Obama’s New Plans to Help Homeowners

The Obama Administration announced last April 28, 2009 new details to being relief to homeowners under the Making Home Affordable program.  Two new programs were unveiled.  The first one is called the Second Lien Program which is designed to help homeowners achieve affordability.  The Second program involves the integration of the FHA Hope for Homeowners plan into the Making Home Affordable Plan.

There are significant challenges to modifying loans for homeowners with first and second mortgages, especially in cases where the first and second mortgages involve different lenders.  It is estimated by the U.S. Treasury that up to 50 percent of homeowners at-risk of being foreclosed involve homeowners with Second Mortgages on their homes.  Hence, the Second Lien Program announced last week is estimated to help millions of homeowners.

The Second Lien Program is envisioned to work together with the loan modifications offered under the MHA program.  When a Home Affordable Modification is initiated on a first mortgage, lenders participating in the Second Lien Program will automatically reduce payments on the Second mortgage according to some standards set by the U.S. Treasury.  This program also makes it possible for homeowners to buy out the second mortgage with a lump sum payment under a formula also set by the U.S. Treasury.  This gives homeowners the chance to extinguish second mortgages when appropriate.

The other announcement by the U.S. Treasury involves steps to incorporate the FHA’s Hope for Homeowners into the MHA program.  Hope for Homeowners require the lender to accept a payoff below the current market value of the home, allowing the homeowner to refinance into a new FHA guaranteed loan.  Refinancing into a new loan below the home’s market value gives the homeowner equity in the home thus resulting in a better financial position for borrowers who qualify.

Under the program changes announced last week, when lenders evaluate a homeowner for an affordable home modification, lenders will be required to determine the homeowner’s eligibility for a Hope for Homeowners refinancing.  Where the homeowner qualifies, the lender must offer this option to the homeowner.  To encourage lenders to join the program, they will be given incentives similar to the success payments in the MHA program.

To better illustrate the second lien program, the U.S. Treasury came up with two case examples.

The first example involved Family A, which took out a 30-year closed-end second mortgage with a balance of $45,000 and an interest rate of 8.6%.  Today, the Family A has an unpaid balance of almost $44,000 on their second mortgage.  Under the second lien program, the interest rate on Family A’s second mortgage will be reduced to 1% for the 5 years reducing their annual payments by over $2,300.  After those 5 years, Family A’s mortgage payment will rise again but to a more moderate level.

The second example involves Family B, which took out an interest only second mortgage with a balance of $60,000 with an interest rate of 4.4% and a term of 15 years.  Today, Family B has $60,000 remaining on their interest only second mortgage because none of the principal was paid down.  Under the second lien program, the interest rate on Family B’s interest only second mortgage will be reduced to 2% for 5 years reducing their annual payments by $1,440.  after those 5 years, Family B’s mortgage payment will adjust up and the mortgage will amortize again over a certain term.

Treasury Secretary Tim Geithner said that: “With these latest program details, we’re offering even more opportunities for borrowers to make their homes more affordable under the administrations housing plan.”  These programs are part of the ongoing effort of the Obama administration to solve the current economic crisis.  Programs, guidelines and participants in these programs are likewise being constantly revised.  Thus, homeowners also need to be vigilant and get up to date information on all their options as available programs are also constantly changing and updating.

National Loan Auditors’ Alliances with Rapid Reporting and PLATINUMdata Add Information Depth to US Court Audit™

National Loan Auditors (NLA) has formed strategic alliances with two companies — Rapid Reporting and PLATINUMdata Solutions, Inc.– adding their cutting edge information technology solutions to US Court Audit™, the comprehensive, forensic analysis of mortgage loan files NLA has designed for participants in the bankruptcy process.

“Our alliances with these two innovative industry leaders add important and valuable dimensions to US Court Audit™,” August Blass, founder and CEO of NLA, said. Based on NLA’s nationally recognized Forensic Loan Audit Pro™, US Court Audit™ provides a detailed, independent analysis of loans and the underwriting process, identifying violations of state and federal laws and regulations by lenders, and uncovering evidence of fraud or other improprieties by home buyers, Blass explained. The audit includes a bottom-line recommendation for loan modification terms, providing a framework for negotiations between debtors’ and lenders’ counsel and a benchmark bankruptcy judges can use in evaluating modification requests.

“Verifications of the borrower’s information (provided by Rapid Reporting) and a current estimate of the property’s value (provided by PLATINUMdata Solutions, Inc.) are key components of both the loan analysis and the modification recommendations we make,” Blass noted.

PLATINUMdata’s collateral assessment tool, “Collateral Expert™” is a sophisticated automated collateral method that provides a real-time analysis of the subject and it’s comparables in the vicinity as well as market information, including declining value indicators. The analysis includes foreclosure activity and “Notice of Default” (NOD) data for the neighborhood, along with extensive comparable sales information — all updated weekly. Going well beyond any other standard collateral automation, Collateral Expert™ also spots crucial neighborhood details the original appraisal may have overlooked or excluded, verifies owner occupancy status, identifies relationships between buyers and sellers, and flags possible property flips and other illegal activities.

“With Collateral Expert™, we are able to give users of US Court Audit™ the most detailed and most accurate analysis of property values and market information available today,” Blass said.

“The idea behind US Court Audit™ is to provide a completely objective analysis and Collateral Expert™ fits perfectly with that goal,” Terry Cabaniss, assistant vice president for production at PLATINUMdata, said. “Like the loan audit itself, our property and market assessments are completely objective. The multiple data points on the Collateral Expert™ reports are provided from PLATINUMdata as a true third party conduit for collateral valuations” she added, “and the numbers and data don’t lie.”

Rapid Reporting focuses on the borrower side of the loan transaction. The company’s signature products — Direct Check and Income Check — “have made Rapid Reporting the acknowledged leader in mortgage fraud prevention efforts,” Blass said. “That’s why we are so excited about adding these premier identity, income and employment verification tools to the US Court Audit™ arsenal.”

Direct Check supplements Social Security number matches with information compiled from more than 150 proprietary databases encompassing 15 billion public and private records, making it the most comprehensive and definitive identity verification tool available. Income Check combines information from IRS taxpayer transcripts with merged reports from three major credit reporting agencies.

“We believe early authentication is the key to preventing mortgage fraud ” Jay Meadows, president and chief executive officer of Rapid Reporting, said. “We know that mortgage fraud contributed to the financial problems we’re seeing today,” he continued. “By adding our service to US Court Audit™, we can help ensure that these fraudulent activities won’t be repeated in the loan modification and bankruptcy process.”

The premier provider of forensic loan audits to financial institutions and attorneys nationwide, NLA created US Court Audit™ to address the anticipated surge in bankruptcy-related demands for court-ordered mortgage “cram downs” resulting from pending legislation that would allow bankruptcy judges to modify mortgage loans as part of the Chapter 13 bankruptcy restructuring process.

But regardless of whether this legislation is approved, Blass noted, pressure for loan modifications will increase, encouraged both by the Obama Administration’s home owner assistance initiatives and by the efforts of struggling consumers to save their homes. “Lenders, servicers and homeowners are going to be dueling over loan modifications for some time to come,” Blass said, “and the independent, comprehensive analysis provided by US Court Audit™ will be an essential negotiating tool, equally useful to both sides.”

The strategic alliances with Rapid Reporting and PlatinumData follow NLA’s recent announcement of an alliance with SigniaDocs, which provides electronic document preparation and quality control management solutions for the residential mortgage industry.

“NLA’s alliances with these three companies — all innovative leaders in their fields — provide the information and technology building blocks that will make US Court Audit™ a uniquely valuable tool, both within the bankruptcy process and outside of it,” Blass said. “We’re providing what amounts to a loan modification in a box,” he added. “The audit includes all the information attorneys representing lenders, servicers and borrowers need to negotiate a modification solution for their clients, and it provides the objective analysis bankruptcy judges need to quickly review or order loan modifications, so they can clear crowded court dockets and provide the expeditious, equitable relief all parties in a bankruptcy proceeding are seeking.”