COMMON EXAMPLES OF FORECLOSURE PREVENTION OPTIONS

Option	How Does the Option Work?	Key Benefits
Repayment  Plan	Distributes delinquent payments over a period of time, usually no more than 10 months. A portion of the deferred delinquent amount is added to the normal monthly mortgage payment.	Brings account up to date in a specific time frame. Original Payments then resume thereafter.
Loan  Modification	A permanent change in one or more of the terms of the mortgage loan, allowing the loan to be reinstated to a "current" status, and resulting in a more affordable monthly mortgage loan payment. Past due interest and escrow are added to the new unpaid principal balance and re-amortized over the remaining life of the loan.	Changes the mortgage note itself, allowing a "fresh" start on managing the loan. Brings account up to date when loan modification is executed, with more affordable terms
Partial Claim (FHA Loans only)	A second mortgage, interest free, that is paid off at the time when the homeowner's loan is paid off. This option allows up to 12 months of past due accrued mortgage payments to be included in the second mortgage. Available only on FHA loans.	This type of FHA/HUD loan is interest-free.  Brings your account up to date immediately.
Fannie Mae Home Saver Advance	A low interest rate loan provided by first lien loan servicer to bring current a customer's delinquent first mortgage. The loan is repaid over a 15 yr term w/ pymt and interest accrual deferred during the first 6 mos. after the advance.  Only Fannie Mae loans.	Brings account up to date immediately. Second mortgage is secured at a low interest rate.
Short Sale	Allows you to sell your home and use the proceeds to pay off the mortgage if you are unable to maintain payments, even if the home's market value is less than the total amount owed.	Avoids the lengthy legal process involved in foreclosure.  Usually less damaging to credit than foreclosure.
Deed in Lieu of Foreclosure	Allows you to voluntarily transfer legal ownership of your property to lender if you are unable to maintain mortgage payments and cannot sell the home at current market value.  Sometimes, lender will pay relocation assistance to the borrower (“cash for keys”).	Avoids the lengthy legal process involved in foreclosure.  May be less damaging to credit than foreclosure.

FOR "PROBLEM" SHORT SALES OR LOAN MODS - USE ESCALATION!

By Chris Qualmann

Those of us in the business of negotiating short sales and loan modifications encounter situations on a frequent (if not daily) basis where we’ve “done everything” and “submitted everything” that a lender’s loss mitigation rep has asked of us, only to then be stonewalled for weeks and months with generic updates like “it’s under review” … “it’s in the underwriter’s hands” … “sorry, we’re backlogged” and “any day now”.

There’s an excellent tool for moving those files that seem forever “stuck in the mud” – and it’s called ESCALATION. As shown on the attached graphic, there are resources within the U.S. Department of Treasury (specifically the “HAMP Administration” Office) for escalating files serviced by lenders who are contracted participants under the “Making Home Affordable Program”. And, there are specific, designated escalation contacts for those loans underwritten by Government Supported Enterprises (“GSE’s”), such as Fannie Mae, Freddie Mac, FHA and VA.

Twice in recent months I’ve had success utilizing the tool of “escalation” – once with the HAMP Office, and most recently with a lender’s in-house escalation division. The first case involved a borrower who had successfully completed her “trial modification” with a HAMP participating servicer on a loan underwritten by Freddie Mac. After making her final trial payment, she received a letter from the servicer stating that the modification would now be permanent, and that her payments would continue on the same, highly-reduced basis for the life of the loan. No mention was made in this letter of the borrower needing to do anything other than counter-sign and return the letter (which she did), and continue making payments at the reduced rate.

Then, a couple of days later, the borrower received a follow up letter … NOW telling her that she needed to make a substantial, multi-thousand dollar “cash contribution” to the arrears that had accumulated over the course of many months of missed payments … or her permanent modification would be denied. Despite my citing “chapter and verse” of the specific, printed Freddie Mac servicing guidelines stating that a servicer could NOT charge a single dollar toward arrears (or for any other reason) as a condition to approving a HAMP modification, this servicer stood it’s ground and wouldn’t budge. And amazingly, the first Freddie Mac rep I contacted feigned “ignorance” as to the verbage of the company’s own regs … refusing to say whether I was “wrong” or “right” … and just kept saying “Uh, I think they (the servicer) can do that”.

But thankfully, by using the specific procedure and forms on the HAMP Admin website for demanding escalation (and, obviously, following up promptly with the designated Treasury Department representative) … the problem was solved in less than a week, and the borrower received a NEW letter reassuring her that her permanent mod was approved, and that it wouldn’t cost her a penny other than the new monthly payment.

My latest use of “escalation” involved a Short Sale on a loan serviced by a well-known lender whose name I’ll gladly name – Chase. Without going through the “whole gory details” … I’ll simply say that after delivering documents over and over and over again (sound familiar?), not only by fax and email but also through Equator (after Chase “switched” to the system), I was getting nothing but bland, generic, stonewall, and ultimately highly conflicting information as to the actual status of where the file stood in the approval process.

Fortunately, I learned that Chase has an EXCELLENT Short Sale “Escalation Division” whose sole purpose is troubleshoot, intervene, monitor, and simply “push the train forward” on files that for one reason or another can’t seem to be brought to conclusion. It takes more than a “simple call” to the “Escalation Division”, though … it’s critical to get an actual escalation number from the lender representative, because once a file is formally escalated (and an “escalation file” created), the file falls under the eyes of not only the lender’s in-house problem solvers, but also the U.S. Office of the Comptroller of the Currency (“OCC”).

BOTTOM LINE – As long as it's used properly, ESCALATION is more than just a “word” when it comes to pushing a loan mod or short sale forward. It’s a critical element of the loss mitigation process that needs to be used sparingly and judiciously, but has “teeth” and real muscle for bringing problem files to conclusion. And, as is the case with any loss mitigation file, whether formally escalated or not, a successful result depends on the negotiator understanding the “Four (4) P’s” – Persistence, Process (meaning: following the rules), Patience (a little, anyway) … and more Persistence!