“Real Scoop” on Bank of America principal reduction press

The BOLD is highlighted below for a reason. This is the actual news report from B. of A. executives. Read carefully while I break it down.

A select group of struggling mortgage borrowers are about to get an offer that sounds too good to be true. Executives at Bank of America say they will begin mailing 200,000 letters offering certain customers mortgage principal reductions.

“If people get these things and toss them, they won’t be eligible,” says Ron Sturzenegger, the Bank of America executive charged with providing solutions to borrowers in need of mortgage assistance. (this statement clearly indicates if you don’t respond, they check you off the list for help)

Apparently only eligible borrowers could get as much as $150,000 knocked off the balance of their mortgages.  It is all part of the $25 billion settlement reached this year between federal and state agencies and the nation’s five largest mortgage servicers over fraudulent foreclosure document processing (so-called “robo-signing).

Bank of America in a deal with state attorneys general and the U.S. Department of Justice, committed $11 billion to mortgage principal reductions, but executives say they will go beyond that if enough borrowers respond to their offer.  Five thousand borrowers have already received a collective $700 million in principal reduction through a pilot program for those already in a modification negotiation.  The 200,000 borrowers being targeted now may have already exhausted modification options or may have yet to contact the lender.

Executives say borrowers receiving the letters are eligible, but they still have to prove they qualify.  In order to be eligible, a borrower must be 60 days late on the mortgage payment as of January 31, 2012.  1. This is ridiculous. This alone could cut out 30% or more of the people who get the mailing. 2. To be exactly 60 days late as of January 31, 2012 may only be 4,000 people. 3. The fact is that B of A knows if the people getting the letter even qualify when they mail it, so why all the semantics?

The borrower has to owe more on the mortgage than the home is currently worth, commonly known as “underwater,” and the borrower’s loan must either be owned by Bank of America or serviced by Bank of America for an investor who is allowing the modifications.

In order to qualify for the modification, the borrower must answer the letter with full documentation of income, showing that under the terms of the modification they can still make the monthly payment.  A borrower with no income would therefore not qualify.   A borrower’s current monthly payment must be  more than 25 percent of gross income, and the borrower must show they are unable to afford that. 1. This suggests that anyone with income reduction or even temporary job loss, doesn’t qualify.

“If you can afford to make your monthly payment and are choosing not to, you will not get this principal modification,” says Sturzenegger.

If the borrower qualifies, (B of A knows full well most won’t qualify and this is just another press release to give people false hope, and appear as if they are helping more people than they really are) Bank of America will bring the monthly mortgage payment down to 25 percent of the borrower’s gross income.  That could mean principal forgiveness well over $100,000, as there is no limit to the amount of the mortgage.  If enough borrowers respond, it could cost Bank of America far more than it committed to in the settlement.

“Yes, we have the capability to go well beyond the $11 billion,” adds Sturzenegger.

(read between the lines, they have the capacity to go well beyond, but they won’t have to because they already know how many people “actually” qualify.)

Bank executives say that before choosing which borrowers will get the offer, they performed a net present value test on each loan, making sure that the principal reduction modification would net Bank of America or the investor who owns the loan more than foreclosing on the home.  “It has to be fair to the investor as well,” says Sturzenegger. (ah they already ran a NPV test. So again, why all the semantics about only those who qualify will get it? They know who will and who won’t. They just don’t want you to know that.)

Not all of the 200,000 borrowers who receive the letters are expected to respond.  Executives say there is a level of fatigue among delinquent borrowers who have already received several notices or who may have gone through a failed modification process already.  (Right, B of A executives already know many of these addresses won’t respond, and my inclination is that they know many of these people they are mailing have already moved out or abandoned the home) Some borrowers simply don’t want to stay in their homes, while others may think the offer is a scam. “They have been contacted by a lot of other people, and this offer may appear too good to be true,” says Sturzenegger.

That’s why Bank of America is sending the letters by certified mail and trying to make the language as simple as possible.  A sample letter obtained by CNBC shows a bright red box in the top corner labeled, “IMPORTANT” and simple language stating, “Qualifying customers may reduce their monthly payment by an average of 35 percent.”

6500 letters should be arriving in mailboxes across the country this week, with a wave of new letters going out every week until the end of the summer, when all 200,000 should have been mailed.  Bank of America is staggering the mailings in order to handle the expected response. That bank has staffed up to handle the task, with 50,000 employees manning servicing desks, but the process will clearly take a lot of time.  That’s why Bank of America has suspended any foreclosure actions against these 200,000 borrowers until the process is complete.

There are currently 5.59 million U.S. loans that are either delinquent or in the foreclosure process, according to Lender Processing Services.  Bank of America services one million of those loans, but many of them are owned by Fannie Mae and Freddie Mac.

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360 Group has had great success holding banks accountable. Our most recent modification had a principal reduction built in and lowered the payment by 40%. It took us over 9 months because the bank kept asking for documentation over and over while in underwriting for 3 months. They hope that something new will show up so they can decline the file. Once declined your out of luck for 12 months, but we don’t give up. Contact us if you have any questions about REALLY QUALIFYING with no semantics and we’ll give you the straight scoop 623-748-7448.

Whats coming in 2013?

Remember, everyone predicting the fall of the US dollar wants you to buy Gold and Silver, and they’re happy to sell it to you because they make a commission. Others claim it’s time to get back into financials and the auto sector. Unfortunately all these people are the one’s wanting to sell you the stocks. Be careful. The 13,000 DOW of last week (2/23/2012) is an exciting illusion that can only last so long. If you’re not able to move your money quickly, you might want to stay away.

There are few views on the US Economy that I can say I agree with 100%. Mr David Stockman has hit the nail on the head and outlined perfectly what appears to be unfolding. Many of us agree with what he is saying because it is based on facts and reality. Not emotional fantasy or wanting to sell you something.

CLICK BELOW FOR VIDEO LINK

2013 will tell

Be aware this tax season

There are a few things to watch out for this tax season to help protect your hard-earned money.

Hiring unqualified preparer: It’s easy for an accountant or tax preparer to take advantage of you, especially if you’re unfamiliar with the tax code or paperwork involved with filing a return. There are many preparers out there who — to make an extra buck — will skim a portion of a client’s refund, charge more than they should for services and lure taxpayers to their office by promising unattainable refunds.

It’s up to you to be careful when selecting a preparer. In future filing seasons, all paid preparers will be required to register with IRS in order to receive a preparer tax identification number.

Phishing for personal information: Be careful before replying to that e-mail from the IRS notifying you of the thousand dollar refund you’re eligible for this year.

“IRS impersonation schemes flourish during the filing season,” the agency said. “Criminals use the information they get to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.”

These scams can come in the form of e-mails, phone calls, faxes or even texts to your cell phone. If you receive an e-mail from someone claiming to be from the IRS, don’t open any attachments or click on links included in the e-mail. Instead, forward the message to the IRS at phishing@irs.gov.

Filing false or misleading forms: Scam artists are claiming refunds they don’t deserve by filing “false or misleading” returns, said the IRS. Taxpayers are fabricating information returns and claiming made-up withholding credits in an attempt to make a little extra money from the IRS by way of a tax refund.

Some taxpayers carry out this scheme because they are under the belief that the federal government holds secret accounts for each of its citizens, said the IRS. These individuals believe that the funds in these hidden accounts can be accessed simply by issuing a Form 1099-Original Issue Discount, which is a phony information return. There is a person doinginfomercials who makes these claims and has already been issued cease and desist demands by the government for past fraud.

Overstating your charitable donations: While giving to charity is a noble act, don’t reverse it by lying about the amount you donated.

Fishy retirement plans: The IRS is on the hunt for taxpayers who abuse their retirement plan arrangements, including individual retirement accounts (IRAs). Taxpayers who enter transactions that allow them to exceed the contribution limit of an IRA are wanted by the IRS, as are those people who fail to properly report early distributions.

Claiming gas costs: Trying to claim the money you spend on your hour-long commute to work each day? This could cost you a $5,000 fine from the IRS. While taxpayers such as farmers who use fuel off highways as a means of carrying on their trade or business may qualify for the fuel tax credit, you can only claim the credit if it meets specific IRS requirements.

Disguising your company: The IRS is currently working with state authorities to identify corporations and other entities that disguise the ownership of a business. These entities are often disguised through using a third party to request an employer identification number, and the businesses or financial services can be used for the underreporting of income, fictitious deductions, money laundering, financial crimes and even terrorist financing.

Giving yourself a pay cut: In an attempt to lower the amount of taxes owed, some taxpayers are filing phony wage-related information returns instead of the required returns. ”Taxpayers should resist any temptation to participate in any of the variations of this scheme,” said the IRS, adding that false filings could result in a $5,000 fine.

Abusing trusts: An increasing number of people are misusing private annuity trusts and foreign trusts to transfer income and deduct personal expenses. ”Some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes,” said the IRS. “Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and to hide assets from creditors, including the IRS.”

Inflating your withholding credit: You could be fined $5,000 this year if you exaggerate your withholding when reporting nontaxable Social Security benefits, which would result in your falsely report zero income to the IRS.

Remember a referral is always the best way to find a good tax preparer. Find out how long the person has been preparing taxes and stick with someone who has been doing it for a long time. We all have to cut our teeth in our craft, but the most experience wins out with tax code as it changes frequently.

Deficiency Judgments & Strategic Defaults

It’s painful to lose your house to foreclosure, but many feel a relief to put that biggest financial burden behind them. Former homeowners will be hearing a lot about “deficiency judgments” this year because even if your bank  approves you to sell your home for less than it is worth, you could still be left on the hook. Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances — like unemployment or a job transfer — can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

After the banks foreclose, it’s very common to have large deficiencies with houses not worth the balances owed. Whether banks can and will pursue deficiency judgments against you depends on many factors, including what state you live in and whether there’s a second mortgage or other liens. There are a whole host of details to be aware of which is why we spend so much time with each client before pursuing the negotiations for them.

Some states don’t allow deficiency judgments. But, even if the original loan was refinanced, or a HELOC was taken out after the original purchase, some or all of it may be subject to claims. Deficiency judgments on short sales and deeds-in-lieu are becoming much more common. In these cases, extinguishing the debt is often a matter of negotiating with the bank. Negotiating is what we do best. It is vital to have an experienced negotiator on your side. There are so many factors involved such as the size of the loan, whether there is a first mortgage only, or a second, and the timing of origination and amount of the second.

Banks have sold many of these accounts to collection agencies and other third parties, at discount so they will be going after their loses. Do not make the mistake of thinking the bank is your friend, or that they’ll do you any favors, they will not.

What can be scary is that the judgments don’t have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn’t have to be a large amount of debt for a lender or collection agency to come after borrowers. Some borrowers have reported getting served a  judgment 2, 3, even 4 years later in some states. Even if they released title once the transaction was closed doesn’t mean it’s done. Releasing title does not necessarily end the debt. It’s complicated because of variations in state law. Here in Arizona there are two parts – one is the Note and the other component is the Deed of Trust that secures the property. Not all states are like AZ.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Strategic defaults is the new term we’ll all hear more about in 2010 and 2011. Sometimes lenders go after borrowers walking away from their homes if they have other assets. Remember, by law, you cannot benefit from a short sale. Banks are pulling credit reports to see if it’s a strategic default. In other words, If you’re behind on all your other payments, you’re okay. But if you’re not, they’ll come after you. Because they know that you’re late on the the mortgage but are choosing to pay other obligations.

If borrowers have any doubts about their risks, they should seek legal advice. We have General Counsel that can answer all your questions so that you can mitigate your risk. Contact us if you have any questions.