How Is the Fight Against Repo Homes Going?

by on Foreclosure Crisis

From available data, the progress of President Obama’s efforts to fight repo homes can be roughly assessed.

Since March 4 when President Obama announced the details of his Making Home Affordable program, 11 of the country’s largest mortgage services have committed to participate in the president’s initiative to reduce the number of repo homes. These 11 servicers hold about 75 percent of the nation’s mortgage loans.

Obama’s program has two schemes: the loan refinancing scheme for mortgages held by Fannie Mae or Freddie Mac, and the loan modification scheme for mortgages held by private lenders.

Chase Home Finance, a unit of J.P. Morgan Chase, is among the first lenders to modify loans for its borrowers under the Obama program to fight repo homes. It has modified about 10,000 loans since the launching of the Obama program. The lender’s spokesperson Tom Kelly said that its own loan modification program has restructured more loans and the company expects to save more houses from becoming repo homes under the government program because of the financial incentives offered to both lenders and borrowers.

CitiMortgage, the mortgage unit of Citigroup, started offering loan modifications under Obama’s program to fight repo homes only on April 23.

Mortgage lenders explained that they have to change their computer systems to incorporate the government’s program and train their staff to be able to process loan modifications.

Meanwhile, the loan refinancing scheme appeared to have more significant initial impact. According to Patricia McClung, vice president for single-family housing at Freddie Mac, the company has completed refinancing for around 1,000 of its mortgages during the first weeks of the refinancing program and during the time Freddie was still putting its systems in place.

In the first weeks of April, the other government-run servicer Fannie Mae received about 22,000 applications for refinancing and about 1.2 million borrowers visited Fannie’s web site to view instructions and check if they are qualified for the program. A Fannie Mae spokesperson said many of the applicants owe their lenders between 80 percent to 105 percent of their home values.

Now that President Obama has expanded its original program of fighting repo homes, more distressed homeowners are expected to be helped. Obama has broadened his program by extending the loan modification scheme to include second mortgage loans.

Housing officials found out that almost 50 percent of distressed mortgages carry second mortgage loans. It was also found out that in many cases, the first mortgages were being modified and paid but the second mortgages were not, alarming mortgage servicers who typically own the second mortgage loans.

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