Wednesday, March 31, 2010

Loan Modification Changes - Will They Help?

I am sure many of you may have heard about the recent changes and expansions announced last week to the guidelines for loan modifications. I have attached a link to the overview below:

Essentially, the government has heard the problems in the process and are trying to push lenders to start doing things right with more formal procedures and time frames. In addition, they want to expand modifications to homeowners in bankruptcy, provide assistance to those temporarily unemployed, provide cash payments to those who short sell or walk away, and provide more protection from unexpected foreclosure occurring during a modification review.

I must emphasize that these are only guidelines for non-GSE servicers to follow (those other than Fannie Mae and Freddie Mac) on HAM modifications only. There is no real enforcement procedure, it is more of a way to tell lenders that they must comply if they want to get the federal incentives. It took the lenders almost a year to implement the original guidelines announced last February 2009, so it is unknown what effect this will have and how long it will take.

The announcement by Bank of America that they will reduce principal on certain loans sounded like a positive thing; however, it was only done to settle certain cases brought by the Attorneys General of several states and will likely only apply to up to 45,000 borrowers who had certain Countrywide predatory loans.

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Bankruptcy Attorney Chris Barsness

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