Fortunately, through responses to this blog, my readers are keeping me/us posted with the latest developments of the HASP. As I’ve previously written, the HASP is really two programs; a refinance program and a loan modification program, which I have dubbed HASP ver 1.0 and HASP ver 2.0 respectively.
The HASP ver 2.0 Update
Just yesterday I confirmed that one of my clients obtained a loan modification from his lender Countrywide Mortgage now Bank of America. BTW, the loan modification was unsolicited from my client. (More on this in another posting) That said, from out of the blue he received a phone call from Countrywide offering to modify the loan for one of his rental units located in Colorado.
Skeptical, and aware that there are SO MANY loan modification scams, he asked me to review the offer, which I did, and it turned out to be 100% legitimate and, frankly, quite amazing.
What Was the Modification?
Currently he had a Neg-Am (referred to as a “Pay Option” by Countrywide) 1st mortgage. He also had a second mortgage. We are absolutely certain that he was very “upside down” with these loans, meaning he owed much more than the properties were worth.
Without requiring an appraisal, without providing any income documentation, he was offered a no cost loan modification extending for his first mortgage only and the terms were amazing.
They extend the term of his loan from 30 years to 40 years. They lowered his interest rate to 4.5% and froze that rate for 10 years and they allowed him to make interest-only payment during that 10 years. At the begging of the 11th year the loan will make annual adjustments of no more than 2% and the rate can never exceed 9.95%.
Now, there are many of you that will say “who wants an interest-only adjustable rate mortgage?” While on one level, I will agree that if at all possible we should try to obtain a 30 year fixed rate mortgage today and lock-in these post-depression era rates that are available today. One the other hand, however, locking in a rate for 10 years is a LONG TIME. To put it into perspective, your 6 six year old will be driving before the rate makes it’s first adjustment!
The bottom line is that the HASP is evolving as I predicted and, hopefully, it will continue to evolve and expand to help more and more homeowners.
ONE VERY IMPORTANT NOTE
The client NEVER missed a mortgage payment! I believe that he was selected for the loan modification for this reason, compounded with the fact that his loan was very much at risk for default. The lender, Countrywide/Bank of America, exercised some very good judgment in my opinion because they provided a very nice incentive to keep a reliable borrower as the owner of this property. Frankly, this entire housing debacle could have been prevented or at least minimized had lenders implemented this type strategy 3 years ago when these issues became apparent.
It’s a good life!
Randall A. Luebke RMA, RFC
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In most jurisdictions, a lender may foreclose the mortgaged property if certain conditions – principally, non-payment of the mortgage loan – obtain. Subject to local legal requirements, the property may then be sold. Any amounts received from the sale (net of costs) are applied to the original debt. In some jurisdictions, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions, the borrower remains responsible for any remaining debt.
You are correct. Most often, a foreclosure is something people try to avoid of course. That said, today, many people are making the decision to allow a foreclosure not based on their inability to repay the debt, but purely on the economics of repaying the debt secured by a home worth less than the mortgage. This is sometimes referred to as a “strategic foreclosure”. The outcome of the foreclosure is always the same on the surface, the bank gets the home, the borrower is relieved of the debt. The ramifications of those actions, very dramatically, however, based on the details of the transactions. That is why is some asks me about a strategic foreclosure, or if they are considering a short-sale, I always tel them to seed advice from their tax advisor, their attorney and a financial advisor like myself is is knowledgeable in both real estate and mortgage issues. To make the right decision, you need input from all three.
Mortgage insurance is an insurance policy designed to protect the mortgagee (lender) from any default by the mortgagor (borrower). It is used commonly in loans with a loan-to-value ratio over 80%, and employed in the event of foreclosure and repossession.
You are 100% correct. That said, mortgage insurance allows people to purchase homes who otherwise would be unable to purchase them because, while they may have the income to afford a home, they don’t have enough savings for a down payment.
In the event of repossession, banks, investors, etc. must resort to selling the property to recoup their original investment (the money lent), and are able to dispose of hard assets (such as real estate) more quickly by reductions in price. Therefore, the mortgage insurance acts as a hedge should the repossessing authority recover less than full and fair market value for any hard asset
sign me up
Many countries have a notion of standard or conforming mortgages that define a perceived acceptable level of risk, which may be formal or informal, and may be reinforced by laws, government intervention, or market practice. For example, a standard mortgage may be considered to be one with no more than 70-80% LTV and no more than one-third of gross income going to mortgage debt.
Thank you for taking time to comment. I apologize, however, as I don’t really understand the point you would like to make. If you would, please add to your comment so that I can better understand how to respond. Again, thank you.
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