Loanmod Approval

Homeowners in California and in a handful of other states could be injected with some much needed help from the Obama Administration. Recently President Obama announced a $1.5B program to help stop the foreclosure bleeding in some of the hardest hit states in the nation. My initial thought when I first saw the headline for this article was…more money for the banks! On the contrary, this looks more like a bailout for the borrowers. Read more…

President Obama didn’t give any details as to how the funds will be applied. Except that the money is to help those that have lost their jobs, owe more than their houses are worth or cannot afford to make monthly payments. The objective of this plan is no different than the objectives of previous programs developed by the Government. But, we’ll have to wait and see what they come up with this time.

The housing market really hasn’t recovered after the Obama Administration introduced the MHA – Making Home Affordable Program back in the spring of 2009, the housing market in some states are still in a downward spiral. Most notably, California and Nevada. I’ve seen property values drop by as much as 50 to 70% of the original purchase price. I’ve even seen repeat customers requesting another loan modification after they have already been modified a year ago or less. I truly believe the biggest boost the government can offer homeowners in California and Nevada is a modification that will reduce the principle balance on homes that are upside down. Not only could this help stop the reduction in housing value as well as reduce foreclosures, but, this will most certainly give homeowners a huge incentive to do what is necessary to keep their home. This will give homeowners the opportunity to sell or refinance their home without negatively affect any parties involved. The banks and their investors will be more than happy to get some of these bad loans paid off and off their book while homeowners can either make money in selling or be able to afford their home for the duration of the loan.

Right now, the only bank I’ve seen proactively reduce principle balance as part of their modifications is Wachovia, which is now part of Wells Fargo. In certain cases Wachovia has reduced the principle balance by as much as 20%. Review some of the successful modifications from Wachovia. Instead of reducing the principle balance to make the payments more affordable, other banks like Chase and Bank of America are doing principle deferrment, where a portion of the principle will be deferred to the back of the loan and no interest will be charged on it. However, the deferred amount will need to be paid off upon refinancing, selling or at the maturity date.

The biggest question here is how will the Obama Administration spend the $1.5B dollars and will $1.5B be enough?

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