One lawmaker has proposed a bill that would prevent illegal immigrants from both issuing home loans as well as getting loan modifications. Representative Kenny Marchant’s (R-Texas) Mortgage E-Verify Act involves a web-based tool that could, according to Marchant, save millions of dollars each year that would otherwise be lost to mortgage fraud:

The E-Verify program is a voluntary, Web-based system run by the federal government to help businesses certify that potential employees are legally authorized to work in the United States.

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Another week is in the books. Can you even believe January is almost over?

This week’s posts were a nice mix of material — mortgage rates, consumer costs, loan mods, the FHA, and home prices. I would like to encourage more readers to comment on these stories since they’re likely to impact most of us in one way or another.

Friday:

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Update3: If you’ve been ushered into a long-term trial mod, one non-profit wants to hear your story. Click here to find out more.

Original Post (published 12/10/09): We’ve covered the Treasury’s Making Home Affordable Program (MHA) quite a lot since it’s inception and have been quick to point out the program’s flaws as well as the flaws others have noticed. The White House has focused less on addressing the structural flaws of this program — which we feel have created a host of “unintended consequences” — and more on prodding lenders and servicers to step up their game.

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In the middle of October, we wrote two blog posts that seriously called into question the effectiveness of the Home Affordable Modification Program (HAMP). In addition to magnifying the program’s inabilities, our two articles also highlighted a wealth of HAMP’s “unintended consequences.” While the two articles addressed different specifics, the general theme behind them both was the same: HAMP is flawed.

Are Loan Mods Destroying the Mortgage Industry?
Update1 Is it Time to Modify Modifications?

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If it didn’t work the first time, what makes the Obama administration think it will work this time?

What we’re referring to here is Washington’s insistence on shaming mortgage lenders into modifying more loans. We can think of several reasons why this strategy is merely the latest in a string of Making Home Affordable missteps.

Back in August we wrote a post tilted “When All Else Fails, Try Shaming Servicers into Cooperating.” The fact that the words we wrote nearly four months ago are still a perfect fit to describe both the White House’s current gripes and the lenders’ consistent rebuttals indicate that nothing was solved through shaming the first time around: Read the rest of this entry »

UDATE1: Fannie Mae has released the details to a program that will turn struggling homeowners into renters. The “Deed for Lease Program” (DLP) allows delinquent homeowners to rent their home for up to a year instead of being foreclosed upon.

Instructions for Borrowers

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Wells Fargo is betting that improving home prices and an increase in consumer income will make their new loan modification strategy a success. The nation’s fourth-largest bank (in terms of assets) has introduced a new, and frankly quite interesting, strategy to modify their large portion of Payment Option adjustable-rate mortgages (ARMs).

If you recall the latest mortgage metrics report, Payment Option ARMs are failing at a rate of three times more than the other products in the marketplace, causing trouble to lender and borrower alike.

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UPDATE1: We thought so, and said just as much last Friday…we just had no idea it would happen this quickly. A short bulletin from National Mortgage News (NMN) this morning reported that the Treasury Department’s Office of Homeownership Preservation (OHP) announced at the Mortgage Banker’s Association’s annual conference that a new wrinkle to the Federal loan modification program is coming soon. Laurie Maggiano of the OHP said the new loan mod effort will be designed to assist borrowers who don’t fit into the current modification mold.

Looking through the latest numbers, we speculated on Friday that it may be time to alter the current structure of loan modifications; according to statistical reports, loan mod issuance has slowed (see original story below), redefault rates are high, and ‘foreclosures in process’ continue to grow.

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Touted as a “milestone” by the Treasury, President Obama’s loan modification program has reportedly helped 500,000 borrowers avoid foreclosure. According to the New York Times, the White House set out to reach the 500,000 mark by the end of this month, and is quite encouraged that the goal was met a few weeks ahead of schedule.

While the number is certainly encouraging, we have to wonder how many of these modified loans will wind up growing delinquent or failing. Our friend Alan Zibel at the Associated Press wrote last month that: Read the rest of this entry »

It seems as though some lenders may be ready to cut their losses and move on, as the number of lenders who have offered struggling borrowers a principal reduction has begun to increase. The majority of modifications so far have come in the form of interest rate reductions and/or loan term extensions. Until recently, flat out principal reductions were rarely a consideration:

The portion of loan modifications in the second quarter that involved reducing the principal jumped to 10% from 3.1% in the first quarter, according to the report released Wednesday by the Office of the Comptroller of the Currency, or OCC, which regulates national banks.

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