According to AZCentral.com, "CMBS loans are often tricky to modify, because the original issuer of the loan is no longer involved and the beneficiaries are individual and institutional investors, often scattered across the globe.
Once in default, a CMBS loan usually is managed by a loss-mitigation specialist known as a special servicer. Kopp said it's easy for commercial-property owners to get discouraged when trying to obtain a loan modification from a special servicer, because the negotiation process can resemble talking to a wall.
Kopp, who has 10 years' experience in the commercial-real-estate industry, said special servicers were essentially limited to accepting or rejecting the borrower's offer. They usually are prohibited from making a counteroffer or disclosing why a borrower's offer was rejected.
As a result, borrowers often give up after a couple of rejected offers, he said.
With about $36.5 billion in CMBS loans issued in Arizona and little improvement in the value of commercial real estate, Arizona could be headed for more serious economic problems if a high percentage of CMBS loan defaults end with foreclosure.
About $3.5 billion of CMBS loans in Arizona already are in default, Kopp said.
Nationally, the value of outstanding CMBS loans is $800 billion, Kopp said.
More than 60 percent of those loans were issued between 2005 and 2007, when commercial real estate was heavily overvalued, he said. Most commercial-mortgage loans don't face a serious risk of foreclosure until they reach maturity, usually after 10 years, said Jeff Boyd, a director at 1st Service Solutions.
That means the foreclosures seen so far among commercial properties barely scratch the surface of the problem, Boyd said.
"Absolutely, the worst is yet to come," he said.
But the situation isn't hopeless, according to Kopp and Boyd. For a fee, their company will structure a loan-modification proposal based on deals special servicers have accepted in the past.
While 1st Service Solutions' business model is relatively unique, it isn't the only company in Arizona that has successfully prevented a CMBS loan from being wiped out by foreclosure.
In a landmark case decided in 2010, a Maricopa County Superior Court judge held that San-Diego-based receiver Trigild Inc. could sell seven Arizona apartment complexes formerly owned by the Bethany Group of Irvine, Calif., without requiring the assigned special servicer to foreclose on the properties.
Bethany Group had financed the purchase of the seven apartment properties with a $164.5 million CMBS loan in 2007 and subsequently defaulted on the loan.
By allowing a new buyer to assume the CMBS loan, rather than wiping out the debt and forcing the buyer to pay cash, the court protected bond holders connected with the loan and prevented the seven apartment properties from losing at least $50 million in combined value, Trigild representatives said at the time.
Since 1st Service Solutions' Scottsdale office opened, Kopp said, it has negotiated $70 million in CMBS loan restructures and modifications using a variety of methods, including discounted payoffs, interest-rate reductions, forbearance agreements and extension of the original loan terms, Kopp said.
In all, the company's Arizona office has been engaged to modify or restructure $262 million in CMBS loans, with many still in the negotiating process.
Unless more commercial-building owners can work out deals with their lenders to avoid foreclosure, the real-estate and lending crises are likely to continue for years to come, Kopp said.
Investment funds and pension plans, too, will suffer if more CMBS loans cannot be modified, he noted.
Because of its early successes with obtaining commercial loan modifications, 1st Service Solutions has been expanding quickly, Kopp said.
Nationally, the company has doubled in size over the past 18 months, with 30 percent growth in the past four months, including the addition of two new senior executives.
It plans to hire three more asset managers within the next two months, Kopp said."
According to Newswire, "As the nation's largest banks are paying multi-billion dollar settlements and being investigated by Attorneys General and other regulators, many of their servicing problems and abuses continue to hurt homeowners. A new report by the California Reinvestment Coalition (CRC), "Race to the Bottom: An Analysis of HAMP Loan Modification Outcomes by Race and Ethnicity for California", reveals that California homeowners are having trouble accessing sustainable home loan modifications, and that borrowers of color are disproportionately facing specific problems that are making it more difficult for them to access modifications. The report analyzes recently released data from the Treasury Department about the HAMP program, in conjunction with CRC's April/May 2011 survey of nonprofit housing counselors.
The findings of the report suggest that modifications are still hard to come by, and that servicers have not corrected many of the problems that have led to investigations of foreclosure abuses.
-- Of 568,630 borrowers requesting loan modifications in
California, 46% were denied immediately. A mere 23% of those
who applied received a permanent modification. The other third
of the applicants were either stuck in aged trial modifications
or had their modifications cancelled.
-- Principal reductions are nearly impossible to receive. In Los
Angeles and Fresno, for example, only 5% of loan modifications
included some degree of principal forgiveness.
-- An astonishing 94% of housing counselors reported that
homeowners are losing their homes while negotiating for a loan
modification with their servicer (the "dual track" problem).
-- Much of the data released from Treasury was incomplete or
inadequate for true transparency.
"The new data, along with the latest survey of housing counselors in California, confirm that things are tough for all families trying to avoid foreclosure, but it may be tougher for borrowers of color," said Kevin Stein, CRC's Associate Director and author of the report. "Federal and state regulators need to ensure that banks give all borrowers a fair chance to stay in their homes."
Racial disparities were evident in various dimensions of the HAMP data.
-- "Incomplete modification requests" was the most frequent reason
for trial modification cancellation, but borrowers of color had
the highest share of cancellations for this reason. In Fresno,
Latinos and African Americans had trials cancelled for this
reason 47% and 44% of the time, compared to 37% of white
borrowers.
-- The issue of servicers losing documents several times persists.
One housing counselor reported that a loan servicer rejected a
modification application because it was in Spanish.
-- In Los Angeles and Sacramento, African Americans
disproportionately had their trial modifications cancelled for
the reason "not accepted by borrower". This seems unusual, and
raises concerns that servicers are steering applicants to less
favorable non-HAMP modifications.
As the state Attorneys General investigation and regulator investigations ensue, these persistent problems and inequities should be investigated and corrected in any settlement with loan servicers. The report includes a series of policy recommendations that would create real protections for homeowners seeking loan modifications. "
according to mysanantonio.com "I am writing this for my son. He is divorced, and his ex-wife signed their home over to him as they were underwater and had no equity in the home. However, his mortgage payment is based on two incomes.
He applied for a loan modification under a “hardship” rule and sent in all applicable paperwork. After four months he was told that he qualified.
His lender then said it misplaced his paperwork and he needed to resubmit all of it. Finally, last December, he received word that he did qualify for a loan modification and needed to make three of the lowered payments (in January, February and March) on time and he would receive the “final-final” paperwork.
He did all this, and then in April, the bank sent him a letter denying his loan modification application.
There is no way he can make his house payment. He is beside himself. It is against his principles to “walk away” from this mortgage, but he feels he has no choice. Do you have any advice? Last year, my daughter was fortunate to have gotten a loan modification.
Thank you for your help. None of this makes any sense, and it is a sad situation for so many people.
A: Unfortunately, your son isn't necessarily entitled to a permanent loan modification, despite being approved on a temporary basis. If the bank thinks it will make more money by foreclosing, then that's what it will do. The bank doesn't have to think about what's in your son's best interest or whether his loan is affordable.
It sounds as though your son was actually approved for a temporary loan modification. Back in 2008, 2009 and most of 2010, temporary loan modifications were granted with (and sometimes without) a brief look at the documents. But the banks would then go through those documents with a fine-tooth comb.
President Barack Obama said that if troubled homeowners made the three temporary payments on time and in full, they would be approved for a permanent loan modification. Unfortunately, this wasn't true. The loan modification program has been a voluntary program, and the banks decide who gets a loan modification. Some banks have been slightly better than others about helping consumers, but overall the loan modification program has only helped a small fraction of borrowers who applied.
It sounds as though your daughter was lucky. As for your son, while his wife signed over her share of the property, unless your son refinanced the mortgage (unlikely), she is still on the loan note. That means her credit will be trashed along with your son's credit if he stops paying the mortgage and does a strategic default, allowing the home to fall into foreclosure. So it's in her best interest to help your son find a solution.
While your son feels that he is betraying his principles, he may not have any choice. The economy is extremely tough and there are a lot of folks who would rather be paying their mortgages even if the property is underwater. That doesn't seem to be an option for him.
If your son truly can't afford the payments, he might consider a short sale. That is, he could market the home for sale and the bank would accept whatever comes from the sale to pay off the debt owed on the loan. While your son would be short on the amount owed to the bank, he could move on to a home that might be more affordable to him. He could even consider renting for a while.
If he believes he has been rejected unfairly for a loan modification and if he seems to qualify under the rules at the government's MakingHomeAffordable.gov site, he should complain to his lender's regulator. If he is working with one of the big banks (Bank of America, Wells Fargo, Citibank or Chase), then he'd want to file a complaint with the Office of the Comptroller of the Currency, which regulates those big banks. The website is HelpWithMyBank.gov.
Finally, I have to agree with your last point: None of this makes sense. But the banks (not to mention the government) never expected the country to still be mired in a housing depression two years after the recession technically ended. But it is, and there are millions of homeowners who are walking the same mile as your son. It is a sad situation, and I wish there were a better answer for you and your son."
According to sfgate.com, "Struggling homeowners desperate to avert foreclosure seem like easy prey to some scam artists, who charge money to help them get loan modifications and then don't deliver, according to consumer advocates who say the problem is particularly acute in California.Bay Area attorneys in June filed one of California's first class-action lawsuits against alleged loan-modification scammers, although one of the defendants says he was also a victim.
"The complaint alleges that these individuals abused the trust (of the victims) to take advance fees for work that either was never performed or performed in a manner that had little to no chance of success," said James Zahradka, supervising attorney at the nonprofit Law Foundation of Silicon Valley.
It filed the lawsuit in Santa Clara County Superior Court, along with the Lawyers' Committee for Civil Rights Under Law, a Washington nonprofit, and Orrick, Herrington & Sutcliffe, a law firm whose Menlo Park office is working on the case pro bono."
according to the Birmingham times, "As part of its effort to preserve homeownership for more working families in Birmingham and surrounding areas, today Neighborhood Housing Services of Birmingham (NHSB) wanted to remind homeowners of the warning signs of a loan modification scam and where to report scam artists, during National Homeownership Month.
Because millions of homeowners nationwide have worked hard to achieve homeownership, every effort must be made to inform struggling homeowners about scam artists. These unscrupulous companies or individuals promise to help homeowners save their home, but in fact take their money for doing nothing, or worse, take their home.
“Loan modification scam artists are relentless. They will use every trick in the book to prey upon homeowners. Because loan modification scams aren’t always easy to spot, we wanted to remind Birmingham residents about the warning signs so they can avoid getting scammed, and avoid losing their money, or losing their homes,” said John Colón, Executive Director of NHSB, a local NeighborWorks organization.
The warning signs include:
A company/person asks for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage. They may pocket your money and do little or nothing to help you save your home from foreclosure.
A company/person advises you to stop paying your mortgage company and pay them instead. Despite what a scammer will tell you, you should never send a mortgage payment to anyone other than your mortgage lender. The minute you have trouble making your monthly payment, contact your mortgage lender.
A company/person guarantees they can stop a foreclosure or get your loan modified. Nobody can make this guarantee to stop foreclosure or modify your loan. Legitimate, trustworthy HUD-approved counseling agencies will only promise they will try their very best to help you.
A company claims to offer “government-approved” or “official government” loan modifications. They may be scam artists posing as legitimate organizations approved by, or affiliated with, the government. Contact your mortgage lender first. Your lender can tell you whether you qualify for any government programs to prevent foreclosure. And, remember, you do not have to pay to benefit from government-backed loan modification programs.
If you or someone you know has been scammed, please take action and report the scam and scam artist to the following resources:
Call the Homeowner’s Hope Hotline: 1-888-995-HOPE (4673) Assistance is available in 20 languages upon request.
File a complaint online through the Loan Scam Prevention Network. Submit an online complaint form in English, Spanish, Korean or Chinese via www.loanscamalert.org.
Call the Federal Trade Commission (FTC) at 877-FTC-HELP (1-877-382-4357) or submit your complaint online in HYPERLINK “http://www.FTC.gov/complaint”English or in “http://www.FTC.gov/queja”Spanish.
June is National Homeownership Month. Throughout the month, NHSB is highlighting the important role that informed, prepared and engaged residents play in healthy communities through long-term, affordable homeownership."
according to contra costa times, "She soon learned that her troubles had just begun.
Weeks after making her first payment under the new rate, the school district staffer began receiving past-due notices, documents showing wildly inaccurate loan balances and letters threatening foreclosure. She now fears she'll lose her home.
"How can they take away what I have worked so hard for?" Campusano said.
Campusano is one of two named plaintiffs in a proposed class-action lawsuit alleging breach of contract by Bank of America and subsidiary BAC Home Loans Servicing.
The suit, which was filed in Los Angeles federal court because BAC is in nearby Calabasas, is among a growing number of legal complaints accusing banks of disregarding what should be binding agreements to reduce the monthly mortgage payments of troubled borrowers.
The suits involve permanent modifications through the U.S. Treasury-administered Home Affordable Modification Program, which offers incentives to loan servicers who extend modifications, as well as so-called proprietary modifications, which banks offer independently of the government guidelines.
They represent a new wave of complaints against banks that have already weathered years of criticism for their reluctance to modify loans and for foreclosing on borrowers after offering them
trial modifications.
Some have faced lawsuits alleging that the foreclosures amounted to a violation of the deal they struck with the government when they accepted funds from the $700 billion Wall Street rescue.
And earlier this month, Treasury officials announced it was withholding incentives from Wells Fargo, Bank of America and JPMorgan Chase for incorrectly determining that many borrowers were ineligible for HAMP modifications, a claim that the banks denied.
Recently, though, government officials and mortgage lenders have been touting statistics showing an increase in the number of modifications being extended.
The Treasury said in its April HAMP report, the most recent, that 70 percent of the trial modifications initiated since June 1, 2010, under the program's guidelines have been made permanent, up from 42 percent for trials started before that date.
Meanwhile, the Hope Now group -- an association of large banks, mortgage servicers and others -- reported that its members had modified 1.8 million loans in 2010, up from 1.2 million modifications in 2009.
But even as troubled borrowers increasingly manage to pry modification deals from reluctant banks, they're finding that problems persist long after the ink dries on their new loan contracts.
The Connecticut Fair Housing Center looked at 655 mortgage modifications granted in recent years to clients of partner organizations in 10 different states and found that nearly a quarter were having problems with inaccurate balance statements, erroneous default notices and other issues.
Campusano's lawsuit cites remarks from an unidentified former call center worker who said staff received bonuses for collecting more than was due under the modification deals. Attorney Shennan Kavanagh declined to make the worker available, but said the worker would testify or provide a declaration if needed during trial.
However Tracey Seslen, a real estate finance professor at the University of Southern California's Marshall School of Business, said the banks are probably just overwhelmed.
"There's not the kind of manpower for the quality control that's needed to make sure these things don't happen," he said.
Whether the problems are due to clerical errors, lack of oversight or something nefarious, the impact on homeowners is severe.
Julie Lewis, a 53-year-old mother of four, modified her contract with CitiMortgage for her Staten Island, N.Y., home after getting a divorce and suffering injuries in a car wreck that kept her from working.
In October 2010, after accepting her modified payments for more than six months, CitiMortgage told her the modification had been denied, according to documents filed as part of a federal lawsuit in New York.
Bank agents now visit her street to take pictures of her home or hang fliers on her doorknob demanding that she call to discuss purportedly late payments.
"The banks act like bullies," Lewis said.
CitiMortgage spokesman Mark Rogers said legal restrictions kept him from discussing Lewis' situation.
Also in Staten Island, Merab Abdaladze and Tamar Bibishvili are having problems getting Chase to recognize a HAMP modification that it made permanent in September 2010.
After accepting the couple's first payment under the modified plan, the bank said the modification was invalid and stopped cashing their checks, according to a motion filed with New York state court. Chase lawyers have since assured the couple's attorney the modification was valid, but the bank still returns their checks uncashed.
Chase spokesman Gary Kishner said he could not comment on pending litigation.
And in the Seattle suburb of Issaquah, Nathaniel and Emily Perrone, both 29, saw a missed payment notice appear erroneously on their account statement soon after BAC approved their permanent modification in October 2010.
BAC customer service staffers have repeatedly assured Nathaniel Perrone that the charge was a mistake, but it remains on the account eight months later, along with late fees.
Bank of America spokeswoman Shirley Norton declined to comment on the cases involving the Perrones or Campusano, who are co-defendants in the proposed class-action lawsuit.
Campusano's problems began when she sought to modify a loan she refinanced years earlier to finish repairs to her Victorian-style home in Lawrence, Mass.
The 44-year-old single mother said she wanted to reduce her housing expenses because she was about to begin repaying a graduate school loan and had recently taken in a niece and nephew after the death of her sister.
Campusano made all of her payments under the modification she was granted in April 2010, but three months later received an account statement that misidentified her mortgage as being an interest-only loan. Over the following months, she was sent bills demanding late fees for payments she never owed.
In November, when she called the bank to ask about letters she received threatening foreclosure, she was told that she was actually ahead on her payments, according to the lawsuit. But the next month, she received four separate foreclosure notices, each giving a different figure as her monthly payment amount."
