Home Mortgage

I believes that loan modifications need to be properly designed to work. At risk homeowners needed some help and hope, the Obama administrations plan to restructure loans gone bad is suppose to help four million home owners prevent foreclosure.
These are somethings you should know about the program.

1. Valid Hardship: HAMP is designed to help homeowners who have been hurt by the recession. Only primary residences are eligible for participation in the program. Investors and speculators can’t take advantage of HAMP. Some of the hardships considered to be valid are loss of income due to job loss, illness, divorce, military service etc.

2. Value: To qualify for HAMP a loan servicer will perform what is called a Net Present Value Test. This test simply compares the expected cash flow that the loan would generate after modification to the expected income if the loan is not modified. This means that if it makes more sense to modify economically the servicer is supposed to make that choice. To further entice servicers to modify loans the government has instituted subsidy payments to them for modified loans.

3. Trial Period: One part of the plan that has caused problems and unnecessary delays is the trial payment period. The trial payments are designed to “train” borrowers to make on time payments. There is a strict requirement that payments being made during the trial period must be on time. There is no “grace period” for the borrower to stretch out the payment date. A borrower who plays games during this phase is playing with fire. If you are one day late with a payment the servicer can cancel your modification with no questions asked. Many servicers have been unable to submit the paperwork and process HAMP modifications efficiently enough to complete the modification during the trial period. Many homeowners have had to make 6 or 7 trial period payments while waiting for their modification to go permanent. If you are in the trial period make absolutely sure you make very single payment on time and comply with every request for documents.

The discussion above has shown that the note holder disappears in securitization and the securitization works an illegal modification of the Transaction without the consent of the debtor. As organized, securitizations have a third major difficulty. Typically a third party to the Transaction is required to make any monthly payment to the certificate holders which is in default. In other words, if a specific mortgagor fails to make the January payment, a third party will make the payment for the mortgagor. Accordingly, the allegation in a foreclosure proceeding that the January payment was not made and is in default is false. The January payment was paid to the investors. How many times must the investors be paid the January payment? Once is enough. Is there any requirement in the Transaction or anywhere else that only the named mortgagor can make the required January payment to the servicing agent? Absolutely not.

So far, just as in the Sherlock Holmes mystery known as “Silver Blaze” where the dog did not bark in the night, our judges have been suspiciously silent. This will change as more and more lawyers become familiar with securitization. Look to see multibillion dollar class actions suits for wrongful foreclosure as part of the shameful legal legacy of unregulated securitization. As long as lawyers chase ambulances and sue for malpractice, Morgicide will not go unpunished.