Mortgage Foreclosure Update
Posted by Lori Molloy, Esq. on December 21, 2015
A big budget Hollywood movie, The Big Short, is coming to theaters near you this month. Based upon the novel by Michael Lewis, it is a story of how some financial guys on Wall Street saw the manipulations in the Housing market in 2005 and figured out a way to make money from what they predicted would be a financial collapse. Sure enough, in 2007, the housing bubble burst, financial institutions collapsed, and the reverberations were felt in the economy.
But many of our clients don’t need to see a movie to tell you about the effects of the housing crisis. Many people were left with loans that had bad, even predatory terms, making them more likely to default. The recession came, and with it high unemployment rates that always causes more homeowners to default on their mortgage. Some programs were created by the federal government and the Commonwealth, and additional money became available as some of the lenders settled court cases with the states Attorneys General.
Among the programs that are still available is the Home Affordable Modification Program (HAMP), with information available at www.makinghomeaffordable.gov. This program was extended through December 31, 2016 and allows homeowners who are struggling to make payments to apply for modification of their loan. If the mortgage loan was made before January 1, 2009, and you are struggling to make payments, you may be eligible. If you obtain a modification of your first mortgage, you may be eligible for a modification or elimination of a second mortgage through the second lien modification program. https://www.makinghomeaffordable.gov/steps/Pages/step-2-program-2mp.aspx
The HAMP was created to require the banks who accepted federal bailout money through the TARP program after the financial collapse to help struggling homeowners try to save their homes. Home loans issued by the FHA, VA, Rural Homes, Fannie Mae and Freddie Mac have modification programs as well, so homeowners with those loans can apply directly for assistance through those programs. In June of 2012, the HAMP program was amended to allow homeowners to re-apply for assistance if they needed consideration for a second modification.
In June 2014, HUD (Department of Housing and Urban Development) sold loans that had been underwritten by banks and insured by the FHA, at auction. Investors, like Lone Star and Caliber Home Loans, which bought many of these loans at a discounted rate, have been criticized for aggressive foreclosures and modifications that do not allow for sustainable mortgage terms for homeowners. http://www.nytimes.com/2015/09/29/business/dealbook/as-banks-retreat-private-equity-rushes-to-buy-troubled-home-mortgages.html?_r=0 .
While consumers may complain to their state Attorney General or the federal Consumer Financial Protection Bureau, the private equity firms are bundling up these mortgages into portfolios and selling them. The expectation is that many of them will be liquidated and sold on market, or they will generate some monthly income for investors. But homeowners under pressure will take the deal, securing a place to live, but often at a very high cost.