“The overaraching sense is that the loan modification process has not worked that well,” said Bert Ely, an independent banking consultant.

Still, the program is expected to show better progress when data from January is released after a strong push by Treasury Department officials to get banks to make more of the modifications permanent. For example, Bank of America, said recently it had increased the number of permanent loan modifications to 12,700 in January from 3,200 in December, 2009. B of A also said that an additional 13,700 permanent modifications were in their final stage. But that’s a drop in the bucket considering B of A holds about 1 million loans that are at least 60 days delinquent.

Trial loan modifications have kept many of these loans outof foreclosure, but by the end of this year, 2.4 million borrowers are expected to lose their homes. That would be up from 2.1 million foreclosures and short sales last year.

A report last week by Moody’s Investor Services called the Abama administration loan modification program’s impact “underwhelming.” Officials noted that not all homeowners are eligible; the program is only for owner-occupied homes and excludes a variety of loans, including jumbo loans. And the administration continues to make changes, including a requirement added last month requuiring homeowners to document their income before a trial modification is granted.

The program continues to draw criticism. Banks have complained they’ve had trouble getting homeowners to provide the necessary documents. Frustrated homeowners have complained of bureaucratic runarounds from their lenders. And Federal watchdog agencies have criticized the program. The final verdict is out.

“January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10% drop in January,” said James J. Saccacio, CEO of Realty Trac. “If history repeats itself, we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the loan modification program or the short sale alternatives work.”

Foreclosure activity decreased by double-digit percentages from the previous month in both California and Florida, and the two states registered nearly identical foreclosure rates — one in every 187 housing units receiving a foreclosure filing.

Other states with foreclosure rates among the nation’s highest were Idaho, Michigan, Illinois, Oregon, and Georgia.

Whether banks can and will pursue judgments depends on many factors, including what state the borrower lives in and whether there’s a second mortgage or other liens on the property.

Some states, such as California, are non-recourse and don’t allow deficiency judgments. But even in these states, if the original loan was refinanced, some or all of it may be subject to deficiency claims.

Deficiency judgments on Short Sales can happen anywahere. In these cases, extinguishing the debt is often a matter of negotiating with the bank. You must ask for a written release of all debt, or you can still be liable for a judgment to be filed against you.

A real estate attorney in Florida sums it up: “People shouldn’t have a false sense of security that a deficiency judgment may not be later sought.” It’s a ticking time bomb.

If you are a homeowner in Cardiff, Encinintas, or Carlsbad and have received a Notice of Default on your property, you need to know about these new HAFA guidelines.

The HAFA program streamlines the short sale process:

• If you have already filed financial information for a loan modification, you do not need to file it again if you are applying for a short sale.
• You can receive pre-approved short sasle terms before you list your property.
• You should be fully released from future liability for the debt by the lender.
• You will receive $1500 for relocation after the short sale.

The HAFA program is scheduled to begin on April 5, 2010, but servicers may choose to implement it earlier. The HAFA program only applies to non-Fannie Me of Freddie Mac loans up to $729,750.

But buyers need to educate themselves about the potential pitfalls of buying a foreclosed property. Buyers should go into the transaction with a certified inspector and may need to hire the services of other professionals such as a mold inspector.

Here are some issues to watch out for:

• If the seller has removed fixtures, make sure they’ve been property removed and not ripped from floors and walls.
• Peeling or bubbling paint, swelling in walls or ceilings, or a musty odor may indicate water damage and possible mold.
• Fungus growth inside cabinets and behind drawers and built-ins may also indicate water damage and potential mold.
• Black cobwebs, gray residue on walls, or a strong oily odor may point to a malfunctioning furnace.
• Check the air quality in the property. The air quality in a home may tell you a lot about the home’s condition.

If the seller’s agent who represents the bank tells you that that damage has been repaired, ask for an explanation. Also, check out the company that performed the repairs to ensure it has industry-recommended certification.

Buying a foreclosed property can be a “good deal” and a “good value.” Just take the proper steps to insure that there aren’t any hidden problems.

As reported in today’s Washington Post, this program, for eligible people whose loans are held by Fannie Mae or Freddie Mac, has only reached 130,000 out of the potential 5,000,000 borrowers. This initiative is separate from the loan modification program. A government spokesperson says they hope the program will begin to move faster in the future.

So-called loan modification consultants — often attorneys, mortgage bankers, or real estate agents — often ask for up-front fees ranging from $1500 to $3000 from troubled homeowners to help them reduce their mortgage payments. These consultants promise to negotiate with the lenders to work towards a loan modification. Meanwhile, these services are provided to free for federally approved nonprofits, such as NeighborWorks.

Besides paying up-front money, troubled homeowners also lose valuable time which could be better spent with free nonprofit agencies.

“California Atty. Genl. Jerry Brown’s office has reported receiving more than 2,500 complaints against loan modification consultants and businesses through Oct. 14th of this year, up from 163 in all of 2008,” the newspaper reports.

Eileen Fitzgerald, from NeighborWorks, says that these frauds often target Seniors, Latinos, African Americans, and Asian Americans.

For the first three weeks of November, community organizers and volunteers with NeighborWorks and its local affiliate, Los Angeles Neighborhood Housing Services, will be distributing marketing materials to warn people about loan modification fraud.

Now these consultants aren’t so sure that the banks want to avoid foreclosure. Homeowners start down a difficult road towards loan modification and are met with indifference and incompetence at the bank.

In March, the Treasury Department did begin a loan modification program to encourage loan servicers to modify troubled loans to prevent foreclosures. But the process has proved very slow and frustrating, and foreclosures continue.

According to a new report by the National Consumer Law Center, it’s no mystery why loan servicers are dragging their feet on loan modifications. The report suggests that these companies actually stand to make money if the troubled property goes to foreclosure.

In almost every case, the loan servicer doesn’t own the loan. It’s simply a company — usually a bank — hired to collect the money from the homeowner and deliver the funds to the investors who own the mortgage. The investors lose money if the property goes to foreclosure, but the servicer doesn’t. And homeowners seeking to save their homes by modifying unaffordable loans typically deal with these servicers.

“Loan modifications inevitably cost the servicer something,” the report says. “A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified, and no penaly, but potential profit, if the home is foreclosed.

This report certainly poses a dilemma to the homeowner appplying for a loan modification. If you are one of these homeowners, be sure you are working with a qualified professional who can guid you through the loan modification process.

This bill prohibits sellers of so-called REO properties — typically properties owned by banks — from requiuring the buyer to use a particular title company, escrow company, or other real estate service provider. This unethical, anti-competitive practice drives up costs for homebuyers and takes business away from locally owned companies.

The bill requires that REO sellers provide a disclosure notice to buyers informing them of their rights to choose their own title, escrow, and other real estate services. Sellers who violate the privisions of this bill are busject to enforcement action by state regulators and liable to buyers for civil penalties.

If you are like many other homeowners,you have started to work with the bank, either by yourself or through a 3rd party, to try to get the bank to agree to a modification of your current loan. But it’s taking forever, and it’s very difficult to get any response from the bank.

Suddenly, you receive a Notice of a Trustee Sale on your home, and you still don’t know if your Loan Modification is going through. What should you do?

The first thing you should do is to call your contact at the bank and ask for an extension of your Trustee Sale date. Then, you can try to push them to give you an answer on your modification. As long as your sale date is far enough out, then you’ll have time to work on your loan modification.

If they won’t extend your sale date, you may decide that it’s time to consider a short sale. In a short sale, you will still lose your house at the end, but your credit will be damaged for only two years instead of the 7-10 years of damage caused by a Foreclosure.

We can help you with this decision. Please post an answer on this blog and we are happy to discuss your situation.