Chase Opens Loan Modification Centers

Default Servicing reports today that Chase has opened several "loan modification centers across the country." Chase's website reports that these are for Chase, WaMU, and EMC customers in need. In person meeting are available. Chase's toll free number is set forth as (866) 550-5705 from 8:00 a.m. to 11:00 p.m. Monday through Friday and other hours on the weekends.

Offices in are set for Miami (South Dade) at 10301 S. Dixie Highway (Tel. 305 669-8025) and in Aventura (North Dade) at 20803 Biscayne Blvd. (Tel. 305 682-3018). Other offices in Florida are set for Orlando, Tampa, and Ft. Myers.

The website indicates that a homeowner should prepare by gathering

• loan number
• two recent pay stubs (self-employed persons should provide 4 months of bank statements and the most recent tax return and income statements for corporations/LLCs)
• hardship letter
• monthly budget outlined

Chase indicates that the information will be reviewed and sometimes further information as to an appraisal or mortgage insurance pursued. After a review, Chase will send a letter to advise if a person qualifies for any loan modification and its terms.

A video presentation by JPMorgan Chase's President/CEO Jamie Dimon before the U.S. Chamber of Chamber is available.

Connecting the Dots - AIG's United Guaranty Mortgage Co., Countrywide, and Pool Insurance

An AIG unit - United Guaranty Mortgage Indemnity Co.., which is based in Greensboro, North Carolina, filed a suit in federal court in Los Angeles in case number 09-1888 (another suit was apparently also filed ins California state court per Reuters) , against Countrywide Financial Corp. alleging misrepresentation as to $1 billion of mortgage loans upon which it issued mortgage insurance. The Bank of New York Trust Co. (part of Bank of New York Mellon Corp.) , a trustee for the mortgage-backed securities issued by Countrywide was also named as a defendant. The media styles this a paradoxical situation in which two bailed out entities are suing each other - "two kingpins of the crisis are now suing each other for misrepresentations" according to Paul Kedrosky. AIG/United Guaranty Corporation is partially owned by (80%) and was bailed out ($173 billion) by the federal government and Countrywide and Bank of America were also bailed out by the federal government. The complaint alleges that Countrywide misrepresented the underwriting standards upon which it obtained private mortgage insurance from United Guaranty Mortgage. The allegations include assertions that mortgages were underwritten in violation of Countrywide's own guidelines, were missing documents, misrepresented credit scores or contained false social security numbers.

According to Reuters, the involved mortgage insurance was purchased by Countrywide "to increase the credit ratings of its mortgage-backed securities offerings" ("pool insurance") as distinct from "private mortgage insurance." Apparently United Guaranty faces huges losses due to the downturn in real estate and is seeking to deny coverage on assertions of Countrywide misconduct.

The United Guaranty Corporation is in the business of issuing "private mortgage insurance." United Guaranty's website explains that private mortgage insurance "protects lenders against increased risk of borrower default related to high loan-to-value (LTV) mortgages" and that it "lets you [mortgage companies] lend more money to more people and sell those loans more easily in secondary markets" and that "your customers can get the home they want, with as little as zero down" and so that "new homeowners can reasonably count on an equity line of credit later for home improvement, unexpected expenses, education, or other purchases." United Guaranty also explains that "mortgage insurance is a partnership - a cooperative arrangement between the mortgage and insurance industries - that enable the largest, most diverse population possible to obtain a mortgage and realize the dream of home ownership." There are two types of "private mortgage insurance" - "borrower-paid" and "lender paid." The amount of the premium is dependent on the nature of the mortgage loan as fixed or adjustable, the loan to value ratio, coverage, and exposure. The rates appear to range from about .24% to 1.25%.

United Guaranty also provides "pool insurance" for mortgage-backed securities. Fannie Mae and Freddie Mac purchase mortgage loans in the secondary market and set there own guidelines. Loans within these guidelines are called "conforming" and those that do not are called "nonconforming or jumbo loans." As nonconforming or jumbo loans are "considered more risky" they are sold to "someone other than Fannie Mae or Freddie Mac" -- "Wall Street firms, private conduits, and other issuers of jumbo mortgage-backed securities - in other words, the 'private-label marketplace.'" United Guaranty explains that "when these large loans are packaged together, pool insurance comes into play." United Guaranty further explains that "with pool insurance, the loans are more attractive to the investors in the secondary market, where mortgages are bought from lenders. Also called a form of credit enhancement, pool insurance protects the purchasers of these jumbo loans against borrower default."


United Guaranty's website explains that "Coverage" is "the portion of the mortgage risk assumed by the mortgage insurance company." "Delegated Mortgage Insurance" is "an agreement between a mortgage lender and mortgage insurer to forgo mortgage loan underwriting by the mortgage insurer and to assign MI [mortgage insurance] coverage based on the lender's underwriting acceptance of the loan." A "Master Policy" is an agreement whereby "instead of each loan receiving an individual policy, the mortgages are insured under the lenders' master policy, then a commitment and certificate of insurance are issued for each individual loan." "Loss Mitigation" "involves step to decrease the amount of a [mortgage default or foreclosure] claim, through (1) bringing the homeowner up to date in the payments (and avoiding foreclosure), (2) taking title to the property and maximizing the final sales price, or (3) other means."

Aig/United Guaranty issued its "declining market list and policy changes" effective January 30, 2009. The new "market classifications" are "moderately", "standard" and "severely." The entire states of Florida, Arizona, California, Michigan, and Nevada "are considered to be Severely Declining Market States." Apparently the "additional underwriting restrictions" for "severely" declining markets includes:

• minimum 720 credit score


• maximum loan amount of $417,000.


• maximum debt to income ratios (DTI) of 45% for certain borrowers

Pursuant to the website, in Florida, certain housing is "ineligible" such as "condos, co-ops, townhomes, etc."

IndyMac Federal Bank FSB acquired by OneWest Bank, FSB

The FDIC announced today that it has completed the sale of IndyMac Federal Bank, FSB to OneWest Bank, FSB which is a newly formed federal savings bank organized by IMB HoldCo LLC. All deposits of IndyMac Federal Bank, FSB were transferred to OneWest Bank, FSB.

On July 11, 2008, IndyMac Bank, FSB (prior to the establishment of IndyMac Federal Bank, FSB) was closed by the Office of Thrift Supervision ("OTS") and the FDIC was named Conservator. "All non-brokered insured deposit accounts and substantially all of the assets of IndyMac Bank, FSB" were transferred to the newly created IndyMac Federal Bank, FSB" as the "assuming institution."

The FDIC further announced thath it entered into a "loss share transaction on the single family residential portfolio" and that pursuant to the agreement, OneWest will "continue the FDIC's existing loan modification program."

A "loss share" agreement typically provides that nonperforming assets are managed and collected by an acquiring bank and the FDIC agrees to absorb a significant portion of the loss - "typically 80 percent" as well as further loss protection.

IndyMac Mortgage Services mortgage modification - download financial packet.

Mortgage Terms in the Post-Bubble Era

Automated Valuation Model ("AVM") - a method of using mathematical modeling and databases to obtain property valuations. A servicer under the new guidelines of the U.S. Treasury Department's "Making Home Affordable Program" may use a Fannie Mae or Freddie Mac's or its own internal AVM among other methods for rendering a valuation.

Credit-Default Swap - an insurance-like policy against default.

Counterparty - the party on the other side of a financial transaction.

Debt to Income ("DTI") - the percentage of a person's gross monthly income that goes to paying certain debt.

Government Sponsored Entity ("GSE") - a type of quasi-governmental organization, such as Fannie Mae or Freddie Mac, that falls in between the categories of the private sector and governmental entities. Congress defined the term GSE in the Omnibus Reconciliation Act of 1990.

Median Family Income ("MFI") - used by HUD program as basis for income limits in various HUD programs.

Troubled Asset Relief Program ("TARP") - a federal program including efforts to purchase assets or equity from financial institutions to strengthen the financial sector.

Mortgage Refinancing and Modification (Non-Bankruptcy) - President Obama's "Making Home Affordable Program"

Updated information for homeowners is available on President Obama's "Making Home Affordable Program" including refinancing and modification options. Fannie Mae and Freddie Mac have also released further information. The following summary of the information would appear to reflect some of the features of the programs, but further inquiry should be made directly with these federal websites as well as with the appropriate mortgage servicer, lender, or governmental agencies.

Refinancing - Fannie Mae/Freddie Mac Owned or Controlled Mortgages

Homeowners (owner-occupants, 1 to 4 unit property) may be eligible for refinancing. Under this program Fannie Mae and Freddie Mac may refinance certain mortgages loans that they own or control.

Eligibility Criteria:

• Borrower current on mortgage (or not more than 30-days late during the last 12 months)
• Balance owed on first mortgage is about equal (up to 105%) to the current value of the home (value determined after application)(agreement of any second mortgage holder may be required)
  
• Homeowner has stable income to support the new mortgage payment

Refinancing Terms:

• Interest rate per market rate (may vary by lender and over time)
• 30 to 15 year fixed rate loans
• No prepayment penalty
• No balloon
  
• No reduction in principal amount
• Transaction costs, such as appraisal or title report may be included in refinancing
  

Application Process:

• Apply through mortgage servicer or lender
  
• Determine Fannie Mae/Freddie Mac Ownership or Control per inquiry with mortgage servicer or confirmation with Fannie Mae (800) 7FANNIE or Freddie Mac (800) FREDDIE
• Gather paycheck stubs, recent tax return, information on second mortgage, information on monthly payments for credit cards, student loans, and car loans
  
• Streamlined processing by lenders/brokers using Fannie Mae platform
• Fannie Mae "expanded refinance flexibility ends in June 2010"
  

Modification - "Most Conventional Mortgages" (Excluding Second Mortgages)

Homeowners (owner-occupants, 1 to 4 unit property) who are already behind or are struggling with a mortgage may be eligible for modification.

Eligibility Criteria::

• May be current, delinquent or struggling with present mortgage
  
• Unpaid principal balance is equal to/less than $729,750.00 (higher for 2 -4 unit property)
• Loan originated before 1/1/09
• Present mortgage payment (including taxes/insurance/association dues) is more than 31% of gross (pre-tax) monthly income
• Present mortgage payment no longer affordable
  

Eligible Mortgages:

Include "most conventional loans" (except second mortgages) held by private lenders or owned or controlled by Fannie Mae or Freddie Mac or held by a mortgage backed security including

• prime mortgages
  
• subprime mortgages
  
• adjustable mortgages
• FHA, VA, and USDA mortgage not yet eligible (but may be soon, but presently may be modifiable under other programs)
  

Other aspects of the modification program are:

• Participating servicers/mortgage holders to be posted at www.financial stability.gov
• Patience requested as Treasury just published program requirements on 3/4/09
• Mortgage servicer to evaluate eligibility if behind more than two or more payments
  
• Mortgage servicer participation is voluntary, but there are incentives to servicer
• No cost to borrower for "Home Affordable Modification"
• No charge for assistance from HUD-approved housing counseling agency (888) 995-HOPE
  
• HUD-approved housing counseling required if mortgage payment as modified together with second mortgage, car loan, credit car, and child support exceed 55% of gross monthly income
• Servicer to determine if cost of modification (including government incentive) less costly than foreclosure
  

Modification Terms (to Payment of 31% of Gross Monthly Income):

• Trial modification - 3 months at new rate as low as 2% to reach payment of 31% of gross monthly income
• Permanent modification thereafter if current after 3 months
• If modified interest rate is below market rate -fixed for first 5 years and then may increase not more than 1% per year until reaches cap based on prevailing interest rate as of date of modification
• If modified interest rate is at or above market rate, modified rate is fixed for life of loan
• Modification payment to include escrow for taxes and insurance
• Successful borrowers on modified mortgage may receive success incentive by U.S. Treasury over 5 years up to $5,000.00

Other Types of Modification May Be Considered by Servicer: (If a 2% interest rate will not result in an affordable payments of 31% of gross monthly income):

• Extension of mortgage term up to 40 years
• Deferring of payment on portion of amount with later balloon payment ("principal forbearance")
• Forgiveness of portion of debt may be done but is not required ("principal forgiveness")
  

Borrower Q&A's is also set forth regarding refinancing and modification.

The federal government's "Homeowner's HOPE Hotline" is (888) 995-HOPE.

House of Representatives Passes H.R. 1106

The U.S. House of Representatives today voted to pass H.R. 1106, the "Helping Families Save Their Homes Act of 2009" by a vote of 234 to 191. This bill allows Bankruptcy Judges to modify principal residence mortgages in certain respects under certain circumstances.

A companion bill will next need to be considered and approved by the Senate. Any differences in a Senate approved bill will need to be reconciled between the House and the Senate in a conference committee.

U.S. Treasury Deptment Announces Mortgage Modification Guidelines

The Treasury Department today announced new guidelines "to begin modifications of eligible mortgages under the Administration's Homeowner Affordability and Stability Plan." The press release states that the "guidelines will implements financial incentives for mortgage lenders to modify existing first mortgages and set standard industry practice for modifications." A summary of the guidelines was also released by the Treasury Department.

Further information including as to eligibility for refinancing or modification is available at http://www.financialstability.gov/makinghomeaffordable/.

House Democrats Reportedly Reach Agreement on H.R. 1106, House Rules Committee Set to Reconvene Tomorrow

The Washington Post reports the House Democrats have reached on agreement on H.R. 1106, the "Helping Families Save Their Homes Act of 2009" with changes to "narrow" some of the bill's provisons.

H.R. 1106 has apparently been sent back to the House of Representative's Rule Committee which is reconvene on the bill tomorrow March 4 at 2:00 p.m. Congressman John Conyers, Jr. (D. Mich.) offered a "proposed revision to Amendment #1 printed in House Report 111-21."

The House of Representative meeting as a "Committee of the Whole House on the state of the Union" considered H.R. 1106 on February 26, 2009, but left is as "unfinished business."

Provisions in the proposed revisions include a new defined term "qualified loan modification" (as section 101 (43A)) and a change in the "clawback" for the mortgage holder on a subsequent sale at an appreciation to 90% for the first year, 70% for the second year, 50% for the third year, 30% for the fourth year and 10% for the fifth year. The clawback would give the mortgage holder a share of the increase in value for five years. "Lack of good faith" would exist if the debtor "can pay all of his or her debts and any future payment increases ...without difficulty for the foreseeable future, including positive amortization of mortgage debt." There is also a provision providing for a reduction in mortgage interest rate to achieve an affordable monthly payment as a percentage of monthly income as an apparent second choice in addition to mortgage principal reduction.

House Majority Leader Reports Agreement Likely on Bankruptcy Mortgage Modification

Bloomberg and the Wall Street Journal report today that House Majority Leader Steny Hoyer (D. Md.) states that a compromise agreement may be reached today on the bankruptcy mortgage modification proposals pending in Congress in H.R. 1106. Bloomberg also reports the House of Representatives may vote as early as Thursday on the bill. The bill provides that Bankruptcy Judges may modify mortgages on principal residences under certain circumstances.

Talk to Your Congressmen about H.R. 1106

NACBA (The National Association of Consumer Bankruptcy Attorneys) has set up a toll free number to enable the public to speak to their Congressmen about the proposed bill H.R. 1106, which would authorize judicial modification of residential mortgages in Chapter 13 bankruptcy. The vote on H.R. 1106 was postponed until later this week.

By calling 1-877-354-4958 between 9 a.m. and 6 p.m. (Eastern Standard Time) you will be routed to the office of your Congressman, Senator, or the White House.