Florida Realtor Magazine reports FICO announced that it has agreements with four of the nation’s top 10 U.S. mortgage servicers to try to identify the borrowers most likely to attempt a strategic default.
In a strategic default, borrowers who can afford to make their mortgage payments choose instead to stop paying and go through foreclosure, generally because they’ve determined that the hit to their credit score is preferable to the cost of keeping the home. Roughly 35 percent of mortgage defaults are strategic, according to the University of Chicago Booth School of Business. FICO estimates the cost at more than $20 billion annually.
FICO uses an algorithm to analyze a lender’s pool of mortgage holders, and while it looks at a number of traits, it focuses largely on the six million U.S. homeowners with current-loan-to-value ratios of 120 or higher – a group considered twice a likely to consider a mortgage default.
A foreclosure or short sale does not always relieve the homeowner of a debt obligation, and lenders might not forgive an outstanding debt. While each lender handles strategic defaults in its own way, banks could use the new FICO information to take a hardline stance on owners who chose a strategic...
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This week MortgageLoan.com reported that financially distressed homeowners with Freddie Mac mortgages will have a new option for loan modifications beginning next month.
The new option, called a Standard Modification, is designed for borrowers who are ineligible for a Home Affordable Modification Program (HAMP) loan modification or have previously defaulted on a HAMP or other loan mod. For those who are approved, the program reduces a borrower's mortgage principle and monthly payment by at least 10 percent each, thereby making the payments more affordable.
To qualify, homeowners must be at least 60 days past due on their mortgage, that is, having missed at least two monthly payments. Those who are not at least 60 days past due can qualify by proving they are in imminent danger of default, through demonstrating an eligible hardship and providing verification of income.
Read more about it here....
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...isn’t a new phenomenon in the housing crisis. But with home values continuing to decline, more owners are finding themselves in a position where they may see it as a savvy business decision to destroy their credit rather than wait years for prices to recover. Marty Likier is one who knows the mental hurdles that have to be crossed to make the decision.
Read Marty's story at
LoanSafe.org...
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Realtor Magazine and USA Today report on the colossal failure of banks to modify home loans: WASHINGTON – June 10, 2011 – The nation’s largest mortgage loan servicers have done a poor job in modifying distressed home loans through the government’s foreclosure prevention program and need “substantial improvement,” the Obama administration said Thursday.
Based on a recent audit, Bank of America, Wells Fargo and JPMorgan Chase will lose government financial incentives that reach at least $1,000 for a permanent loan modification until they improve, the Treasury Department said. They received $24 million in such incentives last month.
None of the 10 largest servicers participating in the Making Home Affordable Program have done a good job, Treasury said. Ocwen Loan Servicing also needs substantial improvement and six others need “moderate improvement,” the audits show.
Read the entire story....
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