So what is new on
the housing market front?
I came across the below mentioned article from a
popular real estate publication. On
the upside, the homeowner, short term, they get to stay in their home. The
caution would be down the road, long term, when the homeowner has paid down the
mortgage to create an equity blanket, but now will have to share that equity
with the mortgage company.
In my view, there could very
well be a tax consequence that may occur for the forgiveness of debt. As a
precautionary measure, get all the facts and have the loan modification
agreement reviewed by a tax professional and our bankruptcy attorney at Steigerwalt Law Firm .
Ocwen Financial
Corporation is giving distressed home owners who owe more than their houses are
worth an interesting option — the company will reduce your outstanding
mortgage, but if your home increases in value by the time you sell or refinance
it, you have to share that profit with your lender.
In Ocwen’s Shared
Appreciation Modification program, the principal of your loan is written down
to 95% of the current market value of your home. The written-down portion is
forgiven in one-third increments over the next three years, so long as you stay
current on the modified mortgage. When you later sell or refinance your home,
you have to share 25% of the appreciation with the investors that own the loan.
You keep the other 75% of the gain.
“Like all
modifications, SAMs help home owners avoid foreclosure,” said Ocwen CEO Ronald
Faris. “But they also restore equity. That’s a significant benefit to the
customer and, we believe, the economy and housing market.”
Ocwen data show an
underwater home owner is one-and-a-half to two times more likely to default on
his mortgage than one with at least some positive equity in his house.
Ocwen launched the
SAM program on a pilot basis in August, 2010. “The results of our initial pilot
were extremely positive — 79% borrower acceptance rate with only 2.63%
re-defaults,” Faris said.
Ocwen has since
ramped up the program and now has regulatory clearance to make it available to
qualified customers in 33 states. “We think this program can make a real impact
on curing the negative equity problem and are working hard to obtain approvals
for SAMs in all jurisdictions,” Faris said.
Ocwen currently services $74 billion in residential mortgages.
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