Team Mona Tong was there and our Popcorn stand was a big success! We handed out over 100 free boxes of fresh popcorn and ran out soon after the first intermission. Next year we will make sure we have more than needed.

The next and last event:

Sunday, September 7
Films & Filmmaker Q & A at ZEUM
4th Street and Howard
2–2:45pm Meet-the-Filmmakers reception
2:45–4pm Films and Q & A

Hope to see you there,
Team Mona Tong

With warm wishes and many thanks to our neighbors for giving us feedback.

This article was published on: 02/01/2008

Help Troubled Borrowers

BY ROBERT FREEDMAN

Bush’s Hope Nowinitiative is a voluntary accord entered into by lenders, loan servicers, and mortgage investors to help borrowers who face default when their subprime adjustable-rate mortgage resets at a higher rate. The most prominent part of the initiative is an interest-rate freeze that would give borrowers facing an unmanageable interest-rate hike the time to work out a solution.
When people ask you for advice, tell them:

1. Call the national counseling hotline President Bush publicized.
The number, 888-995-4673 (888-995-HOPE), is available on a 24/7 basis.

Calling the number puts them in contact with a HUD-approved counselor affiliated with the nonprofit Homeownership Preservation Foundation.

As of mid-December, there were about 180 counselors, and their ranks were supposed to grow to about 400 early this year, according to Tracy Morgan, vice president of the foundation.

Since the president’s announcement, counselors have seen the volume of hotline calls skyrocket from about 1,500 a day to 22,000 a day as of late December, says Morgan. She expects calls to stabilize at about 2,500 a day in 2008.

2. Expect to be on the phone about 45 minutes.
A counselor will gather information about the caller’s financial situation and make a number of determinations, including eligibility to participate in the initiative.

Home owners are eligible for the initiative if they’re current and expect to stay current after the rate resets but are looking to refinance into a more appropriate loan; they’re current but face possible default after their rate resets, so they need to modify their existing loan or refinance into more affordable financing; or they’re in default before their rate resets.

The initiative applies only to purchase-money mortgages, not home equity loans, and only to borrowers who secured financing during the height of the housing boom — Jan. 1, 2005, to July 31, 2007 — and whose rate resets between Jan. 1, 2008, and July 31, 2010. Lenders estimate some 1.2 million borrowers are eligible.

Of course, the counselors can help borrowers who don’t meet eligibility for the initiative, too. “Most of the calls we receive today continue to be for more traditional types of payment problems,” says Roy Nash, executive director of NeighborWorks Waco, a Texas credit counseling and financial education organization. “Income problems as a result of a job loss and unexpected expenses like a medical emergency continue to be the main reason people call.”

3. Expect a counselor to recommend a course of action.
Typically, two or three hotline calls transpire before the counselor has enough information to make a recommendation, though it might take just one call if the borrower is prepared with paperwork verifying income and monthly expenses.

“The more prepared they are, the more quickly we can help them,” says Daniel Garcia, a counselor with NeighborWorks Waco.

The counselor’s main job is to explain what options are available based on a borrower’s situation and to have the borrower call the mortgage servicer to initiate a workout plan.

In some cases, the counselor will recommend the borrower call another counselor, one in the borrower’s area, and get counseling in person. In other cases, the counselor will contact the servicer directly. To do that, counselors must get the borrowers’ written authorization to act on their behalf.

4. Servicers are increasingly amenable to be flexible.
Garcia says servicers are more willing to take calls and be flexible than before the subprime crisis.

“A lot of these lenders [who also do servicing] are overflowing with REOs and can’t take any more, so they have to do something,” says Garcia. “They’re ramping up their staff to deal with this, hiring and training more people, and giving them more authority.”

Countrywide Home Mortgage, the country’s largest mortgage lender and the servicer for an estimated 82,000 loans whose borrowers fall under Hope Now’s eligibility criteria, has a team of 3,000 handling workout plans, though not only for Hope Now cases.

Wells Fargo has established a dedicated counselor phone line. “If customers go to a counseling agency because they need to get help, and they give the authorization to the counseling agency, we will talk to that third party,” says Patrick Carey, executive vice president of default and retention operations for Wells Fargo.

5. Borrowers are receiving fast-track workout plans based on their eligibility.
Servicers have the most flexibility in working with borrowers who are current on their mortgage and expect to stay current after rates reset. Servicers determine these borrowers’ eligibility for refinancing based on information the servicer already has on file, such as the current loan amount and loan-to-value ratio and the borrowers’ FICO score and credit history.

Refinancing is the typical solution for these borrowers, and the servicer is supposed to recommend the best available replacement product for the borrower, even if that product isn’t one offered by a lender affiliated with the servicer’s company.

Carey of Wells Fargo says his company is prepared to do that. “Whatever works best for customers’ financial circumstance, we will work with them to accomplish,” he says.

The servicers are also supposed to help borrowers avoid prepayment penalties in a refinancing, though that might be easier said than done because many subprime loans come with stiff prepayment penalties. The initiative recommends—rather than requires—that servicers modify the original loan to eliminate a penalty. At the same time, investor rules for securities backed by these mortgages govern what servicers can and can’t do, so any attempt to modify a provision such as a prepayment penalty without investors’ OK can invite a lawsuit.

“Any servicers who service loans for others, as most of us do, are governed by the constraints or the guidelines of the investors who own the loans,” says Carey. “Unless you’re delegated to do something, you have to get approval to do it.”

Industry executives and government officials who designed the initiative think they’ve worked out a solution, though, because these kinds of problems were discussed before all parties, including investor representatives, signed off on the agreement.

“With the investor community on board and as a clear beneficiary of this approach, the risk of litigation should be manageable,” said U.S. Treasury Secretary Henry Paulson Jr., who spoke about the initiative in early December.

6. A rate freeze applies to some, not all, borrowers.
The interest-rate freeze that attracted the bulk of media attention when the president announced the initiative applies only to a specific subset of borrowers: those who are current on their mortgage but don’t have the financial wherewithal to stay current once their interest rate bumps up and can’t qualify to refinance.

The freeze is intended to buy these borrowers time to fix their situation. “There are some responsible home owners who can avoid foreclosure with some assistance,” President Bush said when he announced the initiative. “We don’t want to bail out those who recklessly took out a mortgage they couldn’t afford.”

Thus, home owners who’ve suffered a job loss or a costly medical situation may not be eligible for the freeze; to qualify, borrowers also have to have secured their financing during the eligibility window and be current before their rate’s reset.

The recourse for ineligible borrowers is traditional financial counseling, says Morgan.

7. Traditional remedies are open to the most troubled borrowers.
The last group of borrowers the initiative is designed to address includes home owners who are unable to make their payments even before the rate resets. For these borrowers, servicers have few options other than to find the least painful loss mitigation strategy.

“This is when we shift the discussion to deed in lieu of foreclosure or short sale, because these approaches give customers the opportunity to leave that property without going through the foreclosure process,” says Carey.

If borrowers in this situation first call a servicer rather than a counselor, it’s not uncommon for the servicer to refer them to a counselor before any action is taken. The borrowers might be good candidates for various assistance programs available through counselors.

“A lot of times now, the lender is directly referring the client to the Hope Now hotline, and in turn it gets referred to us,” says Garcia of NeighborWorks. “That’s a good thing.”

Counselors often bring a broader view of possible solutions than the servicer can offer. “We can direct them to organizations that can help them gain more income or help them temporarily with utility assistance. And we can also credit counsel them—help them budget better,” says Garcia.

The most important advice you can give is to encourage borrowers to call the hotline and start the process of seeking a solution to their financing woes.

Carey of Wells Fargo emphasized that servicers can do nothing until borrowers call.

“One of the biggest challenges we have in the industry is being able to even have these discussions that can help them,” says Carey. “That’s why it’s so important that they pick up the phone.”

Potential pitfall: The rate freeze is temporary; borrowers still need to work out a long-term solution

Owners already in default:

Solution:Counseling and a loss-mitigation strategy, such as a short sale or deed in lieu of foreclosure. Under the mortgage debt foregiveness law signed by President Bush Dec. 20, borrowers who receive debt foregiveness as part of a loan workout over the next three years won’t have to pay federal tax on the forgiven amount.

Potential pitfall: Those who don’t call in time may not be able to avoid foreclosure.

Keep it together. Make a quick list of all the documents or statements that were needed to complete your return last year – or call your tax planning professional for a checklist. Use this as a checklist to make sure you have a good start on the documents you may need this year. As you receive tax documents in the mail, grab your checklist, and mark the item as received. Then, keep all of the tax documents together in a large file or envelope marked “2007 TAXES.”

Do the math. The most common mistake on tax returns is bad math—from transposed numbers to downright incorrect data. And with one form leading to the other, those errors can make a huge impact. So even if you use tax software, you’re not off the hook–since they only add the info YOU put in. Double-check entries carefully.

Every last cent. The IRS receives copies of your Form 1099 earnings each tax season. So, they know how much you make in interest and dividend income, and they will use that info to double-check your filing information. Make sure you collect all your earnings statements and document them on your return.

If you sold your home last year, remember to gather all your receipts, paperwork etc on all the improvements you made to the house, you may be able to recoup some of the money you spent on improvements .

Sign on the line. It sounds almost silly, but forgetting to sign a return is actually a fairly common oversight. And the IRS won’t process a return that doesn’t have a signature. So, make sure you sign to avoid resubmitting your paperwork and possibly paying late-filing fees.

Remember, there isn’t a lot of room for error when you’re dealing with the IRS. A slight miscalculation could mean the difference between getting a return and writing a check–or worse, paying a penalty.

I was at a neighborhood coffee shop this morning when Earl sat down and started to chat. Earl has lived in San Francisco for several years now and absolutely loves it. He is originally from the East Coast, in a neighborhood with such a diverse population he wouldn’t want to have it any other way. It was his desire and appreciation for diversity that he and his wife chose to purchase in Bernal Heights.

Bernal Heights… gosh what a wonderful neighborhood.

Earl was reflecting on how the real estate market was when he purchased, with all of the multiple offers, over bidding and thoughts of submitting a preemptive offer just to get ratified on a home. “Boy I’m so glad I don’t have to deal with that anymore.” Then he asked how the market was in San Francisco and if it’s a good time to buy, acknowledging he knows the City is a whole different market and so unlike the rest of California. I of course had to say, “It’s always my goal of keeping informed on the local market and the nation.”

Having read the Top 10 Best Performing Housing Markets in Realtor magazine recently, I was able to confirm just what he had stated. Forbes magazine states San Francisco is in the top 10 performing housing markets nationwide. According to Forbes magazine (11/21/07), here is San Francisco’s 2007 third quarter median home sales price and percentage that prices have risen compared to third quarter 2006; $825,400, and up 7.5 percent.

I must admit, there are homes in certain neighborhoods that have not sold and may very well not do so for several reasons, but they are all on an individual basis. As you know, its location first and well, there are just some locations, you just don’t want to live in, no matter how good the purchase price may be. In general however; homes are still selling, some with multiple bids, over asking, and believe it or not, with preemptive offers to. It’s not to say this is the case on the majority of homes, but it certainly is still happening.

For those of you striving to achieve that American dream now is a good time to purchase a home. Be open to information from your Realtor. Really listen to what they have to share with you via publications, the web or conversation. We are a great source of information and should be used as a tool, especially in your local market.

Good luck to you always, may you achieve that American dream.