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Foreclosure: The Stop California Home Loss Blog

Are you at risk for foreclosure in the state of California? Proper-t-Solutions' presents Foreclosure: The Stop California Home Loss Blog. This blog is the homeowner's guide to determining your options when at risk for foreclosure. Read our articles, leave your comments and let's beat foreclosure and stop California home loss.


Loan Modifications California Advertisements Are Misleading

We all watched the economy and real estate prices fall in 2007, and how it lead to the boom in loan modifications (California).  Rapid price drops occurred because payments increased on a countless number of variable rate mortgages, causing them to become unaffordable for the homeowners.  Mortgage funds were drying-up in response to world economic issues caused by the real estate bubble and foreign trade deficits.

Loan modifications in California became an overnight sensation.  Attorneys and other real estate professionals began advertising (and exaggerating) about all of the instant benefits of this obscure program.  The advertisements didn’t tell us that the potential benefits were only partially true, and that your results may differ. As a result, the problems homeowners were facing merely got delayed, and sometimes got worse. 

According to the advertisements, late fees, back-interest, and penalties would be waived.  The principal balance and interest rates would be reduced.  Loan modification California was being advertised as "the" solution in cases where the mortgage balance exceed the property value; while theoretically possible, this is a rare occurrence at best.  Banks have have not signalled any willingness to so easily accept these losses from reduced principal balances.

After more than two years of negotiating with lenders, the performance of nearly all loan modification companies has been dismal compared to the expectations that were created by the advertisements.  Most homeowners found themselves in a losing battle with their lenders.  

According to a study conducted by a reputable legal publication, for the "lucky" few actually receiving loan modifications, the monthly payments increased 34% of the time, and more than half of homeowners re-defaulted within nine months. The banks were adding late fees, interest, and penalties onto the principal balance and amortizing the payments over 40 years. 

In addition, the amount of fees that were being added were excessive in many cases.  Earlier this month, the Federal Trade Commission ordered Bank of America to pay a settlement of $108 million because two of its loan servicing companies were caught charging excessive fees that could not be substantiated.

Banks are continuing to show their greed (and short-sightedness), and no apparent morality :

  • It has been clearly documented that banks created the real estate crisis (it was not the homeowners) by offering the cheap loans with low rates and easy qualifying.  These readily available funds caused real estate prices to grow as rapidly as they did.
  • The banks accepted federal bailout funds, but have not approved many loan modifications.  Most were denied based on various technicalities.  Roughly 90% of the total applications are unresolved and will need some solution for their financing issues. 
  • Many believe that banks were disingenuous because they granted "temporary" modifications under the condition that homeowners resume the monthly payments.  "Temporary" modifications were even granted to homeowners that could clearly not afford the properties. With the very low approval rates, it appears that their true intent was to deny permanent loan modification while collecting the monthly payments from the homeowners in California and other distressed states.
  • Banks show no remorse for charging their excessive fees from the people who could least afford it.
  • Homeowners are steadily losing their homes, but because they are making payments they cannot afford, and their saving are being depleting.  The only logical conclusion is that these homeowners will be facing a bankruptcy in addition to a foreclosure!

Where are the real benefits of loan modification California? 

Recommendation - Reassess Your Options

My recommendation is that homeowners should reassess their options and identify the best potential alternatives for their individual situations. Perhaps the loan modification can still be pursued, or perhaps a short sale or other remedy should be considered if you find you cannot afford the property. 



Loan Modification California -- Home Affordable Modification Program (HAMP)

The Home Affordable Modification Program (HAMP) is a federal program that was created to promote loan modifications California and in other states that have high numbers of distressed properties.  The intent of the program is to help minimize the number of foreclosures and reduce the losses that the lenders and the federal government would incur.  Regrettably, the program is not achieving its goals.

Greedy Banks Not Approving Loan Modifications-California

Banks receiving the bailout funds are required to participate in this program.  However, it appears that lenders are attempting to benefit from the stimulus funds, and at the same time, minimize the losses that they might otherwise absorb if they were to grant more permanent loan modifications in California and the other distressed states.

 As of December of 2009, only 2,000 homeowners (less than 1%) have been granted a permanent loan modifications from over 650,000 total applicants. Presently, indicators show that the approval rates have improved somewhat, but are still at unacceptable levels.

The applicants were placed in trial modifications, which required them to make their monthly payments.  The vast majority have never receiving final approval.  As a result, many homeowners were becoming increasingly agitated by the banks because their saving were being eaten-up by the payments.   Eventually, many homeowners were cut from the program on technicalities without ever receiving approval.

This program is seen by most as a complete failure.  The only winners are the banks who seemingly deceived the homeowners to get the extra payments from them.

Lender Coersion With Campaigns of Guilt and Fear

A prominent law school published a study indicating that lenders are engaging in a campaign of guilt and fear to coerce families into continuing or resuming their monthly payments.

  • The lenders are not willing to accept the financial losses that would result from permanent modification, despite having received federal bailout monies. 
  • Some lenders have implemented strategies to increase the penalty and fee revenues from non-performing loans.
  • For homeowners that clearly cannot afford their loans, it appears evident that many lenders are attempting to get as much money from the applicants as possible before foreclosing.  This approach also keeps the property occupied (reducing vandalism), and yields some revenue for the lenders.

What the Obama administration is quickly learning is that the federal government cannot easily legislate loan modification laws and regulations that modify contractual agreements in the private sector.  The banks are playing hardball with the homeowners (and the federal government). In the final analysis, lenders are operating for a profit and will use or circumvent loan modification laws California and HAMP to their financial advantage. 



California Mortgage Foreclosure Laws Get Help From FTC

The California mortgage foreclosure laws got a bit of help from the Federal Trade Commission (FTC) on Monday when it ordered two of Countrywide’s mortgage servicing companies, who are now part of Bank of America Home Loans, to pay $108 million in settlement charges to their borrowers.  This payment is the result of Countrywide charging excessive fees from cash-strapped borrowers who were struggling to keep their homes. This is one of the largest judgments ever imposed in an FTC case.  In a released statement, the FTC said the $108 million settlement will reimburse overcharged homeowners whose loans were serviced by Countrywide.  According to the FTC, Countrywide used unlawful practices in servicing homeowners’ mortgages, violating Federal and California mortgage foreclosure laws.  The California mortgage foreclosure laws work in tandem with Federal laws, and in this case, Californian borrowers got some needed assistance from the FTC.

California Mortgage Foreclosure Law Violations 

Countrywide has allegedly been charging excessive fees for default-related services which are heavily concentrated in California.  Countrywide was accused of making false claims about the amounts owed by homeowners in bankruptcy, using amounts that couldn’t be backed up.  Countrywide also allegedly didn’t tell people going through bankruptcy when new fees or charges were being added to their loans. 

New Precedent Established For California Mortgage Foreclosure Laws 

Going forward, borrowers in Chapter 13 bankruptcy must be sent a monthly notice with information about the amounts that are owed – including any fees assessed during the prior month.  Additionally, Countrywide must ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy.  These requirements set precedent, having the effect of supplementing California mortgage foreclosure laws.

Clearly, Bank of America (Countrywide) got caught, which is why they agreed to this settlement.  It goes to show that, for the lenders, it is all about the money and their concern for the customer is secondary at best.  Some lenders will do whatever they need to do to squeeze out more profits without concern for how it affects their customers. 

In separate reports, it has been clearly documented how lenders are using a campaign of fear and guilt to keep homeowners paying their mortgages, even when the lender knows that the homeowners cannot afford the payments. 

This is a strategy to bleed the homeowners dry.  When the homeowners are completely depleted of their funds, the lender forecloses.  This is a strategy that maximizes the lenders’ income, but shows zero concern for the welfare of the homeowners.

 Clearly, this strategy does not benefit homeowners.  It would be better if homeowners got assistance earlier in the process to make an objective assessment of their situation.  If they can afford or almost afford the property, a work-out plan (loan modification) with the lender should be pursued.  If they cannot afford the property or have negative equity, then it is usually better to keep what’s left of their savings and credit rating, and develop a plan to get rid of the property. 

It is imperative that the homeowners find someone who can assist them during this process to ensure the best possible outcome is identified and implemented.


California's Foreclosure Alternatives Review Process

Defaulting on one’s loan causes the start of foreclosure process in California, the process by which the lender takes over the home in order to recover their principal investment.  The primary foreclosure process used in California is the non-judicial foreclosure process.  Fortunately, lenders want your money and the interest that comes with it, not your house. But if the lender chooses to take your house, the California non-judicial foreclosure process is used in most cases because it is faster and less costly (for them) than the judicial foreclosure process. 

This California non-judicial foreclosure process kicks hundreds of homeowners to the curb every day.  A non-judicial foreclosure typically takes as little as 120 days from the day that the NOD (notice of default) is recorded.  The non-judicial foreclosure process in California is adminstered by the lender's attorneys, and they rarely make mistakes that would prevent them from taking your home once they make the decision to do so.

Foreclosure Alternatives Review Process

Homeowners who are overdue on their monthly mortgage will be contacted by the lender to identify alternatives to the foreclosure process in California.  Homeowners might not be provided with the options they want or that make sense, however.  For example, payment plans offered might actually be higher than the original monthly payments that were missed.  To make matters worse, often lenders will not make their best possible offer, and are reluctant to make any other concession to the homeowner if it has a cost for the lender.  This process can be especially unpleasant for homeowners who have borderline affordability issues. 

After the lender’s review is completed, the foreclosure process in California authorizes the lender to file the notice of default and begin the official “foreclosure”.

It is recommended that homeowners find some help long before it ever gets to this stage in the process.  Fortunately, good help is out there, and it is often available for free.


California Mortgage Foreclosure Laws – Deed Transfer

Under California mortgage foreclosure laws(Civil Code 2924 h), after the Trustees Sale, the final step in the California foreclosure process is the transfer of the trustee’s deed. The trustee’s deed transfers property to the winning bidder. By default, this will be the lender if no bid higher than the lender's opening bid is received.

At this point, it is too late for the borrower to recover ownership of the property under the California mortgage foreclosure laws. However, if fraud or other identifiable procedural error can be proven then the foreclosure may be overturned if lawsuits are filed.

Once the deed has been transferred under California Mortgage Foreclosure Laws, the property is lost and the owner's credit rating will suffer. 

However, this should be a "worst case scenario" and considered only after the other options are looked at, and ruled out. Property owners who seek assistance from someone who is well versed with the California Mortgage Foreclosure process can usually avoid the Foreclosure process. 

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