NJ- Still Significant Foreclosure Activity

Posted by kevin on July 25, 2017 under Foreclosure Blog | Be the First to Comment

NJ had 35,000 foreclosures filed in 2016. That is about one half the amount of annual foreclosure actions filed at the height of the mortgage crisis, but it is still significantly higher than the 20,253 foreclosures filed in 2005. And, at the time, 2005 was a record year.

Bankrate lists New Jersey as the worst state when it comes to foreclosures. Statewide the rate of foreclosure is one unit in 515. The national average is one unit in 1636.

There are a myriad of reasons for this dubious honor, but that is not the point of this blog. Readers should be aware that New Jersey still has a foreclosure problem. Individual home owners should be aware that there are steps to be taken if you fall behind on your mortgage.

The first thing that you should do if you are delinquent is not to bury your head in the sand, or hope that things will work out. If you take that approach, I assure you that things will not work out.

There are many factors which go into an analysis of a foreclosure situation. How much is the mortgage? How much is the property currently worth? Is it a single family residence or rental property? If rental, is it rented and for how much? What is your income? What is the monthly principal, interest, taxes and insurance (PITI)? Is the loan interest fixed or variable and what is the current rate? Is there a second mortgage? What other debts do you have? What loan documents do you have? Were you represented by an attorney in the loan transaction? And probably, the most basic factor is what is it you want to accomplish?

Once your situation is analyzed, you can start to put together a strategy. Maybe, you do not want to keep your home that is grossly “underwater”. In that case, a short sale may be an appropriate strategy. Maybe, you are only a few months behind and have significant credit card debt and doctor’s bills. In that case, a Chapter 7 or Chapter 13 bankruptcy may be an appropriate strategy. Maybe you were put into a loan that you could not afford. In that case, litigation (that is, fighting the foreclosure in court) may be the answer. Maybe you could benefit from a modification. Even though the federal HAMP program was phased out as of December 31, 2016, Fannie Mae and Freddie Mac have their own programs which could significantly lower your monthly payment. Moreover, private lenders have what are called “proprietary” mortgage modification programs which may be helpful.

As you can see, there are options available. Moreover, you are not limited to one option. I have had clients who fight the foreclosure in State court and then seek a modification, or a Chapter 13. Others seek a modification and then file Chapter 13, or seek a modification while in Chapter 13.

The key is, seek help early in the process. Even the most experienced foreclosure/bankruptcy attorney may not be able to help you if you call and say, ‘I have a sheriff sale tomorrow. Can you help?’

Mortgage Modifications- Where Are We?

Posted by kevin on July 16, 2017 under Foreclosure Blog | Be the First to Comment

The Making Homes Affordable HAMP mortgage modification program expired on December 31, 2016. If you filed for modification before that date, you application will be considered until December 31, 2017. However, no new applications under HAMP after December 31, 2016. So, where are we at?

Well, the GSE’s (Fannie Mae, Freddie Mac) still have programs and most, if not all, servicers and lenders have their in-house programs.

For example, in December, 2016, Fannie Mae announced its new Flex program which combines features of the Fannie Mae HAMP, Standard and Streamlined modification programs. As with the prior programs, your loan has to be held by Fannie Mae in its own portfolio or sold to investors by Fannie Mae. Servicers can begin implementing the new program as early as March 1, 2017 but must implement the program no later than October 1, 2017. Borrowers who are delinquent or in imminent danger of default qualify. If the borrower is less than 90 days delinquent, PITIA (principal, interest, taxes, insurance, and HOA assessment) is based on 40% of gross income and the reduction in payment must be at least 20% of what the borrower had been previously paying. If more than 90 days delinquent, then the servicer considers only a 20% reduction. The program utilizes waterfalls similar to previous programs and does allow principal forbearance in certain situations. Although geared to primary residences, investment properties and vacation homes can be eligible if the loan is at least 60 days delinquent.

In-house programs exist just as before. They are sometimes called proprietary programs. I have dealt with so-called proprietary programs since 2012. The biggest problem is that the servicer does not publish the program guidelines so you are getting basically a pig in a poke. However, for the most part, the proprietary programs are similar to the HAMP programs in that the servicer will target PITIA payments at a percentage of income. Normally, the target is in the 30-40% of gross income range, but I did have a case with Bank of the West where they targeted PITIA at 50% of gross income. There are waterfalls to get to the target as with the HAMP loans. The biggest difference is that few proprietary modifications will take the loan out to 480 months from filing of the modification application. The worst case scenario is that the modification term is limited to the remaining term of the loan.

There is still a brisk market for mortgage modifications on their own, in conjunction with a foreclosure or in conjunction with Chapter 13 bankruptcy. Since the Dodd Frank modification rules kicked in in 2014, a foreclosing lender cannot start a foreclosure unless it has made a decision of a pending mortgage modification application. If the foreclosure has been filed, and the borrower files a complete mortgage modification application within 37 business days before the sales date, a lender is precluded from going to sheriff sale until it makes a decision on the modification application. That is Dodd Frank. Many servicers will put off the sale if the application is filed less than 37 business days of the sale. I have had situations where the servicer has put off the sale when the application was filed 10 business days before the sale, and I have also had situations where decisions, for whatever reason, have not been made for well over a year after the application is submitted.

So, if you are behind on your mortgage but have a job, you can still qualify for a mortgage modification. It would pay to look into that option.