Tag Archives: principal reduction

Less than 1% of seriously underwater properties qualify for principal reduction

RealtyTrac®, a national source for comprehensive housing data, today released its Q1 2016 U.S. Home Equity and Underwater Report, which estimates that less than 1 percent of all seriously underwater properties nationwide potentially qualify for principal loan forgiveness under a new mortgage modification program introduced in April by the Federal Housing Finance Agency, which oversees government-backed loan agencies Fannie Mae and Freddie Mac.

To be considered eligible in the RealtyTrac analysis, the seriously underwater properties (loan-to-value ratio of at least 125 percent) needed to also be actively in foreclosure, owner-occupied, and have an estimated loan amount no more than $250,000 on a loan that is guaranteed by Fannie Mae or Freddie Mac.

Out of 6,703,857 million seriously underwater U.S. properties as of the end of Q1 2016, the RealtyTrac analysis estimated that 33,622 (0.50 percent) would potentially qualify for the FHFA principal reduction program.

Read on.

FHFA makes it official: Principal reduction is coming

A day that many in the housing industry thought would never come is finally and actually here, as the FHFA is making official – widespread principal reduction is coming. In what it is calling a “final crisis-era modification program,” the FHFA announced Thursday that it will be launching a principal reduction program for some borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac. Click here to learn more.

New York Attorney General pushes FHFA for principal reduction

It turns out that the housing rights protestors that interrupted a lecture earlier this week at Harvard from Federal Housing Finance Agency Director Mel Watt aren’t the only ones pushing the FHFA to engage in principal reduction.

In a letter sent this week to Watt, New York Attorney General Eric Schneiderman joins the chorus calling for Fannie Mae and Freddie Mac to reduce the mortgage balances of struggling borrowers.

In Schneiderman’s letter, a copy of which was obtained by HousingWire, New York’s attorney general says that he is “pleased” that the FHFA is now “seriously evaluating” adopting a principal reduction plan, and advocates that principal reduction “should be deployed broadly and quickly to homeowners in desperate need of this relief from the continuing damage caused by the housing crisis.”

According to Watt, the FHFA is still considering a principal reduction plan, despite reports to the contrary.

Read on.

Philadelphia Fed: Could principal reduction save bankrupt homeowners?

Back in 2009, mortgage lenders shot down proposed legislation by the Obama Administration to allow strip-down of residential mortgages for homeowners in Chapter 13 bankruptcy due to the adverse effects that it would have.

Now five years later, the Federal Reserve Bank of Philadelphia is arguing that lenders were wrong.

A mortgage strip-down reduces the principal of underwater residential mortgages to the current market value of the property for homeowners in Chapter 7 or Chapter 13 bankruptcy. If a bankruptcy judge is granted mortgage modification powers, than it stands to reason an interest deduction could be implemented on top of the principal reduction.

The legislation was proposed in 2009 as a means of reducing foreclosures during the recent mortgage crisis.  And according to a new paper from the research department with the Philadelphia Fed, introducing mortgage strip-downs would not have strong adverse effects on mortgage loan terms and could be a useful new policy tool to reduce foreclosures.

The paper titled, “Using Bankruptcy to Reduce Foreclosures: Does Strip-Down of Mortgages Affect the supply of Mortgage Credit?” sought to determine whether allowing bankruptcy judges to modify mortgages would have a large adverse impact on new mortgage applicants.

Read on.

Los Angeles Times wonders whether Fannie Mae are softening in their hard stance against principal reduction

LA Times:

On Friday, the Coronels, now living on Social Security and Jaime’s pension as a union laborer, will throw a party to celebrate another Fannie Mae concession that lets them buy back their home for $280,000, far less than the $400,000-plus debt that had gone into default. The effect of the deal was to reduce the principal owed by the Mexican immigrants, enabling them to qualify for a new mortgage.

The go-ahead for the indirect reduction appears to mark a shift for Fannie Mae, which with its brother mortgage company, Freddie Mac, required a federal bailout in 2008.

Shrinking the mortgage amount that a homeowner owes has been done often in recent years to help underwater borrowers with loans not backed by Fannie and Freddie, in cases where foreclosing would be more costly for the lender or investors in the loan.

But in the six years since Congress created the Federal Housing Finance Agency to oversee Fannie and Freddie, the agency has never included mortgage principal reduction on its list of approved techniques to help homeowners in distress.

 On a side note: I looked up Jaime and Juana Coronel’s property on the Los Angeles recorder office website and here is what I found. In June 2010, The Coronels received a Notice of Default by Recontrust  in the behalf of Bank of America. Then, there was a substitution trustee filed in June 2010. Then, a trustee sale was filed in September 2010. Then, the property was sold to Fannie Mae in October 2010. But, what is interesting is that in October 2014, Assignment of Rents was recorded where now rental homes are securitized and sold on Wall Street. Here are the details from the Los Angeles recorders office website:

Number Date Type Grantors Grantees
20100768107 2010-06-07 NOTICE DEFAULT CORONEL JAIME R
CORONEL JUANA V
20100806059 2010-06-14 SUBSTITUTION TRUSTEE CORONEL JAIME R RECONTRUST COMPANY
CORONEL JUANA V BAC HOME LOANS SERVICING LP
CORONEL JAIME R BAC HOME LOANS SERVICING LP
CORONEL JUANA V RECONTRUST COMPANY
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC
20101281228 2010-09-13 NOTICE OF TRUSTEES SALE CORONEL JAIME R
CORONEL JUANA V
20101486668 2010-10-19 ASSIGNMENT TRUST DEED BAC HOME LOANS SERVICING LP FEDERAL NATIONAL MORTGAGE ASSOCIATION
CORONEL JAIME R
CORONEL JUANA V
COUNTRYWIDE HOME LOANS SERVICING LP
20101486669 2010-10-19 TRUSTEES DEED RECONTRUST COMPANY TRUSTEE FEDERAL NATIONAL MORTGAGE ASSOCIATION
CORONEL JUANA V
CORONEL JAIME R
20101537530 2010-10-27 SUBSTITUTION TRUSTEE HFTA CORPORATION HFTA CORPORATION
TRANSAMERICA FINANCIAL SERVICES
CORONEL JAIME R
CORONEL JUANA V
20110589853 2011-04-25 COURT ACTION LIEN CORONEL JAIME JESUS LOS ANGELES COUNTY COURT TRUSTEE
20141147916 2014-10-30 ASSIGNMENT OF RENTS CORONEL JAIME R NEW AMERICAN FUNDING
CORONEL JAIME R NEW AMERICAN FUNDING
CORONEL JUANA V BROKER SOLUTIONS INC
CORONEL JUANA V BROKER SOLUTIONS INC
RAMIREZ ALFREDO
RAMIREZ ALFREDO
VELASCO MARIA R
VELASCO MARIA R

CBO Report: Modifying Mortgages Involving Fannie Mae and Freddie Mac: Options for Principal Forgiveness

Link

NY AG wants Obama to appoint new interim FHFA director

NY AG wants Obama to appoint new interim FHFA director

ew York Attorney General Eric Schneiderman applauded President Obama for the potential nomination of Congressman Mel Watt, D-N.C., as the permanent head of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.

However, Schneiderman called on Obama to take immediate action to replace acting director Ed DeMarco with a new acting director who will allow principal reduction relief for struggling homeowners.

“As I have consistently said, the FHFA’s refusal to allow principal write-downs that would result in more loan modifications is a direct impediment to our economic recovery and stands in way of our efforts to provide much needed assistance to homeowners in New York and across the country,” Schneiderman said.