by Nancy Osborne, COO of ERATE®
(1/13/2010) When it comes to the loan modification process the nation's credit unions may know something the others do not. While Fannie and Freddie have had only marginal success with their trial loan modifications under the Administration's Home Affordable Modification Program (HAMP), an astonishing 84% of one credit union's modification efforts were reportedly working well.
In fact over half the credit union members who enrolled in the modification program were reportedly back on track in making their mortgage payments on a consistent and timely basis and less than 1/10th of one percent had gone on to become REOs proceeding into foreclosure.
A key component of the credit union's foreclosure prevention strategy is to allow its members sufficient time to re-group after facing an economic set back. This extra time permits a financially strapped member to re-adjust their budget to their new financial circumstances.
Extreme effort is made to implement modification options which will only have an immediate impact in improving a borrower's ability to meet their payment obligations.
One strategy which is reportedly rarely used by the credit union is to extend the maturity date of a loan by re-amortizing it. More often than not the strategy preferred is to provide an extension or forbearance in the monthly payment for a period up to three months.
An agreement to receive a partial payment for a period up to six months is also commonly used, however in some cases both an extension and immediate rate reduction may be given.
The Credit Union may also consolidate other loans, both secured and unsecured debts, due to the credit union by recasting and securing just one loan against a member's home.
Another surprising and unusual requirement the credit union has had much success with, is insisting on having a face-to-face meeting with the borrower/member.
Meeting on a face-to-face basis has proven extremely helpful in analyzing the cause(s) behind a member's financial instability as well has assessing how successful a member may be in resolving their problems in the future.
Taking a more personal approach may be dismissed as a luxury that many lenders/servicers facing an overwhelming flood of distressed borrowers do not have time for and yet it appears to potentially provide the most positive outcome for all the parties involved.
Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.
"I am addicted to Bloomberg TV" says Nancy.
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