Loan Modification Re-Default Rates Rise to 75% including in San Diego is a post from: Troubled Property Solutions | Loan Mods | Short Sales call 1-619-631-4546

The Odds Are Stacked Against the Homeowner:

Most San Diego homeowners want to keep their home, and thus pursue a loan modification but will find it ultimately doesn’t work. 

But according to a recent report approximately 65-75%  of  borrowers who have had their mortgages modified through a government-sponsored program will redefault within 12 months.  Between 65% and 75% of loans that are modified through the Home Affordable Modification Program(HAMP) but not backed by the federal government are likely to go bad, according to the report released by Fitch Ratings, a N.Y.-based credit-rating agency. The main reason these borrowers continue to struggle is that HAMP does nothing to solve the rest of their debt problems, the report added. “Many of these borrowers still have very heavy levels of other debt,” said Diane Pendley, a Fitch managing director, “auto loans, credit cards and other expenses.

The HAMP modifications reduce housing expenses down to 31% of income but do not touch these other obligations.” Currently, according to the Fitch report, about half of prime borrowers who lose their homes now do so through foreclosure. The other 50% go through short sales, in which they sell their homes for less than what they owe the bank, or deed-in-lieu, a transaction where the bank takes back the property directly and forgives the outstanding balance (what we call the bank’s “Give Us Your House” Program). The servicers have been encouraged to rev up their short sale engines by the Treasury Department, which runs HAMP and its sister program, Home Affordable Foreclosure Alternatives (HAFA), which provides cash incentives to the parties who agree to short sales.  Now, when borrowers re-default on HAMP mods or other bank workouts, banks are much more likely to offer help to execute a short sale or deed-in-lieu.  Keep in mind that a loan mod is considered a refinance, and in California is no longer protected against the anti-deficiency judgement laws that California offers for purchase money loans.

So if you think the terms of the loan mod are not going to work out for you in San Diego or in California, consider whether you want to sign those loan mod docs and expose yourself to a deficiency judgement if you re-default.

Short Sales in San Diego Lose Banks Less Money is a post from: Troubled Property Solutions | Loan Mods | Short Sales call 1-619-631-4546

Short Sale is Better for Banks than a Foreclosure in San Diego

According to DSNews.com the Loss Severity on Short Sales are 13% Lower than REOs, including in San Diego, confirming what we have known for the last 3 years!

Over the past year, the mortgage risk analysis firm Clayton Holdings says it has witnessed an overall increase in short sale activity. Because of the growing emphasis on keeping borrowers out of foreclosure, servicers are becoming more inclined to employ alternative loss mitigation strategies. And Clayton says the added benefit to servicers is that loss severities for properties sold through short sale are 13 percent lower than loss severities for REO sales. The analysts at Clayton Holdings examined performance indicators across nine servicers’ internal proprietary short sale programs, from October 2009 to March 2010. In addition, the data showed that short sales cost bondholders about half the amount in fees and advances as REO sales, saving roughly $16,000 per sale.

Clayton says servicers with the lowest loss severities for short sales employ a variety of strategies including outsourcing, utilizing dedicated short sale teams, working directly with local broker networks, and setting list prices based on historical and geographical REO net proceeds.