Loan Modification and Litigation » government loan modification programs

Positive Results Reported Due To Loan Modification Programs, According to FDIC’s Bair

michael e. riley — Tue, 16 Jun 2009 15:51:55 +0000

Sheila Bair, the chairman of the Federal Deposit Corp has noted that the loan modification efforts are having positive results, but their ultimate success will most likely depend on the economy and mortgage market.

“My sense is that it’s having an impact,” … but “there is obviously still distress in the mortgage market” Bair said in answering questions after a speech to the Chicago Federal Reserve Bank’s annual bank structure conference.

According to Bair, most mortgage holders will continue making their monthly payments if they are brought down to the affordable level, regardless of whether they are in the upside-down mortgage scenario or not. Upside-down mortgage refers to a condition when a home value is lower than the mortgage owed on the property.

Loan workouts are traditionally more difficult to pursue if the credit distress is driven by a life event, such as loss of a job or disability, when compared to the workouts as a result of a structural problems with the loan itself.

Sheila Bair said she would like to see the secondary mortgage market “come back in the right way” with “the right incentive structure” after being a casualty of the financial crisis that started in 2007.

Bair said the agency had added 1,000 staff in the past and is still hiring, commenting on the FDIC’s workload during the recent spate of bank failures.

FHA Streamline Refinance: What You Need to Know

michael e. riley — Tue, 19 May 2009 18:32:49 +0000

“FHA Streamline Refinance” refers to a process of refinancing a FHA mortgage and specifically the amount of documentation and underwriting that is required to be completed by the lender. The process (as any refinance) involves certain closing costs that are either paid up-front or rolled into the amount of refinance.

The requirements for the FHA Streamline Refinance are as follows:

The mortgage to be refinanced must already be FHA insured
The mortgage to be refinanced should be current and in good standing (not delinquent).
The refinance is to result in a lowering of the borrower’s monthly principal and interest payments.
No cash may be taken out on mortgages refinanced using the streamline refinance process.

There are a few different ways the lenders may offer FHA streamline Refinance. Some may offer it at no out-of-pocket costs by charging a higher interest rate on the new loan. Charging this premium allows the lender to pay the closing costs associated with the refinance.

Other lenders may offer FHA streamline refinance by rolling the closing costs into the amount of the new mortgage. Of course this can only be done if the property equity allows for such transaction. This is determined by an appraisal, however the new loan amount cannot exceed the original loan amount.

Properties where the borrower does not reside as their primary residence (such as investment properties) may only be refinanced without an appraisal.