Local Lenders from Wells Fargo and Bank of America have reported a surge in FHA refinance applications and new home purchase inquiries for short sale and bank owner REO properties.

Focus on FHA Mortgages and Foreclosure Prevention

According to Bryan Dornan, founder of the Lead Planet, a mortgage lead generation company that provides real time internet loan modification, refinance and FHA leads said, “Mortgage lead volumes are up again, with interest rates hitting record low’s and borrowers becoming more comfortable taking out home loans as the real estate market is getting near the bottom.”

Here is an overview on loan modification, FHA mortgage lending and foreclosure prevention legislation: Lender loan workouts have helped hundreds of thousands of homeowners renegotiate a lower rate in an effort to make their home loan more affordable.  The banks are overloaded with foreclosures and the uncertainty in the housing market has made the lenders debate on loan modifications, a no brainer.

California Mortgage and Loan Modification Law Updates

In November 2007, Gov. Arnold Schwarzenegger and several lenders announced a voluntary agreement meant to encourage loan modifications for borrowers facing foreclosure.

SB 1137: Created a 30-day waiting period before lenders could file a notice of default; required lenders to maintain foreclosed properties; notification for renters in foreclosed properties.

AB/SB 7 (Second Extraordinary Session): Enacts a 90-day foreclosure moratorium, except for mortgage lenders and loan servicers that have entered into a loan modification program.

Government level

FHA Secure looked good on paper but failed miserably because mortgage lenders refused to adapt to the FHA refinance program that was designed to bail out distressed homeowners who could not afford their adjustable rate mortgage.

Hope NOW: Program created in 2007 to encourage lenders to work with struggling borrowers. A mortgage industry group said the program has helped 2.3 million people avoid foreclosure.

President Obama’s plan: The $75 billion program aims to help 9 million struggling buyers refinance or obtain loan modifications. But many Inland homeowners may not qualify.

Pending state bills

AB 34 (Nava, D-Santa Barbara): Contains new licensing and regulation requirements for mortgage originators.

AB 260 (Lieu, D-Torrance): Imposes restrictions on subprime loans and new rules for mortgage brokers and real-estate lenders.

AB 329 (Feuer, D-Los Angeles): Creates new disclosure rules for reverse mortgages.

AB 603 (Price, D-Inglewood): Prevents for one year the eviction of renters living in a foreclosed property.

SB 94 (Calderon, D-Montebello): Prohibits advance fees for loan modifications.

SB 120 (Lowenthal, D-Long Beach): Creates protections for renters living in foreclosed homes, such as return of security deposits.

SB 239 (Pavley, D-Agoura Hills): Creates a new crime of mortgage fraud.

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Ellie Mae, a provider of loan processing software, is creating and updating loan modification closing packages for several top mortgage lenders, the company said. Ellie Mae said that their customers are presently using the service to process more than 5,000 loan modifications per week.

The service creates loan modification packages with Web-based data entry that requires no re-keying of data. All documents are compliant with Fannie Mae, Freddie Mac and MERS requirements, Ellie Mae said. According to Ellie Mae, their service assesses the needs of the mortgage lender’s flow chart, accommodating detailed loan work-out plans while handling the recording, notary and compliance needs..

Mortgage, lead generator, Lead Planet, has noticed that many of their mortgage brokers are using Ellie Mae in conjuction with foreclosure prevention processing.  According to the Lead Planet National Sales Manager, Dan Ambrose, “Loan modification leads are being requested almost as often as FHA leads.  Ambrose continued, “At this rate, I would anticipate getting more request for loan modification leads than refinance leads in 2009.

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As credit scores continue to complicate mortgage lending, many loan officers are turning to FHA leads these days, despite the fact that many of them didn’t specialize on government home loans in the past. With the improvements in loan origination software, many aspects of FHA have been implemented to handle the recent changes in FHA lending. Mortgage leads vary significantly these days with options for loan modifications, debt settlement, VA, conventional and FHA loans that all have different lending guidelines.

Fortunately, the recent advancements in mortgage software helps ease this transition much more for lenders and brokers to originate FHA customers. Some of these enhancements incorporate the FHA county limits and monthly mortgage insurance tables which help save time and improve accuracy of mortgage applications. 

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