Will it help?
If you are 90 or more days late on your mortgage this new “plan” is aimed at you. Typically a lender doesn’t even start the process before the loan is 90+ days delinquent.
6 large lenders are said to be on board. They will stall the foreclosure proceedings for 30 days and give you a chance to catch up, refinance, short sell or modify your loan.
Not sure about other states but here in California, the homeowner has the right to postpone the trustee sale. It’s not complicated, they just have to ask.
Did you know that? Do you think the homeowners know that?
What’s more, many times the Lender will grant them a postponement of 90 days!
Isn’t this better information that should be delivered to the homeowners instead?
Are you surprised? Ready for another bigger surprise?
The Homeowner can postpone up to three times.
For Californians, I see this as completely unnecessary and a bogus.
What do you think?
I think we’re asking the dishwasher to season the soup. You’re right on track Mike, the whole thing sounded silly when I heard the news jockey on the radio trying to explain it.
As a mortgage professional I must have a firm grip of the laws in place within my state (FL). That is top of the list this morning, something I should have known. Project Lifeline, albeit well intentioned, will probably help a paltry few avoid foreclosure. It is a drop in the bucket approach, mostly political window dressing. The next two years will likely reveal just how many it missed as foreclosures mount. Treasury Sec Paulson has already indicated that if you cannot legitimately carry the debt the program does not apply. Immediately I think of those who inappropriately utilized stated income, no ratio and no doc loans to get into the home they emotionally wanted, chucking long term economic reality out the window.
Howard -
My point isn’t that this is going miss people, but more that it’s redundant and very weak compared to what we already have in place.
Does FL have something in place already like we do here in CA?
I am embarrassed to say I don’t know, your post has provoked me into action and I will have that data at my disposal today. I do understand the CA redundancy after reading your post. I will know how this plays out in FL today.
Thanks for tweaking me into action!
Mike – First off, all I think this “lifeline” will do is give those who want to walk away another 30+ days to stay in their home. I do not see it doing much for homeowners, except delaying the inevitable.
As for FL law, I am not a lawyer, but I have been informed that Florida has homeowner favorable laws. I do know that the foreclosure process in Florida takes the longest to complete of all the states (up to 6 months or more in many cases). As for the details of the law, I will leave that to the RE lawyers, but those facing foreclosure would likely do well to consult them.
Howard & Robert,
I know FL is a Judicial State, while here in CA we are Non Judicial. I’d like to hear what Howard comes up with.
One provision of project Lifeline is that to be eligible you cannot have “lied on your application.” So it looks like many of those who took out stated income loans won’t get a “lifeline ” after all.
Agreed Gina!
Even if the borrower took bad advice from an unsavory mortgage hack, they signed the documents indicating they were in agreement with what was listed on the 1003. I can almost hear the slimeball originator saying, “don’t worry, it’s how the system works.”
Unfortunate but true!
In Florida, mortgages must be foreclosed by filing a lawsuit in court. As in any lawsuit, the borrower must be served with notice of the lawsuit and must be given an opportunity to appear and defend his or her rights. The borrower has 20 days to file a response to the law suit, and then typically it can take 45 – 60 days to complete the foreclosure. If the borrower retains legal representation the attorney could possibly delay the sale for an additional 60 days.
The lender will try to show that the borrower is in default, and that foreclosure is therefore necessary under Florida equity law. Florida is unusual in that the legislature has passed very few statues regulating foreclosures. Most of the law on the subject of foreclosures in Florida is found scattered in dozens of cases.
The basic statue, chapter 702.01 reads as follows: All mortgages shall be foreclosed in equity. In a mortgage foreclosure action, the court shall server for separate trial all counterclaims against the foreclosing mortgage. The foreclosure claim shall, if tried be tried to the court without a jury. Counterclaims by a borrower may be tried to a jury, but they must be tried separately from the main foreclosure lawsuit. In Florida because the lawsuit to foreclose on a borrower is a suit in equity, it is impossible to obtain an injunction to stop what is, in essence, a court ordered sale. In addition, the court can order the sale at a low price. A sale can be set aside if there is an error in the procedure to foreclose; however, it cannot be set aside due to the low sale price. The court order commanding foreclosure will specify how the foreclosure must take place, and the foreclosure must take place on those terms. After the sale takes place, the sale terms must be confirmed by the court that ordered the sale. If the terms of the sale order are met, title in the buyer’s name can become complete by filing a certificate of title. At the discretion of the court, junior lien holders can redeem the property, up to the time of the confirmation of the sale. The equity of redemption is cut off when the sale is confirmed, but it exists prior to that time, which means the borrower can save the property from foreclosure by coming up with the money before confirmation.
Sounds to me as though lifeline may buy the distressed borrower a little more time in FL. I’m pretty confident that the distressed borrower cannot afford an attorney so limited time to be sure. Time is the issue and time will tell.
Howard – Thanks for taking the time to find all of that out.
I guess one could argue that since they aren’t paying their mortgage they could have money to get an attorney, but why delay the inevitable and waste precious money? Although 60 days extension of the foreclosure process is 60 days less rent that will need to be paid. Worth it?
The biggest problem I see is that the participating Lifeline lenders are going to be contacting those > = 90 days deliquent. In FL the bullet may have already exited the barrel.
Ladies and Gentlemen, we are missing the obvious. With delinquencies and REOs at an all time high it is in the financial institutions best interest to keep the borrower in their home. Lets face it, property sales have slumped. So what are we going to do with even more REOs? Property values have been so over inflated in the past few years with profit-takers “flipping” homes right and left. Who is going to buy our REOs? So we foreclose and than still take a loss by sitting on a REO hoping it sells. Oh sure we can write off the loss, but how much of a loss are the investor going to stomach?
Come on lets be realistic here, politics aside. If we extend a note, restructure or even offer a discount on the rate, we can control or even cut our losses, keep the homeowner in place and most of all, not have another useless and costly REO. Yes, we could restructure any loan at anytime to save a foreclosure but now we have Uncle Sam’s blessing. If we post huge losses after doing so, oh well, at least we tried. Now we can take the loss to the IRS and smile.
Project lifeline! This 30 days, lets call it a “Cooling Off Period” sort of like buying a gun. It takes the pressure off the homeowner and the financial institution and allows cooler heads to prevail.
On a personal note. Even with less earnings I feel we need to invest in our people and the future. We are willing to make an effort and take that step first to do so.
Check out Indy Mac’s comments on Hope Now. I am sure they will jump on Project Lifeline with the same fervor. This is a very telling Shareholders letter, read it all. If not at least read “Impact on Consumers.”
http://biz.yahoo.com/bw/080212/20080212005507.html?.v=1
Maybe I am all wet on this. If I am wrong school me. If not, maybe it is time to make a change in the way we think!
PS: yes there will be a number of “waste cases” out their taking a free ride, but if we can help the ones who want it and need it, than lets help!
Dr. Darren,
I hear you and agree with a caveat. The industry made it’s bed here, now it has to lay in it. Is the industry once again in self serve mode? Are offers of assistance consumer-centric or about REO inventory control? Washington’s Dopplar radar missed the brewing storm, do we trust them to “fix,” the problem or assume it is all political posturing?
Nice post here. It does make senses, appreciate for sharing.