Recently, Bank of America launched a new program called the Principal Reduction Plan.  According to the plan, people who have home loans with Bank of America and Countrywide and are 60 days or more late on their monthly payments may qualify for “earned principal forgiveness”.  Loans that qualify are, “pay option ARMs, prime two-year hybrid mortgages and subprime loans initially offered by Countrywide. Fannie Mae and Freddie Mac loans will not be eligible”. (Wallet Pop)

Essentially, the purpose of the new plan is to reduce borrowers’ principal balances and to help homeowners avoid foreclosure.  Bank of America promised that it would eliminate, “$3 billion in principal owed by thousands of severely delinquent borrowers who owe more than their homes are worth,” reports the Los Angeles Times.  Many say that the plan came into existence due to increasing pressure from the government for banks to reduce the number of foreclosures and offer assistance to needy homeowners.

“Modifications are better than foreclosure,” said Bank of America executive, Jack Schakett, during a media conference. “The time has come to test this kind of program.”

The new program is expected to launch in May.  At this time, Bank of America says that it has 1.5 million borrowers who are 60 days or more behind on their mortgages.  The bank claims that it will reach out to qualified borrowers, but warns that not all borrowers who have defaulted on their loans will qualify.  Wallet Pop reports that only, “45,000 customers will ultimately qualify for this program.”

Prior to the introduction of the Principal Reduction Plan, banks have tried to combat foreclosures by offering loan modifications.  However, during loan modifications, banks would traditionally lower interest rates, increase loan terms or reduce late fees.  Until now, banks have always been resistant to reducing borrowers’ principal balances.  After realizing that homeowners are considering leaving their homes instead of paying high mortgage payments, banks are being more aggressive and presenting solutions.

The Los Angeles Times says that, “If successful, the plan could become a model for other lenders.”  Should this happen, the fragile real estate market may regain some stability and the number of foreclosures in the United States could decrease – a great win for homeowners throughout the country.  With Bank of America daring to take this huge step and put homeowners’ needs first, it is only a matter of time before other financial institutions feel pressured to follow in its lead.

Read Full Articles:
How Bank of America’s Principal Reduction Plan Will Work (Wallet Pop)

Bank of America to Reduce Mortgage Principal for Some Borrowers (Los Angeles Times)

The government has spent tons to bail out banks during the economic crisis, but according to middle class America, big banks are doing very little to help the average American.  Due to the increase in unemployment and a weak economy, more and more homeowners are finding it hard to make ends meet and pay their mortgages.  In fact, at this time, 6.5 million homeowners in the U.S. are behind on their mortgages.

Despite lofty promises banks made when the government bailout came into play, countless Americans say that they have been given little help and are now on the verge of losing their homes.  Of the 1.1 million Americans that have requested federal assistance, only 168,000 have been helped by banks, the very institutions that promised to give Americans the assistance they needed to recover from economic hardships.

A few days ago, ABC News published a story entitled Whistle-Blower: Banks Give Homeowners the Runaround.  To go along with the story, the news station casted a poll and the results were quite alarming.  According to the poll results, 60% of people feel that banks are not doing enough to help struggling Americans.

ABC News’ story revolves around an insider who works at a very large financial institution.  If you think he is a low man on the totem pole – you are wrong.  The insider reports that he has worked at one of the biggest banks in the U.S. for over 20 years and is a Vice President.  Deeply bothered by the bank’s response to struggling homeowners, the Vice President decided to come forward and discuss how the bank is giving the runaround to people who are in desperate need of assistance.

According to the informant, people who call the bank for assistance with loan modifications or with lowering their monthly mortgage payments are told to call an 800 number.  However, instead of answering homeowners’ questions and lending assistance, bank representatives simply give callers the runaround.

He also told ABC News that, “In our managers meeting, which can last eight or nine hours, we probably addressed mortgage modifications five minutes or less.”  When asked how many loan modifications his bank has completed in the last year, he responded, “Fully completed?  Zero.”

After getting the runaround, many homeowners come to the informant in tears and are deathly afraid.  Not to mention, these homeowners often have to deal with astounding late fees and penalties, as well as the fear of losing their homes.  Each year, it is estimated that banks receive $40 billion in penalties and late fees alone, which proves these institutions are more focused on capitalizing instead of giving much needed assistance.

If the government does not intercede and banks continue to hold all the power, the middle class will continue to face difficult times.  In fact, some question how the middle class will even survive.

If you are finding it difficult to get a loan modification, contact the friendly staff at American Economic Solutions.  We would be happy to work with you and to provide you with dependable help when you need it most!

Watch full story from ABC News: http://abcnews.go.com/WN/saving-middle-class-whistle-blower-banks-helping-americans/story?id=10178938

Up until recently, President Obama’s plan to counterattack the foreclosure crises in the United States was to keep homeowners in their homes.  Now, the plan has changed as the Obama Administration is looking to help homeowners sell their homes at a loss.  Under the short sale program, homeowners that have defaulted on their mortgages will get paid to leave their homes. 

In an article entitled Program Will Pay Homeowners to Sell at a Loss for the New York Times, author David Streitfeld writes, “This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.”  Streitfeld also says that, “More than five million households are behind on their mortgages and risk foreclosure.” 

This alarming number prompted the Obama Administration to launch a $75 million mortgage modification plan, but the initiative was only successful at helping very few homeowners.  For example, in the month of October, 500,000 people tried to modify their home loans, but only 2,000 were successful at obtaining permanent loan modifications (New York Times).

With millions of homeowners in the U.S. on the verge of losing their homes, the government needs to take action or the crises will escalate.  It seems that the government’s response is the new short sale program, which is scheduled to begin on April 5, 2010.  Instead of trying to obtain loan modifications, homeowners will now be encouraged partake in short sales. 

The new plan is supposed to make the short sale process easier for both homeowners and mortgage lenders.  In the past, many homeowners complained that mortgage lenders and banks had made the short sale process an utter nightmare by refusing to accept offers from buyers.  Now, banks will be asked to accept offers, even if they are for less than what they expect.

The program has many benefits for homeowners and communities.  For example, homeowners will not have to worry about incurring damage to their credit ratings because they will avoid foreclosure.  Communities will have less foreclosed properties and instances of vandalism.  Yet, even though there are many pros and a short sale boom seems eminent in 2010, lenders are wary and anticipate fraud.  They also do not want to sell properties at a loss.  To them, it is just bad business and the program presents great risks.

At American Economic Solutions, we think that it is about time that the government passes an initiative that addresses the issues homeowners are confronted with in this tough economy.  So much has already been done to help banks and lenders.  Now it is time to focus on what the middle-class needs, better foreclosure solutions and compliance from mortgage lenders.  We are very excited about the possibilities the new short sale program presents and are looking forward to helping homeowners avoid foreclosure.

If you pay your credit card bills before your mortgage, know that you are not alone.  According to a recent study released by TransUnion, consumers are choosing to pay off their credit card debt before their mortgages. 

Sean Reardon, a consultant with TransUnion and the creator of the study says that, “Conventional wisdom has always been that, when faced with a financial crisis, consumers will pay their secured obligations first, specifically their mortgages.” The study revealed that the number of Americans that chose to pay their credit card bills over their mortgages increased by 68% from 2007 to 2009.  Two states that clearly show bill payment hierarchy are Florida and California (Bills.com).

The team at American Economic Solutions feels that while it may seem like paying your credit cards first is a wise option, it can lead to much greater problems in the long run.   Whenever homeowners stop paying their mortgages, mortgage lenders move quickly to issue foreclosure notices.  And, the reality is that dealing with a foreclosure can be far more strenuous than dealing with a credit card collector.  What is more frightening, receiving calls from creditors or losing your home?  Give this some thought before you skip a mortgage payment.

There are certain things in life that must take priority over others.  At AES, we consider housing and transportation to be more important than paying down credit card balances.  If you find that you are in a compromising situation and cannot afford to pay both your mortgage and your card bills, you should always pay your mortgage first.  You should also seek immediate help from our debt management specialists.  Every day, we meet with individuals who are overwhelmed by debt.  Our team works with our clients to come up with feasible solutions that often prevent foreclosure and enable them to regain control finances.  

If you are struggling with debt, don’t hesitate to get the help you need to reclaim control of your life.  Contact us today to speak with a knowledgeable debt management professional!

On February 8, the California section of Real Estate Rama posted an article entitled “New Research Shows Red-lining in Five California Cities”.  According to the article, predatory lending is hitting cities in California that have a high Latino or African American population.  The article, which cites a report by the California Reinvestment Coalition, asserts that many banks have failed to prevent foreclosures and that there is a high denial rate for home loans amongst the Latino and African American populations.

The report produced by the California Reinvestment Coalition examined the practices of banks, including large mortgage financiers, in five California cities over the past three years.  The cities surveyed were:  Los Angeles, Oakland, Sacramento, San Diego and Stockton. 

After the study concluded, the California Reinvestment Coalition discovered that there were a high amount of predatory home loans and defaults, specifically within the Latino and African American communities.  The study also revealed that the amount of loan modifications and new prime loans were very low compared to other ethnicities and neighborhoods.

The report from the California Reinvestment Coalition brings to light four main points.  First, mortgage lenders in California have saturated communities with high-cost predatory loans.  Second, a large number of foreclosures have resulted from predatory lending practices.  Third, the majority of mortgage lenders are not working with families to prevent foreclosures.  Finally, mortgage lenders are denying home loans and loan modifications to a high number of applicants in the Latino and African American communities.

Kevin Stein, associate director of the California Reinvestment Coalition, said, “The data confirm what we have heard from housing counselors and borrowers—that banks aren’t meeting their commitments to help families stay in their homes, and that this is further destabilizing California communities.”

At American Economic Solutions, we feel these are bad banking practices that must be stopped immediately.  With the number of foreclosures already being so high and California’s staggering unemployment rate, we find it disconcerting that banks are choosing to deny select communities credit. For too long, mortgage lenders have been taking advantage of homeowners’ lack of knowledge. A lot of these mortgages were issued while homeowners were under duress and looking for options. 

The reality is, the government has been taking care of the banks, but banks are not taking care of homeowners. Lenders received billions, if not trillions, in assistance from the government.  Historically, lenders have been very conservative, but they very liberally took the government’s money.  Instead of passing the savings and money onto homeowners who need it the most, they pocketed it, leaving countless people homeless and economically devastated.

Read full story from Real Estate Rama – California….

One of the biggest challenges homeowners are facing in today’s economy is paying their mortgages.  Last year, over 2 million individuals in the U.S. went through foreclosure (RealtyTrac) and in 2010, another foreclosure wave is expected to hit consumers.

Due to the overwhelming amount of foreclosures, many homeowners are pursuing alternatives in order to keep their homes.  One of leading alternative is loan modification programs.  While loan modification programs are known for helping consumers lower their interest rates, increase loan lengths, eliminate penalties and make lower monthly mortgage payments, the sad reality is that many loan modification programs are offered by fraudulent companies that make money y taking advantage of homeowners.

At American Economic Solutions, we know that loan modifications are a viable option for homeowners, but we also know that if homeowners work with the wrong company or fall prey to predatory mortgage lenders, agents or attorneys, they may wind up in worse predicaments.

Therefore, it is important that homeowners work with a loan modification company that:

• Does not charge upfront fees.  At AES, we charge zero advance fees for loan modifications.
• Is legally compliant.  American Economic Solutions is not only legally compliant, but also SB94 compliant.
• Has years of experience.  The AES team has over 20 years of finance, mortgage and real estate experience.  Some of our team member have Department of Real Estate licenses in multiple states and are Certified Mortgage Planning Specialists.
• Has great standing with the Better Business Bureau.  AES has an upstanding history with the BBB.

These are all qualities that American Economic Solutions has.  At AES, we aim to keep our clients in their homes by offering dependable loan modification programs that are effective and ethical.  Contact us today to learn how our loan modification programs can help you save your home.

For more tips on finding the right loan modification company, check our recent article on eHow.

In today’s market, many homeowners are finding it difficult to make their mortgage payments on time.  For this reason, our team has compiled a list of frequently asked questions and answers which may be helpful for people who are behind on their mortgages.

I am behind on my mortgage.  What are my options?
Your options will depend upon your financial situation, length of delinquency and age.   For example, if you are struggling to pay your mortgage because of accumulated late fees and penalties or have a high interest rate, one of our loan modification programs may be ideal for you.  Or, if you are over the age of 62, you may qualify for a reverse mortgage.  Depending on your circumstances, other options may include short sales, bankruptcy or loss mitigation.

I know other people who have filed for bankruptcy.  Is that the best option for me?
Again, in order to determine which option will work best for you, we would have to consider your individual circumstances.  It is true that many people choose to file for Chapter 7 or Chapter 13 bankruptcy when they are behind on their mortgage payments.  While there are several bankruptcy benefits, like having your debts discharged or being able to repay your debts over the course of 3 – 5 years, it is important that you speak with one of our mortgage specialists before you commit to filing for consumer bankruptcy.  Simply put, there may be better options for your situation.

I just received a notice of foreclosure.  What should I do?
Immediately after you have received a notice of foreclosure, you need to take quick action.  The best thing you can do is contact American Economic Solutions and speak with one of our mortgage specialists.  We may be able to prevent your foreclosure and will do everything we can to help you remain in possession of your home.   Our team will review your current situation and provide effective solutions that will enable you to stop foreclosure.  Remember, the sooner you get our team involved, the better your outcome will be.

What should I do if I want to modify my home loan but don’t know where to start?
You can start the loan modification process easily by speaking with a specialist from American Economic Solutions (AES).  We are a trusted company that has completed hundreds of loan modifications.  With our help, you will avoid scams, pay zero advance fees and have the comfort of a 100% money back guarantee.  We will work closely with your lender to come up with the best mortgage terms possible.

What if I believe I was a victim of a loan modification scam?
If you have been a victim a loan modification scam, you should report the company you worked with to the Better Business Bureau.  You can also file a complaint with your state’s Attorney General’s Office.

For further assistance, contact our team today!

On December 4, 2009, Time featured an article entitled “Why the Loan-Modification Program Isn’t Working” by Barbara Kiviat.  In the article, Kiviat’s stance is simple – the loan modification program is faulty because it does not address the core issue homeowners are facing in this weak economy – lacking paychecks.

In numerous states, the unemployment rate is over 10%, which means that more Americans are without jobs than ever.  Without jobs, people do not have the financial resources to pay their mortgages, even with President Obama’s new loan modification program. 

According to Kiviat, at the close of November 2009, the departments of U.S. Treasury and Housing and Urban Development (http://www.hud.gov) announced, “they would no longer take kindly to mortgage firms that don’t make modifications lasting.”

Historically, mortgage firms were offering short-term or trial loan modifications to homeowners.  In order to qualify for permanent loan modifications, homeowners had to make it through a three month probationary period.  Kiviat writes, “More than 650,000 borrowers have been placed in trial modifications, but as of September, fewer than 2,000 had become permanent.”  With the new loan modification program, the government has one objective – to make loan modifications long-term. 

Still, even with permanent loan modifications, Americans will struggle to pay their mortgages if they do not have jobs or the financial means to keep their homes.  Kiviat says, “While an out-of-work person can, theoretically, get a loan modification under HAMP by proving eligibility for at least nine months of unemployment benefits, the program isn’t set up to handle someone without a regular stream of income.”  Therefore, the overall effectiveness of the newly launched initiatives are questionable and remain to be seen.

At AES (American Economic Solutions), we believe that homeowners can get affordable and lasting terms for their loan modifications when they work with mortgage professionals that understand their financial situations.  Contact us to discuss our no advance fee loan modification programs!

Read full story from Time…

Most homeowners assume that once foreclosures are completed, they are “free and clear” and may begin to rebuild their lives without receiving collection notices from their mortgage lenders.  Yet, there is a term that is spreading like wildfire in the mortgage industry and that term is “deficiency judgment”. 

A deficiency judgment is a lien that is filed against a homeowner whose foreclosure sale did not generate sufficient funds to repay the amount the homeowner owed on his or her mortgage.  Mortgage lenders file liens against homeowners to collect remaining balances well after foreclosure sales are completed.

According to a recent article written by Les Christie for CNNMoney.com, “Former homeowners may still be on the hook if there’s a difference between what they owed on their mortgage and what the bank could sell it for at auction.”  Christie also says that, “”deficiency judgments” are ticking time bombs that can explode years after borrowers lose their homes.”

In 30 U.S. states, mortgage lenders are allowed to file deficiency judgments, making foreclosure a never-ending nightmare for some unfortunate homeowners.  Even homeowners who are responsible are not immune from these judgments.  Christie writes, “ 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.”  Christie goes on to say, “As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.” 

Mortgage lenders will consider numerous factors before they decide to pursue deficiency judgment, like where the homeowners live and if the homeowners have second mortgages.  In the event of a short sale, a homeowner may ask the mortgage lender for a formal release form financial obligations, but many homeowners are unaware that they must request releases.  This lack of knowledge can cost homeowners down the road.   

At American Economic Solutions (AES), we know that lack of knowledge can come back to haunt homeowners with foreclosed properties, especially when deficiency judgments are involved.  We strongly encourage homeowners to obtain professional help from our mortgage specialists when they are dealing with foreclosure so they can avoid liens, like deficiency judgments, in the future.

Read full story from CNN Money…