The phrase “Delinquent Mortgage,” once a foreign concept for many Americans, has now become part of our everyday vernacular. When nearly 4 million homeowners are currently 60 or more days behind on their mortgages, it is actually no surprise that citizens nationwide are buzzing about the housing crisis. That crisis is worse here in Las Vegas than it is in many other areas of the country and Las Vegas citizens are certainly feeling the economic pinch.
More than 60 percent of homeowners nationwide who have seriously delinquent loans are still not involved in any form of loss mitigation with their lenders, probably due to the frustration with the processes available. In fact, a recent performance report indicates that nearly half of the property owners approved for trial loan modifications have fallen out of the program. By the end of July 2010, approximately 616,839 out of the total of 1,307,489 HAMP three-month trial plans have been cancelled since the program began. This tremendous dropout rate may be due to the lengthy process of obtaining a permanent modification. For instance, as a result of the backlog, only 36,695 HAMP restructurings were converted to permanent status during the month of July.
For those who are already involved in loan modifications or short sales, the process may soon become even more difficult and time consuming as Fannie Mae and Freddie Mac have become more aggressive in forcing originating lenders to buy back bad loans. A report by Fitch Ratings illustrates that, in a worst-case scenario, the buybacks may result in a combined loss of between $17 billion and $42 billion for the nation’s four largest banks – Bank of America, JPMorgan Chase, Wells Fargo, and Citi. Considering these numbers, it is safe to assume that the process will become even more tedious.
Despite homeowners’ understandable frustrations with the short sale and loan modification processes, these avenues may preserve some homeowners’ rights down the road. For example, if a lender tries to pursue a deficiency judgment following a foreclosure, the homeowner has the ability to demonstrate efforts to work with the lender to mitigate losses. It is hopeful that the courts will not turn a blind eye to these whole-hearted attempts. As such, underwater homeowners should become informed, seek assistance from a legitimate source, and do their best to stay patient.
Kelle L. Kuebler, Attorney*
*Licensed only in New York and Connecticut