Tag Archives: Principal Writedown

As the House prepares to debate on the future of the Federal Housing Administration's Short Refinance option, FHA Commissioner David Stevens implored House subcommittee members to give the program a chance. The program is a voluntary option for lenders to agree to offer principal write downs and restructure loans for underwater borrowers. Stevens said as of February 11, 23 FHA-approved lenders are participating in the program and 245 FHA case numbers have been requested, of which 44 loans have been endorsed.

Bank of America is the first major mortgage servicer to leverage the federal government's Hardest Hit Fund to begin pilot programs of principal reductions for Arizona customers who owe more on their mortgages than their properties are worth. Through the Arizona pilot, BofA customers experiencing financial hardship may be eligible to have the amount owed on their mortgages reduced through matching contributions from the state and participating mortgage investors.

Regulators and attorneys general say their investigations of servicing practices have uncovered critical deficiencies and shortcomings that have resulted in violations of foreclosure laws. They've made it clear that mortgage servicers will be required to make operational changes and will be hit with sanctions and penalties. It's been reported that the 14 servicers subject to the investigations will, as a group, face a hefty $20 billion in fines, but there is dissension even among the government agencies involved over the amount. Negotiations are ongoing.

As the backlog of foreclosures continues to drive down housing prices, losses on private-label residential mortgage backed securities (RMBS) will increase in 2011, according to Moody's. The forecast for more red ink seeping from home loans sold to investors comes despite the fact that the agency believes the rate at which loans become delinquent will decline during the year. Moody's expects flaws in foreclosure practices that have recently come to light to delay foreclosures by three to six months, further extending the window of losses for investors.

Wells Fargo has reached an agreement with California Attorney General Edmund G. Brown Jr., to provide loan modifications worth more than $2 billion to an estimated 14,900 California homeowners with pick-a-pay loans originated by World Savings and Wachovia, banks Wells Fargo acquired. Wells Fargo will also pay an additional $32 million to thousands of borrowers who lost their homes through foreclosure. The bank says the majority of Wachovia's Pick-a-Payment customers reside in California.

With property values still tumbling, it's no surprise that nearly a quarter of the nation's mortgage borrowers owe more than their home is worth. Industry studies support the consensus that the farther a borrower sinks into negative equity, the more likely they are to throw in the towel. The severity of this catch-22 is now top-of-mind for government officials. The administration is reportedly pressuring Fannie Mae and Freddie Mac to make principal write-downs a key component of their foreclosure prevention efforts.

Wells Fargo & Co. announced this week that from December 18, 2010, through June 30, 2013, Wachovia Pick-a-Payment customers who are at-risk of default may be eligible to earn principal forgiveness by making on-time mortgage payments. The company says it has already written mortgage principals down by a total of nearly $3.4 billion for Pick-a-Payment customers. The bank will also contribute $24 million to eight states to help with customer outreach and alleviate the impact of foreclosure in local communities.

OneWest Bank, the Southern California regional lender that was formed out of the old IndyMac, announced Tuesday that it has implemented the new Principal Reduction Alternative (PRA) piece of the administration's Home Affordable Modification Program (HAMP). OneWest is one of the first servicers to officially launch the program, which was initially introduced by the Treasury in late March to provide some mortgage relief to the growing number of homeowners underwater on their mortgage.

If governmental policy on foreclosure prevention does not change, 11.5 million borrowers are in danger of losing their homes, according to the analysts at Amherst Securities. That staggering figure equates to one out of every five borrowers - an astronomical 20 percent default rate. So how can the administration fix deficiencies in its loan modification program? Amherst analysts say the answer lies in cutting borrowers' principal balances and boosting housing demand, including opening up financing channels for investors.

Minneapolis-based Wolters Kluwer Financial Services recently announced that two members of its compliance management services team have earned the prestigious Certified Regulatory Compliance Manager (CRCM) designation from the American Bankers Association’s (ABA’s) Institute of Certified Bankers (ICB).