifications are considered as the way people facing foreclosure can save their homes, they are not working. Public pressure was causing mortgage companies to modify mortgages for all types of people including those who most likely will default again.

The average person who reads this article and does no further research will naturally assume that loan modifications are a total failure. They will never find out the reason there has been such a high rate of people facing foreclosure again after their loans were modified.

The article talks about subprime mortgages. These are not covered by the Making Home Affordable Modification Program. When they are modified, there are no formal guidelines which the mortgage companies have to follow. Many of the people facing foreclosure contacted their mortgage companies on their own. They never sought help from a lawyer or an expert in the field. They just assumed that their mortgage company would treat them fairly.

When a person facing foreclosure on one of these mortgages contacts their mortgage company, the company’s normal course of action has been to take the amount they are behind on their mortgage and any penalties and add the total to the balance owed on the mortgage. Their objective then has been to get person caught up on their payments as quickly as possible. They would increase the person’s monthly payment by a specified amount over the course of the number of months necessary to accomplish this.

For those months the monthly payment was higher than the regular payment. The person was expected to find a way to make the payment. After they paid their shortage their payment would revert back to what it was.

What’s wrong with that picture?

The person did not have enough money to make their original monthly payment. That’s the reason they fell behind. Where were they supposed to get the money to make a larger payment? Even if they found a way to make that larger payment and got caught up, how could they continue to make the regular payment when they couldn’t make it before?

The other challenge on these subprime mortgages was that the interest rates normally were very high. Another way that many of these mortgages were modified was that the interest rate and the monthly payment were reduced. However, the mortgage company never determined whether the person could make the lower payment on a consistent basis.

It wasn’t until the Making Home Affordable Modification Program was started in March of 2009 that a serious way to modify mortgages and reduce mortgage payments that people could consistently make was introduced. This program is still too new to determine how many people who have their mortgage payments lowered will fall behind again in the future.

In the last several weeks I have seen numerous articles like this one. The writers just are not doing enough research to determine the reason loan modifications have not been working. If they did, they may ask for changes which will improve the programs and actually help more people facing foreclosure to save their homes.

If you are facing foreclosure, don’t think that a loan modification will not work for you. Get the help of a lawyer or an expert in the field and let them guide you in the steps you need to take to save your home.

Much Success,

Mark Elkins

We all have heard about how much the values of homes have dropped in most areas of the country. It seems that it is just getting worse. Every several months we hear that the values have dropped more.

Today I would like to tell you what I see as the reasons for the drop in values.

The foreclosure crisis is having two side effects.

First – foreclosed homes have to be sold. In certain areas there are more foreclosures than others. Many of these are listed for sale.

Second – many people who were thinking about buying a new home are putting that off for awhile. They have heard about the economy tanking. Friends, relatives and associates have lost their jobs and are struggling financially. They have seen and read about devastating impact foreclosure has on families. They are worried that if they buy a new home now and a financial disaster hits them, they may end up facing foreclosure. So they have decided to hold off buying a new home until the economy improves.

What impact are these two side effects having on real estate values?

The news media tells us that in the last several months home sales have increased. Unfortunately they don’t go into detail on this.

In many areas there are a lot of foreclosed homes on the market. In some areas they are the majority of the homes for sale.

If you look at actual real estate sales you will see that there are a large number of foreclosed homes being sold. In some areas this approaches 50% of the homes sold.

Every mortgage company wants a foreclosed home to sell quickly. They are not in the real estate business. Their business is lending money for mortgages. They never wanted to own the home. It is their objective to get it off their books and pay the investor off as quickly as possible. So they will have the home listed for sale at a below market price.

People looking to buy a home today are looking for a bargain. They know which homes have been foreclosed and are being sold by a mortgage company. When they see one that they like they make an offer. The offer normally is quite a bit below the current sales price of the home. The mortgage company frequently will accept that price or a price between the offer and the current sales price.

The impact this has on sales is devastating. Any homeowner who has to sell their home in this market is competing with the sales of these foreclosed homes. If their home is similar to a foreclosed home and they priced their home higher, any prospective buyer will be drawn to the foreclosed home rather than theirs. So they may have to sell their home for an amount far below what the home is actually worth.

Just imagine an area where the majority of homes for sale are foreclosures. Anyone who has to sell their home there is going to get far less for their home than they wanted.

Home values in any area of the country are determined by how much homes are currently selling for. Sales of foreclosed homes normally are pulling the values down. In those areas where the majority of sales are on foreclosed homes, the drop in values is most significant.

What can be done to stop the drop in the values of homes? From my perspective, the answer to the problem is that people facing foreclosure need to be helped to save their homes. Finally there are some good programs which focus on modifying a person’s mortgage and reducing their monthly mortgage payment to a level they can afford. This should enable them to stop the foreclosure process.

If you are facing foreclosure, don’t give up in your efforts to save your home. Don’t try to do all of the work on your own. Get a lawyer or an expert in helping people facing foreclosure to help you.

Much Success,

Mark Elkins

I don’t know if you read or heard about this.

The Associated Press reported that on April 30 agents for the U S Postal Service confronted a Michigan postal carrier. He had a postal route in a rural area north of Detroit. They said that he stole nearly $20,000 of postage stamps. He was charged with stealing stamps that the postal service was shipping to retail merchants on his route.

The postal carrier, John Auito, said that he started to steal these stamps in September of 2008. He sold them to people who participated in stamp auctions on EBay. He sold the stamps for 15% less than their value.

When asked why he stole the stamps, he said that he feared foreclosure on his home and used the money he got for the stamps to make his mortgage payments.

Some people will do some strange things to try to save their home from foreclosure. This is one of the strangest stories that I have heard so far.

I wonder if Mr. Auito consulted with anyone about what steps he might take to save his home from foreclosure. Did he know that he might qualify for a loan modification and that his monthly payment might be reduced to a level he could afford to make without stealing the stamps? Did he check with a lawyer to see how they might help him?

Apparently he did not. It looks like he tried to handle it on his own. He came up with a way that was available to him and that just might save his home.

Now he is facing prison time and will have a felony on his record. Look at the impact on him and his family.

If you are facing foreclosure, please don’t try to take matters into your own hands. Consult with someone. Contact a lawyer or an expert in dealing with foreclosures. Explain your situation to them and find out what options are open to you. You may find out that your situation is not as severe as you think. You may be able to stop the foreclosure and save your home more easily than you think.

Much Success,

Mark Elkins

In yesterday’s Blog Post, I wrote about how successful Philadelphia’s Residential Mortgage Foreclosure Diversion Pilot Program has been in modifying the mortgages of people facing foreclosure. This program started in May of 2008. At the end of 2008 over 78% of the people who had their mortgages modified through the program remained in their homes. Nationwide more than 50% of the people who have their mortgages modified through other means cannot consistently make their new mortgage payment and are facing foreclosure again.

One of the reasons the Philadelphia program is so successful is the counseling requirement. The Philadelphia program is mandatory. At the time a mortgage company notifies a person that they are starting the foreclosure process, a separate letter is sent to the person telling them about the Foreclosure Diversion Pilot Program.

This letter tells the person that the first step is for them to schedule an appointment with a housing counselor. The letter contains the phone number to call to schedule the appointment. There is no charge for the services of the housing counselor.

For the meeting with the housing counselor the person has to bring information on their income, assets and debt. The counselor reviews everything and does a financial assessment. From that assessment the counselor prepares a report. In that report they prepare a plan explaining how the monthly mortgage payment could be reduced to a level which the person can afford to make. That should enable the person to get back on track. They can save their home and the foreclosure process can stop.

The next step is for the person facing foreclosure to attend a conciliation conference with a representative from their mortgage company. At this conference the plan proposed by the housing counselor is reviewed. If it is acceptable to all parties, the person’s mortgage is modified in line with the plan.

When you think about the role of the housing counselor, you realize that this is one reason the Philadelphia program is so successful. The counselor is reviewing the person’s financial situation and putting a realistic plan together showing how much of a monthly payment the person can afford to make.

When requesting modifications in areas outside of Philadelphia frequently people facing foreclosure do not submit detailed and complete information on their finances to their mortgage company. They overlook some items. At times they fail to submit critical information because they don’t think that it is important.

No one from the mortgage company has a preliminary meeting with the person. So there is no chance for them to find out if the person has overlooked any crucial information. The mortgage company comes up with a monthly payment which they feel the person can easily make. Actually the person will have trouble making it because of the critical information that they have failed to reveal.

Now let’s turn back to Philadelphia. The next step is a conciliation conference. The person facing foreclosure and a representative from their mortgage company attend this. A case manager appointed by the court presides over this conference. At this conference the plan prepared by the housing counselor is reviewed. All that the person facing foreclosure and the representative from the mortgage company have to do is agree that the new monthly payment and the modification are acceptable to them. If they do, the case manager approves it.

In the majority of instances the housing counselor is the one formulating the loan modification. The parties merely agree to it.

This is one of the reasons for the high success rate of the Philadelphia program.

It would be great if housing counselors can be used to create plans like this throughout the country. The person facing foreclosure would want to make sure that the plan created did not favor the mortgage company and the monthly payment was one that they could pay every month. Mortgage companies would want to make sure that the plans were well thought out and that their interests were protected.

Much Success,

Mark Elkins

Several weeks ago I came across a report. This report gave an overview of what is considered to be the most successful program at the present time to help people facing foreclosure save their homes. It was started in Philadelphia last May.

The program focuses on modifying people’s mortgages and reducing their monthly mortgage payment to a level they can afford to pay. At the end of 2008 over 78% of the people who had their mortgages modified through the program remained in their homes. That may not seem that impressive. However nationwide, less than 50% of the people who had their mortgages modified through other programs were consistently making their mortgage payments on time after 6 months and were facing foreclosure again.

This program doesn’t have a catchy name. In fact, it’s embarrassing because it’s so technical – the Residential Mortgage Foreclosure Diversion Pilot Program. It is run and overseen by the courts in Philadelphia.

The first thing that intrigued me about this program is the community outreach component. The program is mandatory for anyone facing foreclosure. As soon as their mortgage company sends them a letter starting the foreclosure process, they are supposed to call and schedule a meeting with a housing counselor.

The court system realized that they could not rely on the people facing foreclosure who were sent this letter to call and schedule the meeting with the housing counselor. The court also realized that most would probably never open the letter. So they had to try something else.

They got community organizations to reach out to them. When a letter is sent out to a person notifying them that foreclosure is starting, their name and address are routed to a community organization. The community organization has one of their representatives contact the person.

The representative does not do this by phone. They go out and meet with the person. They tell them about the process set up in Philadelphia. They also tell them that the first step is for them to meet with a housing counselor. They then have the person call the housing agency. Most times these calls were made while the representative from the community organization is with the person. Frequently the representative gives the person their cell phone to make the call.

Let’s look at this more closely. Most people who are facing foreclosure are embarrassed at what is happening to them. They frequently beat themselves up for allowing themselves to get in this situation. They don’t want others to know about it. So they keep it to themselves.

Many don’t take any action at all. They won’t open mail they get. They won’t answer the phone. They hope that it will just go away. Unfortunately by doing this they frequently jeopardize any chance they have to save their homes.

So the representative from the community organization in Philadelphia who contacts them is actually giving them much needed support. That person is letting them know that people care about them. People are available to help them through this crisis in their life. The representative gives them the courage to reach out and take the step to get the help they need.

As I read this, I started thinking. I wondered why the same thing couldn’t be done across the country. What if people from community organizations and churches were enlisted to go out and talk to people who were just notified that the foreclosure process had started? What if these people were able to support them and to let them know of the help available to them right there in their own community to protect their family and save their home? Wouldn’t we go a long way in solving this foreclosure crisis very quickly?

As I thought more about this, I realized that the best people to call on the people being notified that foreclosure was starting were those who had faced foreclosure and who had been able to save their homes. They could relate better to what they were going through than any other person.

Isn’t it time we explored getting such a program going?

Much Success,

Mark Elkins