Realtor Coaching & Training: Loans
This is an updated Credit Suisse chart of the number of mortgages that have reset dates in the near future…
Why do you care about this?
Simple. Many of those homeowners won’t be able to refinance. Their homes are far too underwater and no government intervention is going to help. These homeowners will be short sales listings..or REO listings. You need to get your mind around the massive number of homeowners that will be facing this problem in the very near future.
Most of the resets are expected to occur through 2012. Between 2010 and 2012, the chart indicates that $253.25 billion of option ARMs will adjust, while Alt-A loans totaling $163.71 billion will reset over that time. Altogether, $1.010 trillion worth of ARMs will reset or recast during the three-year period.
An interesting short term delay in the surge of option arm defaults is due to the artificially low interest rates. Thus, when the resets kicked in the house payments didn’t increase. But, what happens when interest rates DO increase…as is expected to happen soon?
Defaults. In the form of strategic defaults and foreclosures. Even IF the homeowner can re-fi..what are the chances that they will be able to afford their new house payment with the increased interest rate.
Currently its estimated that there are around 5 million homeowners who are in some form of default. Lets assume that HAMP (Home Affordable Modification Program) ’saves’ a percent of these homeowners…that still leaves literally millions of homes that must be sold. According to Credit Suisse there will be around 10,000,000 foreclosures over a 5 years period (starting in 2008).
Bottom line, this market is the new normal. Short Sales, Underwater Homeowners, REOs…low (to no) appreciation rates dominate the real estate markets for years to come.
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Freddie Mac is buying back the loans they have sold off to investors…when the borrower has missed 4 payments.
Here is how the process traditionally works:
Home buyer needs a mortgage——-> Loan Officer who works for ABC Mortgage originates a Fannie Mae mortgage for buyer/ borrower. ——–> ABC Mortgage has to follow the Fannie Mae lending guidelines in order for the loan to be a Fannie Mae loan. ———-> ABC Mortgage originates and closes the loan for the buyer. ———> ABC Mortgage becomes the servicer for the new FHA Mortgage. They collect the payments etc. ————> Loan is sold off to the secondary market.
Obviously, this is an over simplification. But, this is the process. Now, the problem comes in when ABC Mortgage didn’t follow the FHA Lending guidelines and issued a mortgage to a borrower who didn’t truly qualify. If the loan goes bad (4 payments) because ABC Mortgage’s not following the rules…then the Fannie and Freddie will force the originator (ABC) to literally buy the loan back. Remember, this is a ‘non-performing’ loan…no money is being collected.
(Lenders, feel free to post comments if my details are wrong)
We have also heard that Fannie Mae has hired hundreds of new auditors to ‘audit’ mortgages originated over the last 3-5 years. When they discover the originator (as in the back that originated the loan….) issued a mortgage and didn’t follow the Fannie guidelines…the originator is going to be forced to buy back the loan.
Think about all of this for a moment….all the flaky origination that has happened over the last few years may result in the originating mortgage companies actually being forced to buy back the loan they sold to Fannie Mae! How many of these lenders can afford to cover these bad loans?
Here is the story from CNBC.com
Government controlled mortgage finance company Freddie Mac says it will buy back troubled loans contained in securities it has already sold to investors.
The McLean, VA-based company said Wednesday it would repurchase mortgage loans in which borrowers have missed at least four months of payments. It did not disclose how much it would spend.
Freddie Mac guarantees the mortgage securities it sells. The company said buying the delinquent loans back would cost less than making those guarantee payments.
Freddie Mac and sibling company Fannie Mae have been run under tight government oversight since they almost collapsed in September 2008. They have required $111 billion in federal aid to stay afloat.
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Seth Wheeler, Senior Advisor to the Treasury Department discussing the Obama Administration’s Home Affordable Modification Program, which isn’t working at the level needed or intended, indicated that the Obama Administration may be shifting focus from modifications to another program which simply gets troubled borrowers out of their homes as quickly and cleanly as possible.
In other words, Short Sales are the solution.
Wheeler told ASF members and guests, “Short sales, deeds in lieu are other ways to prevent foreclosures to help achieve stability [in housing],” “Modifications are only for a certain subset of distressed homeowners.” Translation: not many want to mod their loans or can mod their loans.
As you will recall last November the Treasury launched the Home Affordable Foreclosure Alternatives program which specifically targets short sales and deeds in lieu of foreclosure.
Watch the video about HAFA Now.
So, here is how it works….’troubled borrowers’ are sent to the HAMP program first. In other words, the first thing the lenders will do is offer mortgage loan modification. Next, if the borrower can’t or won’t do a loan mod…then…they are directed to the HAFA program. Here are the details of this process:
Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days of the date the borrower:
- Does not qualify for a Trial Period Plan;
- Does not successfully complete a Trial Period Plan;
- Is delinquent on a HAMP modification by missing at least two consecutive payments; or
- Requests a short sale or DIL. This last point is interesting. You need to be aware that when your client calls their lender and the lender attempts to ‘force’ them to their loan mod department under these new guidelines the borrower can request to go directly to the short sale department. Kind-a confusing but, you get the idea.
Here is what you need to know about HAFA. Remember, the video that we created for you last year about HAFA is HERE.
- The HAFA program offers incentives in this program “upon successful completion of the short sale” or Deed in Lieu.
- Borrower receives relocation assistance of $1500.
- Servicer incentive of $1000 to cover administrative and processing costs and investor reimbursement of $1000 for subordinate lien releases. That’s when the investor allows up to $3000 in short sale proceeds to go to subordinate lien holders.
- Participating lenders can NOT pursue a deficiency judgment post short sale (or DIL) closing. This will be the end to all the mickey-mouse lenders try to get borrowers to agree to post closing. Like, paybacks.
Bottom line, expect the HAFA program to be front and center starting this April once the new guidelines are in full effect. Its our believe that these new guidelines will usher in what we have been advocating for years…the streamlined short sale! Agents, 2010 IS the year of the short sale. Watch the FREE Harris Real Estate University Agent Short Sale Secrets CDPD video and download the FREE book NOW.
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New Emerging story that will certainly rock the real estate world…
We have verified the facts of this new ’secret program’ are would be happy to share this information with anyone. (CNBC…)
Over the last 90 days we have been hearing from Harris Real Estate Coaching students that banks are now extending opportunities to REINSTATE mortgages loans…after a foreclosure…to the former homeowners!
You read that right….homeowner ‘loses’ their home to foreclosure. Legally, its no longer their home. Home is legally in the hands of the bank. In the past…after the homeowner loses the home in a foreclosure sale….they move out…afterall, its no longer their home..home becomes a REO listing.
Now, homeowners are being offered the opportunity to stay in their home…reinstate their mortgage reflecting the value as established at the foreclosure sale. New mortgage terms, market interest rates.
It seems that this new ’secret’ program is being tested in many major markets across the US. The former homeowner is now able to REINSTATE their mortgage…at the new value as established by the foreclosure sale. In other words, the negative equity is gone…the second mortgage is gone….back property taxes paid off…back HOA fees gone. Their new mortgage amount IS the amount the lender paid at the foreclosure sale!
I want you to think about that for a moment. This means that even AFTER a homeowner missed payments…loses the home to foreclosure…that they can now IMMEDIATELY secure another loan for the homes current market value. WOW!
Consider this, 25% of all homeowners with mortgages are upside down by at least 10%…..10% of all homeowners with mortgages are upside down by at least 25%. HREU Students know that this trend of underwater homeowners will increase before it levels off. There are 50,000,000 mortgages in the US….as of today…6,000,000 aren’t ‘performing’. In other words, homeowners aren’t paying their mortgages!
What happens when all of these millions of upside down homeowners discover that they can have their negative equity wiped out….secure a new mortgage…and keep their home…if they let it go into foreclosure?
Let me know what you think about this…
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We love CNBC’s Diana Olick…why?
She doesn’t spin…she tells it like it is and isn’t trying to be PC. In our opinion she is the only high profile mainstream reporter that is actually…reporting! (I have a feeling she will place high on this years HREU 100 Most Important People In Real Estate list…which will be released soon)
Here are a few of the high points of today’s video:
* 1 out of 8 homeowners are in trouble.
* 9.97% of loans are delinquent.
* 3%+ of all mortgages are now delinquent.
Agents, here is the question you need to be answer…are YOU ready to become a REO Listing Agent? Literally millions of bank owned homes will need listed and sold over the next few years. Do this…watch the FREE Agent REO Secrets video and then download the FREE How-To List REOs book.
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Watch this video….THIS IS HUGE!
As we have been expecting to happen for well over a year…the powers that be are now ‘exploring’ reducing outstanding mortgage balances.
You read that right…..reducing the amount a homeowner actually OWES on their home! WOW!
Agents, what can you do to help these homeowners…what can you do now to make money? Earn your HREU CDPD, Certified Distressed Property Designation. Did you know that the guidelines for Short Sales have all changed….? Watch the videos we created for you that explain the New 2010 Treasury Department Guidelines. 2010 IS the year of the Short Sale. 
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Do Mortgage Loan Modifications work?
Is the Obama administrations 75 BILLION dollar ‘Home Affordable Modification Program’ (HAMP) doing anything to end the seemingly never ending foreclosure crisis?
Will mortgage loan modification’s end the housing crisis?
Read this…watch the video….and you tell me!
Here are the facts:
1) 78 banks and servicers in the HAMP, which represent 85 percent of the total mortgage market, have just over 3 million loans on their books that are at least 60 days past due. So they sent out notices to those 3 million borrowers requesting more information.
2) A lot of those borrowers (as high as 50 percent) didn’t respond, according to the banks. Some don’t even live in the houses anymore. Gone.
3) 1,032,837 were offered modifications. But only 759,058 modifications were started. Why? Because a lot of the borrowers just didn’t want them. They would rather try to sell the house or go into foreclosure and walk away. Remember, some borrowers are so underwater on their loans, that they will never see equity again, so why bother making any modification payment, even if it is affordable.
4) Of the 759,058 modifications started, 697,026 are still in the three month trial phase.
AGENTS: As you know we have been offering short sale training for years and years now. We were the first national coaching company to teach agents how to do short sales…and we are by far the largest. Thousands of agents have received their HREU CDPD* (Certified Distressed Property Designation). We have made it easy for you to learn everything you need to know to easily list and sell short sales. Watch the FREE Short Sale Secrets video and grab your FREE Short Sale Book. If you would like to go ahead and enroll now for only $97 call 1-866-422-9497 or sign up here.
5) Treasury reports that 31,382 trial modifications are now permanent. It also reports, well I had to do the math because they didn’t put it on the report, but a spokesperson did independently confirm, that 30,650 modifications were disqualified.
6) Treasury officials noted the 31,000 number in the release: “the report shows that servicers have only converted 31,382 modifications to the permanent phase.”
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