Yesterday the US Treasury stated Bank of America, Wells Fargo and JP Morgan Chase were not fulfilling the goals of the Making Home Affordable program (using taxpayer TARP money) and as needing “substantial improvement” in handling the flood of requests for loan modifications. Because of these shortcomings, the US Treasury is withholding financial incentive payments that were designed to encourage the large banks to aggressively tackle underwater loans through loan mods or HAFA short sales.

Well duh – any Realtor working in the trenches can share their horror stories about interminable delays, lost paperwork and multiple submissions of paperwork that has plagued the real estate business because of these issues! Despite all the talk bank leaders tell Congress that they’re “doing everything possible” to handle the tsunami of short sales and loan mods, it’s obvious they’re not doing enough to staff up their resources to handle these issues.

Recently I met with an individual who was concerned about the tax implications between a foreclosure vs. doing a short sale – and the potential of having to pay taxes on the short sale. I believe this individual felt there would be no (or maybe less) tax implications if the property were simply to go through the foreclosure process.

The first thing I said was I’m not a tax attorney or CPA so I can’t give tax advice, and all tax implications must be discussed with your tax adviser. But having said that, here are the general federal and California rules, forms, etc, pertaining to this issue. Read the rest of this article »

The closely divided Senate Banking and Financial Institutions committee voted 3-3 yesterday afternoon. Because of the tie, the bill failed to pass.

Proponents of the measure argue on a micro scale for the individual homeowner who is deeply underwater, maybe trying to get a loan mod and/or is facing foreclosure. Opponents of the measure argue on a macro scale that the measure merely delays the inevitable cleansing of financially weak homeowners who can’t afford their homes, thus delaying an increasingly stubborn housing recovery.

As usual, there is merit in both positions.But for now, it would appear the current process of dual-track will continue.

The CA Senate’s Banking and Financial Institutions committee is meeting this afternoon to consider SB729. If ultimately passed and signed into law, this bill would have dramatic impact on how foreclosures are conducted in California. Read the rest of this article »

The house (controlled by Republicans) made a basically symbolic vote yesterday to repeal the Obama administration’s Home Affordable Modification Program (HAMP), but a number of Democrats also voted with the Republicans. Why? The loan mod program isn’t working.

Set up to use TARP funds at the height of the housing/financial crisis, the intent was to help 3 – 4,000,000 troubled homeowners modify their loans so they could stay in their homes. But as you read my previous post (“Loan mods and drama in BK court this morning”) loan mods have been virtually impossible to navigate.

With the Dems in control of the Senate and Obama certainly not willing to kill his own program, I don’t see much chance of HAMP being killed off. Rather, what I see is renewed pressure from the fed on the servicers to get their act together. That pressure is literally on today as the fed and the 50 states’ attorneys general meet with representatives of the 5 largest banks to start on negotiations to mitigate loan mods, short sales and foreclosure processes.

I saw first hand the failure of the loan mod “game” and its consequences played out in bankruptcy court this morning.

Two separate cases. Two separate homeowners pleading their story before the judge. One party has lived in her home 37 years. The other party is retired. Notwithstanding the factors or judgment (good or bad) that got them to this point in the first place (used their home as an ATM machine?), both cases revolved around huge frustrations both parties had trying to pursue a loan mod.

In the first case, the lender’s attorney was trying to get a Relief From Stay motion against the retired couple which would allow the lender to foreclosure on their home. Standing at the podium next to her was the couple. The husband was highly frustrated, trying to explain to the judge a litany of issues they’d encountered in dealing with their lender. The judge was patient and understanding, but ultimately said her experience on the court was that the bank’s left hand didn’t know what the right hand was doing.

She then made I thought a great decision. She made the attorney standing there personally responsible for handling this couple’s issues with the bank. The couple was told to send 2 month’s payments by the end of this week to the bank’s attorney, told the attorney to give them her business card, and basically told the couple this attorney was now the official representative of the bank. Great!

The other case was sad. The woman was sobbing at the podium. The judge had the bailiff give her a box of tissues, but ultimately, I believe she will lose her home. But she had the same horrible experience of attempting to get a loan mod. Her frustration was heart wrenching, but there was little the judge could do but explain her time line of how her case would play out in the next couple of months.

These 2 cases underlined for me on a micro scale what’s happening today on the macro scale in Washington as theses issues are being hashed out – first, the meeting between the 5 largest banks (the “servicers”) and the fed plus the 50 states’ attorneys general on the whole foreclosure, loan mod situation; two – the House voting yesterday to repeal the HAMP program because it’s not working; and three – the FDIC ruling that future loans banks sell into the secondary market (without the banks keeping some “skin in the game”) must have 20% or greater down payments.

Not much comfort for the 2 parties I saw this morning in bankruptcy court.

Should principal balances on mortgages be reduced for homeowners who can’t (or won’t) make their payments?

That’s a big question facing the 5 largest servicers (read BofA, Wells Fargo, Chase, Citi and Ally Financial) on Wednesday. As part of the effort to clean up the robo-signing mess in states that have judicial foreclosures, the attorneys general of the 50 states plus the fed issued a 27 page “Settlement Terms” document that is intended to provide more safeguards of procedural rights for the foreclosure process.

But a part of this document (see paragraph VI – Monetary Relief) has a single paragraph that states “a substantial portion of monetary relief shall be dedicated by Servicer to support an enhanced program of sustainable loan modifications including principal reductions.”

This concept is causing a raging philosophical debate. Is it fair or right for a homeowner to have his debt reduced while his underwater neighbor is still making payments on his negative equity? Let’s see what Wednesday brings…

The last Congress created the Financial Crisis Inquiry Commission (www.fcic.gov) to answer that question and yesterday they gave the official answer in a 545 page report. So who’s to blame? Read the rest of this article »

A battle is raging over arcane regulatory rules that may have significant impact on how much down payment a lender will require in the future. Wells Fargo has just  suggested to regulators that home buyers come in with a 30% down payment. What’s this all about?

Read the rest of this article »

The HAFA (Home Affordable Foreclosure Alternatives) program became official on April 5, 2010. The HAFA program stream lines the short sale process by preapproving the short sale prior to the homeowner putting their home on the market. There are other great benefits – see our short intro video on HAFA.

But the guidelines didn’t include Fannie Mae or Freddie Mac mortgages. Finally, those guidelines were just released… Read the rest of this article »