Loan Modifications – Who took my Non-performing Mortgage?

Loan Modifications… Who took my Non-performing Mortgage?

OK, so the word is out, the Doctor is in, and the medicine is … loan modifications. Specifically, principal write-downs.

Interesting.

The Hope for Homeowners initiative passed by Congress in July and officially launched a month-and-a-half ago to much acclaim, is a potentially positive FHA insurance package aiming to insure $300B of new mortgages for borrowers in a “negative equity” position.

Negative equity, of course, meaning that the loans are worth more than the home.

So … what’s the catch?

Well, the borrower has to qualify with a 31% or lower DTI ratio, at least 6 payments made and none of them late.

What do they get if they meet those magic criteria? (Oh, by the way, if I had to hazard a guess at the average DTI for loans originated in 2007, it would probably be 40-45%).

So, who’s going to qualify?

The answer is: very few people.

In the first 2 weeks of the program, exactly 49 people applied, and … none were approved.

And as for the highly touted FHA Secure program (remember that one – the one that was supposed to be the saving grace for borrowers who had missed a payment – well during the same period a total of 203 mortgage applications were filed and 49 approved.

In that same time in California, approximately 1,300 homes saw a Notice of Default filing.

So what’s the big deal here? Can’t we just give the H4H program some time?

Sure.

But remember that lenders are going to be looking for federal backing for their principal write-downs if they’re going to be participating in these 90% principal reduction plans. H4H is one of them.

So, while everyone’s waiting for the good news on H4H to come out, why not get your wallets out and make an offer on those 49 non performing notes that were just turned down?

There will be a whole lot more non-performing notes (to buy) where those come from.

Talk soon,

Dean

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