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Getting Your Loan Modified
US Treasury Department 2011 Making Homes Affordable Report
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Who are losing their homes?
Jim is a dental student, married with two young children. While attending school in Denver he bought a modest starter house, intending to sell when he started his residency after college. When considering this plan, they did what responsible young people do. They sought the opinions of parents, friends and financial advisors. All of advice they received was the same. “Buy a house. Don’t take any cash out of it. With double-digit appreciation you can’t go wrong. At the end of 4 years, the house alone will have gone a long way toward paying for dental school”.
You learn a lot about the financial habits of your clients when you are a realtor. You learn even more when you are a realtor working in short sales. In the time it took for Jim and I to complete the listing documents, Cindy had gathered up all of the financial data that I needed. This is not a small pile. Tax returns, bank statements, pay stubs, on and on. The point is, these are financially organized people. Not the image that some folks have of a couple losing their house.
The house had lost half of its value in four years. They bought using a down-payment assistance program that doesn’t allow him to rent the house and they are too honest to cheat. They can’t stay in the house and weather the storm, hoping for values to return. To do so would mean postponing Jim’s residency, getting a job in this market and changing the whole planned course for he, his wife and two young children.
They will move, work on rebuilding their credit, and hope that the lending crunch has eased by the time he is ready to open a dental practice. A couple who had impeccable credit will then have mediocre credit which means a higher interest rate on the loan to open that practice which will increase Jim’s overhead. That means less money to put into the growth of his business. Less money put into his personal budget. Less money to put into college funds for his children. They’re smart. They work hard, live within their means and are organized. Clearly, they will recover from this crisis, but the trajectory of their lives and plans has been forever changed.
Top three lenders get really bad report card
I read this week in DSNews.com that the US treasury department came out with a report card on Loan Modifications. It shouldn’t come as a surprise that the top three servicers, Bank of America, JP Morgan-chase and Wells Fargo had such miserable performance on loan modification that the treasury department has cut them off. They won’t be receiving the financial incentives from the government for modifications until they improve their track record.
You could say that it is about time that they got some consequences for their poor performance, but from my vantage point, they now have less reason than ever to work with consumers on getting their loans modified.
In April, 2011, only 29,000 HAMP trial payments were converted to permanent modifications nation-wide. This comes up to an average of 580 per state. Here in Colorado, we still have over 5000 homes in foreclosure just in the greater Denver area and nearly 7% of homeowners are 90 days or more late on their mortgages.
I am glad that we are starting to get some straight talk on loan modifications. They aren’t working, and millions of homeowners are pinning all of their hopes and fears on a process that is failing them entirely.
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Related articles
- Treasury slams big banks’ mortgage modifications (usatoday.com)
Recent interviews on the Tom Martino Show
These interviews were live a few weeks ago. Tom Martino has been a consumer advocate in the area for years and has been helping us get good information in front of homeowners
. Please don’t call the Call Center since nobody will be on the phones!
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Stages of Grief when loosing a home
Loosing a home to Foreclosure or having to do a short sale is a traumatic event. So is the Bankruptcy that often follows either. My experience is that people in these positions go through the stages of Grief described in the Elizabeth Kubler-Ross 1969 book On Death and Dying.
The traditional stages of grief are Denial, Anger, Bargaining, Depression and Accetpance. If you add Shame to the mix you have a pretty good discription of a person loosing their home. As Realtors we need to be sensitive to the fact that our clients are in one of the most traumatic periods of their lives. We also need to be objective if they are behaving in ways that don’t make sense.
I recently had a client who was so mired in anger at her situation that she turned it on me. I was hurt and stunned by her outburst, and then reminded myself of her situation. She has seen her career grind to a halt, lost her home, gone through bankruptcy, and is now a single woman in her fifties living with family and attempting to start over with no obvious path for doing so. Her anger isn’t about me and never was. It is about fear. She is terrified and has every right to be so.
We are taught to show our best side to people, to be good members of society and to play by the rules. Many of the people loosing their houses feel cheated. They have tried to modify their loans and been mis-led about their chances of being able to do so. They have been swindled by companies that offer them help, take their money and disappear. Advisers give them conflicting information and the government programs are confusing and largely ineffective.
The best we can do is to try to understand the greif our clients are experiencing and be gentle with one another.
Related articles
- Cycling Through the (Unemployment) Stages of Grief, Over and Over Again. (surviving-unemployment.com)
Understanding the Terms of your Loan Modification
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My Home Team Denver 