Loan Modification Lancaster / Palmdale

April 14, 2011


Chris Sorensen exposes the problems with trying to get loan modification without knowing how to talk to your underwriter about your income. Chris offers information about the HELP you need. 661.945.9461

I decided to take some excerpts from her written testimony and provide it here with commentary in an effort to address what has been the obvious problem fortwo years that just now appears to be getting attention.  Read on as this testimony also describes each and every program that is currently available;

“Chairman Dodd, Ranking Member Shelby, and Members of the Committee, thank you for the opportunity to testify today regarding issues surrounding mortgage servicing. This testimony will cover two key areas: first, the steps we are taking to ensure that servicers participating in the Making Home Affordable (MHA) program are adhering to program guidelines in light of the recent foreclosure issues, and second, the accomplishments of MHA to date and its impact on mortgage servicing.

The reports of “robo-signing”, faulty documentation and other improper foreclosure practices by mortgage servicers are unacceptable. If servicers have failed to comply with the law, they should be held accountable.”

Campaign Donations, lobbyist and the sheer size and magnitude of the issues at hand will prevent anything more than lip service and hand wringing until more Americans threaten their elected leaders.

“The Federal Housing Administration (FHA) has been reviewing servicers of loans it insures for compliance with loss mitigation requirements. Additionally, the Office of the Comptroller of the Currency has directed all large national bank servicers to review their foreclosure management processes – including file reviews, affidavit processing, and signatures – to ensure that the processes are fully compliant with all applicable state laws.”

When all an institution must do is document that they attempted contact or document that a borrower failed to provide their proper paperwork and their is no forced face to face mediation, no matter how brief, this is all for not. This process assumes the borrowers are all incapable of proper utilization of a fax machine.

“Because MHA and its first lien program, the Home Affordable Modification Program (HAMP), are pre-foreclosure programs, the recent reports of robo-signing of affidavits and improper foreclosure documentation do not directly affect the implementation of HAMP.”

I respectfully disagree. I believe it demonstrates an overall lack of respect for the American public, its Judicial Branch of government and a lack of respect for the regulators and elected leaders.
I also believe they have a need to speed things up to avoid the American public from gaining knowledge, in any significant numbers, on their rights to demand that the entity foreclosing on them actually possesses the legal right to do so.

“HAMP is intended to prevent avoidable foreclosures by providing financial incentives to servicers, investors and borrowers to voluntarily undertake modifications of mortgages for responsible homeowners in a way that is affordable and sustainable over time.”

The average back end ratio historically that allowed borrowers to perform well, was limited to 38% to 41%. Under the HAMP program it AVERAGES 63.3%. This is not sustainable by any historical measurements and the incentive is provided to the Servicers up front regardless of the outcome. The claw back ability of the Treasury to get the tax payer money back for a lack of success on the HAMP program has not been utilized based on my research.

“To remedy servicer shortcomings, we have urged servicers to rapidly increase staffing and improve customer service.”

Urged? I would fine them until they reacted in a way that was in keeping with their assurances.

“MHA has strong compliance mechanisms in place to ensure that servicers follow our program’s guidelines.”

Again, I must respectfully disagree. If you did, the number would not be so dismal.

“Servicers may not proceed to foreclosure sale unless and until they have tried these alternatives. They must also first issue a written certification to their foreclosure attorney or trustee stating that “all available loss mitigation alternatives have been exhausted and a non-foreclosure option could not be reached.” On October 6, Treasury clearly reminded servicers of non-GSE loans of this existing requirement that they are prohibited from conducting foreclosure sales until these pre-foreclosure certifications are executed. It should be noted that the GSEs have similar guidelines for their HAMP modifications.”

This is a maddening process. The vast majority of those who have attempted to effectively comunicate with their Servicer has literaly came close to losing their mind. The lack of consistency in the overall process as well as the constant changing of the rules and expectations for all parites involved have created an environment of uncertainty. Confucious say; A confused mind will always say no. I’m an expert and I’m confused. I can’t imagine what they average HUD Counselor of homeowner must be going through.

“Treasury has implemented non-financial remedies that have shaped servicer behavior in order to address the most vital issue: the ultimate impact on the homeowner.”

I wonder is this was said with a straight face. 

I have this fantasy that Ms. Caldwell will win the Lottery and become rich beyond her wildest imagination. She would find this out moments before she is to testify. She would then get sworn in, sit down and pull the mic close to her and tear her written testimony up for all to see. Then she would tell the truth and blast the Servicers and the political lobbyist and her bosses for not having the backbone or commitment to the American homeowner to actually hold accountable those who created this crisis and continue to control the response to it today. I know, I know. That’s why its called a fantasy.

“Twenty months into the program, close to 1.4 million homeowners have entered into HAMP trials and experienced temporary reductions in their mortgage payments. Of these, almost 520,000 homeowners converted to permanent modifications.”

During this same time over 7 million plus have become seriously delinquent. Uncertainty in what the government will do next has exacerbated the problem.

“In the year following initiation of HAMP, home retention strategies changed dramatically. According to the OCC/ OTS Mortgage Metrics Report, in the first quarter of 2009, nearly half of mortgage modifications increased borrowers’ monthly payments or left their payments unchanged. By the second quarter of 2010, 90 percent of mortgage modifications lowered payments for the borrower. This change means borrowers are receiving better solutions. Modifications with payment reductions perform materially better than modifications that increase payments or leave them unchanged.”

The fact that this had to be pointed out amazes me.

“Second Lien Modification Program”

“The Second Lien Modification Program (referred to as 2MP) requires that when a borrower’s first lien is modified under HAMP and the servicer of the second lien is a 2MP participant, that servicer must offer to modify the borrower’s second lien according to a defined protocol. 2MP provides for a lump sum payment from Treasury in exchange for full extinguishment of the second lien, or a reduced lump sum payment from Treasury in exchange for a partial extinguishment and modification of the borrower’s remaining second lien. Although 2MP was initially met with reluctance from servicers and investors who did not want to recognize losses on their second lien portfolios, as of October 3, 2010, Treasury has signed up seventeen 2MP servicers, which includes the four largest mortgage servicers, who in aggregate service approximately 60 percent of outstanding second liens. The program uses a third-party database to match second lien loans with first lien loans permanently modified under HAMP. Servicers are required to modify second lien loans within 120 days from the date the servicer receives the first lien and second lien matching information. The implementation of this database began over the summer. Five 2MP Servicers have already begun matching modified first liens with their corresponding second liens, while the other twelve are in some phase of developing systems capacity to do so. Information on the second lien program will be included in upcoming Monthly Servicer Performance Reports as data becomes available.”

I like this. Now, can we have a fine for those who will also seek a deficency letter from the borrower?

“Home Affordable Foreclosure Alternatives Program”

“Any modification program seeking to avoid preventable foreclosures has limits, HAMP included. HAMP does not, nor was it ever intended to, address every delinquent loan. Borrowers who do not qualify for HAMP may benefit from an alternative program that helps the borrower transition to more affordable housing and avoid the substantial costs of a foreclosure. Under HAFA, Treasury provides incentives for short sales and deeds-in-lieu of foreclosure for circumstances in which borrowers are unable to complete the HAMP modification process or decline a HAMP modification. Borrowers are eligible for a relocation assistance payment, and servicers receive an incentive for completing a short sale or deed-in-lieu of foreclosure. In addition, investors are paid additional incentives for allowing some short sale proceeds to be distributed to subordinate lien holders. The Home Affordable Foreclosure Alternatives (HAFA) Program became effective on April 5, 2010.”

How about a fine for not cooperating with this process inside of 90 days? And, no more games with appraisals or attempting to extort additional money from the Realtors involved.

“Principal Reduction Alternative”

“The Administration announced further enhancements to HAMP in March 2010 by encouraging servicers to write down mortgage debt as part of a HAMP modification (the Principal Reduction Alternative, or PRA). Under PRA, servicers are required to evaluate the benefit of principal reduction and are encouraged to offer principal reduction whenever the net present value (NPV) result of a HAMP modification using PRA is greater than the NPV result without considering principal reduction. The principal reduction and the incentives based on the dollar value of the principal reduced will be earned by the borrower and investor based on a pay-for-success structure. Under the contract with each servicer, Treasury cannot compel a servicer to select PRA over the standard HAMP modification even if the NPV of PRA is greater than the NPV of regular HAMP. However, Treasury has required servicers to have written policies for PRA to help ensure that similarly situated borrowers are treated consistently. The program became operational October 1, 2010 and the four largest servicers have indicated an intention to offer PRA to homeowners.”

This money begins as a principle forbearance and 1/3 of this amount is to be forgiven after each successful year of making the payments on time.
I have become a bit cynical and as this program is not required and it involves giving away money, I have my doubts. Especially in light of the fact that the Federal Government has proven its willingness to step in and help them financially when deemed necessary. If I were the CEO, I would avoid giving away my Shareholders money until all other options had been exhausted.

“FHA Refinance ”

“Also in March 2010, the Administration announced adjustments to existing FHA refinance programs that permit lenders to provide additional refinancing options to homeowners who owe more than their homes are worth because of large declines in home prices in their local markets. This program, known as the FHA Short Refinance option, will provide more opportunities for qualifying mortgage loans to be restructured and refinanced into FHA-insured loans.

In order to qualify for this program, a homeowner must be current on their existing first lien mortgage; the homeowner must occupy the home as a primary residence and have a qualifying credit score; the mortgage owner must reduce the amount owed on the original loan by at least 10 percent; the new FHA loan must have a balance of no more than 97.75% of the current value of the home; and total mortgage debt for the borrower after the refinancing, including both the first lien mortgage and any other junior liens, cannot be greater than 115% of the current value of the home – giving homeowners a path to regain equity in their homes and affordable monthly payments. Program guidance was issued to participating FHA servicers in September 2010.”

FHA and VA always seem to get it right.

“As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Treasury is preparing to establish a web portal that borrowers can access to run a NPV analysis using input data regarding their own mortgages, and to provide to borrowers who are turned down for a HAMP modification the input data used in evaluating the application.”

This will be awesome and the fact that it has taken two years and a Bill to force it upon the industry is shameful.
The only concern I have here is the Garbage In Garbage Out syndrome. If one is not very familiar with the Fannie Mae and Freddie Mac as well as FHA underwriting guidelines, one could easily enter the wrong income and create a false read.
Getting quality loan officers back into the process and offering them a small compensation for their time, much like an Agent is offered $75 for a Broker Price Opinion, would eliminate that vast majority of false starts due to inaccurate numbers entered into the Net Present Value calculation and the accusation that borrowers are failing to provide the required paperwork. Loan Officers, at least the majority of the remaining ones, are more than capable of knowing what paperwork is needed and collecting it. Why should these experts be left out and only pay HUD Counselors who often lack the skill-set required to make this program work?

“Servicers need to increase efforts in helping borrowers avoid foreclosure through modification, as well as other alternatives to foreclosure, such as short sales.”

Short sales are the best alternative for all.

Steps Treasury Expects To Be Taken In Order…

…”First, participating servicers are doing everything that they can to reach, evaluate, and start borrowers into HAMP modifications, second, if a HAMP modification is not possible, every servicer is properly evaluating each homeowner for all other potential options to prevent a foreclosure, including HAFA or one of their own modification programs, and third, servicers are utilizing programs such as UP or the HFA Hardest-Hit Fund to their fullest ability in order to prevent avoidable foreclosures.”

Treasury’s priorities are good, their just not aligned with the Serivers and without penalties in place or performance reports that will have a negative effect on the cost of delivering future loans to the GSE’s, we will continue to suffer through this.

“As we deploy a comprehensive suite of loss mitigation options, we must remember, as the President noted, not every foreclosure can be prevented. Any broad-based solution must aim at achieving both an efficient and equitable allocation of resources. This means a balance must be struck between affording homeowners opportunities to avoid foreclosure while expeditiously easing the transition in those cases where homeownership is not an economically sustainable alternative. This is especially important in order to lay the foundation for future appreciation which will provide a meaningful path to sustainable homeownership.”

If we would simply speed up the decision making process, have it be easily discerned and have penalties for Servicers that go beyond a certain number of days to render a decision, we might be able to achieve the stated objectives in this testimony.


H.E.L.P Foundation




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