Could this be a step in the right direction….

Bank of America announced a new program that will forgive up to 30% of the principal for those owing more than 120% of the value of their home. The program is slated to start this May is in response to a settlement reached with the commonwealth of Massachusetts regarding the type of loan modifications Bank of America could make on their Countrywide portfolio. And it may be a preemptive move to the Washington State suit that Bank of America is not doing enough to modify underwater loans.


While principal reduction has been practiced sparingly on a case to case basis by other large lenders, the Bank of America program will be more wide spread, yet focused to one group of its client base. Applying to only borrowers who have loans generated by Countrywide Financial will be eligible. Of those borrowers only the riskiest loans will be considered. You know the breed; option adjustable-rate, subprime and prime loans with a low initial fixed rate then annual increases. Bank representatives say there are approximately 45,000 loans in the portfolio that qualify. The average reduction will be in the $62,000 range.

Other qualifications are similar to those for a standard loan modification, you also must have missed at least two consecutive payments and be able to demonstrate that you are in financial hardship. Ones loan must have a balance of 120% of the estimated home value.

Once you qualify the program will reduce the principal balance and place the determined amount in an interest free account. For every five year period that you make your payments the bank will forgive a little more of the principal balance until the balance has reached the 100% loan to value ratio. To protect Bank of Americas interests should the homes price recover in the fourth or fifth year to the loan balance the forgiveness to the interest free account would stop and would have to be paid off when the home is sold or the home is refinanced.

Now before you run out and call your Bank of America representative you should know that it will be Bank of America that will reach out to you should you qualify for this program. While this is not ideal it could be a step in the right direction in providing relief that makes sense.

Help is coming for distressed property owners…

Are you one of the legions who for a myriad of reasons need to sell your home and have found that your equity has evaporated? Has your lender sent a notice letting you know that foreclosure may be in your future? Have you explored your options and determined that a short sale is your best avenue of retreat? Have you dreaded the long drawn out and uncertain process of the short sale? Help could be right around the corner, that is if your loans are backed by Fannie Mae or Freddie Mac and your lender is one of those who have volunteered for the program.


The federal government’s Home Affordable Foreclosure Alternative program (or HAFA) is set to start providing relief to qualifying homeowners starting April 5 running through December 31, 2012. HAFA establishes short sale rules and incentivizes borrowers and lenders to work together to avoid foreclosure. The new guidelines will have the borrowers receiving preapproved short sale terms from their lenders before they put the home on the market. The predefined steps will make the process easier to understand for all involved in the sale.

The first step is to determine your loan is backed by either Fannie or Freddie. This can be done by going to http://loanlookup.fanniemae.com/loanlookup/ or https://ww3.freddiemac.com/corporate/. If you have a loan back by either you can then apply for a home loan modification through the Home Affordable Modification Program (HAMP) http://www.makinghomeaffordable.gov/. If you are backed and you do not qualify for a home loan modification or you have started the loan modification process and have missed a payment during the trial modification period you will qualify for the HAFA program.

A few more stumbling blocks include:

• That you are delinquent or you will be defaulting in the near future,

• You can demonstrate that you have a hardship,

• The home is your principal residence,

• Your mortgage was originated before January 1, 2009,

• Your monthly housing payments exceed 31% of your gross income,

With the new HAFA rules, if you do not qualify for a home loan modification your lenders will have to offer you a short sale within thirty days. You the borrower will then have fourteen days to respond to the lenders short sale agreement.

Once an offer to purchase has been made you and your broker will have three days to submit the offer to the lender along with the buyers’ mortgage pre-approval letter. Should there be any other liens on the property you will need to include the status of negotiations with those lien holders. Once all has been submitted the lender will have ten days to approve or deny the offer.

One of the great benefits of the program is the requirement that the lenders release you from any further obligation to repay the difference between the balance of the loan and the sale amount. The ability of the lenders to pursue deficiency judgments has been a black cloud over many a short sale. Lenders (or the collection agencies that they sell the bad debt to) have the ability to pursue a deficiency judgment for up to ten years and in some cases up to twenty years. They can do this because in a short sale the terms of the loan have been modified and the foreclosure process is avoided. No foreclosure means no protect by state foreclosure statues (a discussion for another time).

To get more lenders on board HAFA provides incentives for second mortgages lien holders, up to $3000. While this may not seem like much when tens of thousands may be owed on a note it is far better than the big goose egg they would have received previously. Not forgetting the role that loan servicers play in moving the short sale process along HAFA offers them up to $1000. HAFA also offers the mortgage investors who agree to share the short sale proceeds with the second lien holder up to $1000. And last but not least HAFA provides up to $1500 to assist the homeowner in relocating.

If sounds like a good fix for you and you would like help in navigating this process, call or email me. I would love to provide you with some relief.

I’ve fallen, can you help me find my way!

Are you like many of my clients where the last few years have not been kind to your finances? Do you owe more on your home than what it would sell for in today’s market? Have you been exploring your options; loan modification, deed-in-lieu, short sale, foreclosure or gutting it out and wait for the market value to return? With such a dizzying array of choices, all with serious repercussions, where should you start?

Seeking the wisdom of professionals well versed in today’s ever changing real estate landscape is your best chance to make the best of an unfortunate situation. Real estate agents/brokers are on frontline in this battle and can help provide direction and insight to current market conditions but few are licensed to practice law or give financial advice. The advice of a real estate attorney and a certified public accountant is essential to mapping out a strategy that could affect your finances for the next twenty years.

While most folks who find themselves in this ever evolving nightmare cannot begin to afford a $275 an hour attorney or accountant, there is alternative help available. Here are a few contacts to start with; Legal Aid Services of Oregon, LASO, 541-385-6944 for the Bend office or visit their web site at http://www.lasoregon.org/. Another option is Free Legal Aid at http://www.usattorneylegalservices.com/; this website will refer you to LASO, but also has a lot of good resources that will help depending on what path you take. The Free Legal Aid site has good examples of a sample hardship letter, debt settlement letter and more. Last but not least there is Neighbor Impact their mission is to help the economically disadvantaged in our area. Neighbor Impact offers mortgage default counseling amongst several other financial counseling programs. They can be reached at 541-548-2380 or visit their website at http://www.neighborimpact.org/.

No matter the path you chose, start your journey by collecting and organizing your financial information. Being prepared to provide the most intimate details of your finances will lessen the stress involved in discussing and planning your exit strategy.

You will need to collect a list of your income, assets and liabilities. Two months is the standard for providing pay stubs, bank, mortgage and other monthly statements. Have complete tax returns for the last two years at the ready. In your packet include all correspondence from your lender(s) pertaining to foreclosure of your property; if you have received a Notice of Default include it too. Rounding out your information packet, draft a letter that describes why you are in financial hardship. To say that your house is no longer of the value it once was will not suffice as a reason for your hardship, though it may be a large contributor to your situation.

Mentally prepare yourself for journey of twist and turns that will take months and possibly years to complete. Be strong as all things do pass and life will get better.