Now there is a source for Boise peer to peer lending, or p2p lending as it’s sometimes called. Right here in the Treasure Valley, you can hook up with peer to peer lenders and even venture capital firms and angel investors who are interested in getting a better return on their money than the banks can give them.

{jumi [*3]}

Here at Peer to Peer Lending is a good place to start if you’re looking for short term peer to peer loans in the Boise, Idaho area.

“HOPE NOW is a waste of time!” she exclaimed. Now granted, I don’t get calls from any of HOPE NOW’s satisfied “customers.” She goes on to tell me the usual story about HOPE NOW, and how they did very little to help her solve her problems. “All they did was take down my monthly budget numbers and pass them on to the lender. I never heard from them again.”

The homeowners who call me typically have real problems, a legitimate hardship and are dealing with issues that require a little more attention than simply logging financials and passing them on to the lenders. When homeowners like this contact HOPE NOW, they’re often more than a little “peeved” at the results they get from that organization.

HOPE NOW published its December numbers and announced that for the first time since July of 2007, loan modifications accounted for more than half of all workouts. In an age when getting a loan modification is easier than at any time in human history, they’re beating their chest about beating coin-flip odds.

The other interesting piece of information:

                             ONLY 37 percent of prime borrowers who received workouts 
                                            completed a loan modification.

I’d bet that their recidivism rate is also higher than the industry average.

I’m certain that this number has a lot to do with the fact that the GSE, FHA and VA loans are less inclined to offer loan modifications than sub-prime.

Despite this resistance, a 37% loan modification rate is absolutely deplorable. I suggest that the main reason that the loan modification rate is so low is because they’re working for the lenders, not the borrowers.

Based on my interactions with people associated with HOPE NOW, and the experience I have in dealing with homeowners who were not helped by the organization, here are my observations:

1- HOPE NOW is basically running a mail-forwarding service. If you’d prefer to call them, they’ll forward your info to your lender if you’d like. That’s about it, though.

2- While they may call their telephone operators “counselors,” don’t expect any counseling. I suppose it depends on how you define the word “counseling.” If you mean, “administer advice to assist you in reaching your best outcomes,” you’re barking up the wrong tree [See point #3].

3- Because they’re originated and funded by the mortgage industry, they’re working on behalf of the lenders. Therefore, they offer little of value beyond what you could get by contacting your lender directly.

4- They’re best at solving “small” problems. If you’ve had a slight mishap but your financial situation is back to normal, it may be easier to work through them than directly through your lender.

5- Once they’ve submitted your information, don’t expect them to do any follow-up afterwards.

6- Once they’ve submitted your information, you’ll most likely go back to dealing directly with your lender.

7- If you’re looking for someone to act on YOUR behalf, to help you obtain the best terms possible, or to help you deal with financial difficulties, you’d best look elsewhere.

HOPE NOW advertises itself as some sort of outreach program, perhaps you’ve seen their ads, “Nothing is worse than doing nothing.” Some who’ve called HOPE NOW might disagree.

HOPE NOW fills a valuable role: they provide secretarial resources for the mortgage servicers. And they provide this service to the lenders at a very low cost. 

If this helps some borrowers to avoid falling through the cracks of a poorly-executed loss mitigation system, there is a lot of value in that function.

But for homeowners looking for an advocate who will serve their best interests, HOPE NOW is not the answer.

Hey… what do you want for free?

If you understand that you get what you pay for and are looking for someone to work with you on YOUR behalf and not your lender’s, go here for a better solution to avoid foreclosure.

I don’t often comment on topics like this, but I just saw Shepard Fairey on the “Colbert Report,” and learned that he was the artist who created the iconic Obama Hope poster.

This is the very poster that young kids were getting in exchange for helping people to register to vote, and work for the Obama campaign.

Colbert asked him if he’d made a lot of money on the poster and he indicated that he hadn’t but that, “I benefit in other ways,” one of which was that Obama was elected president.

Here’s the irony: Obama outspent McCain by 3-to-1 or more, yet the artist who created the very symbol that’s synonymous with his campaign was paid little to nothing.

I do respect his choice. My question: Is this indicative of what’s to come? While I’m sure there will be many who will commend the artist for his contribution, I can assure you that others made fortunes as a result of this campaign. Will this level of sacrifice be held up as a shining example of what will be expected of others? I am of the belief that someone who contributes value should be compensated. I would have rather seen him create a foundation and let HIM decide how that money was spent if he didn’t want to accept personal compensation. This model seems in line with the “from each according to his ability, to each according to his need” philosophy. 

Shepard Fairey also is the man who created the “Obey” giant, which Colbert asked him about. He replied that people often follow the past of least resistance and that they often do what they’re told to do, rather than think through their choices. He created this icon to encourage people to decide whether they should do what they’re told to do and “Obey” or if they should do what they decide is right for them.

He said, “This country was founded on dissent, and when people don’t dissent when they need to, things go wrong [like they did in the last 8 years].”

I agree wholeheartedly with his premise for this campaign.

Here’s the supreme irony of the Shepard Fairey story: A man who firmly believes in dissent helped to elect the man who may expand government’s influence more than any other president in the history of this country.

Fortunately, Shepard Fairey was able to decide for himself how he wanted to be compensated. Sadly, many of his countrymen may soon be unable to do the same.

Obey, indeed.

A very important consideration when you’re trying to prevent foreclosure is your loan-to-value ratio. This is the measure of what you owe on the home, versus what it’s worth.

This is one of the reasons I ask potential clients what their home is worth. It’s important to make a clear-headed decision on these matters. And taking into account the LTV is an important part of the decision making process when you’re trying to prevent foreclosure.

We’ve grown accustomed, over the last few decades, to having LTV’s that are less than 100%. For years, it’s been assumed that “everyone” had some equity, and it was rare to owe more than your house was worth (at least when you considered the overinflated appraisals that were being issued for the last 8-10 years). But nowadays, many people owe more than their home is worth.

According to an extraordinary article by John Lounsbury, this situation is going to get worse. He says, “It has been estimated that 19 million mortgagees will owe more than their house is worth by 2010. This is 50% of all mortgages.”

This should not surprise anyone, as the general trend is downward, and people are finally waking up to the fact that spending half of your GROSS income on your housing payment is idiotic. Frankly, even the the ratios that Fannie Mae now finds acceptable are absurd.

It’s clear to me that many, many Americans are completely rethinking their spending- what’s worthwhile, what’s not. No asset class or market segment is immune to this mindset.

However, despite popular opinion, many homeowners are much more likely to want to prevent foreclosure and keep their homes, even when they know that they owe more than the home is worth. My experience is contrary to the mythical “ruthless homeowner” who consciously decides to stop making mortgage payments because he’s upside down on his mortgage, rides out a foreclosure and sends “jingle mail” to his lender.

My expectation is that housing still has another 20% to fall from where it stands today.

So, if that’s my key assumption, then why does it make any sense to try to prevent foreclosure and keep your home?

Great question. Here’s my theory.

In my experience, the mortgage industry has an extremely feeble hold on the pulse of the market. I have seen that pretty consistently, the mortgage industry is 18-24 months “behind the curve” when responding to changes in market conditions. Today, they’re “solving” problems that ideally would have been acted upon a year and a half ago.

The level of denial amongst mortgage investors is equal to that of the very homeowners who are trying to prevent foreclosure. I spoke to a very well-connected former GSE official and I was shocked at the fact that while he had a good command over current facts and figures, and had pretty lousy expectations for the economy going forward, his ideas for how to address the problem were completely ignorant of falling housing prices. While he was cognizant of the current situation, his “solution” to the problem of recidivism flew in the face of the facts.

So it’s going to take some time before the mortgage industry really deals with the problem of handling underwater assets. Right now, they’re focusing on how to keep homeowners in homes (to some degree), and deciding on which homeowners to boot out right now.

What they’re really doing is kicking the can down the road. At some point, when the homeowner wants to move, dies, takes a job transfer, can’t afford the less unaffordable, “streamlined” loan modification payment (redefaults?), the day of reckoning will arrive and they’re going to have to figure out how to handle these losses. Because losses will be taken, one way or another.

My expectation is this: in another 24 months, the mortgage lenders will come up with some way of dealing with this issue. It’s not that they’ll want to; they’ll be forced to accommodate reality. To a large degree, they already are, as they’re taking on a fair amount of short sales right now.

“Moral hazard” or not, they’re going to have to make provisions for the homeowner who’s current on payments, but will not pay off the loan in full with a market-value sale. And if they’re going to require the sellers who’ve met their monthly obligations to “pony up” and cover the difference or sign some sort of unsecured note, they’re going to have a hell of a lot of homeowners who just default several months before their move, make no attempt to sell the home, and let the REO division handle it.

The increased losses of that approach will bend the lenders’ philosophy to a more pragmatic solution.

With that in mind, if you owe more than your home is worth but you’d still like to prevent foreclosure and keep the home, here is my advice:

1- Determine how much your home would REALLY sell for in this market

2- Knock off another 20%

3- If you’re comfortable with that- and you buy into my theory- then have your financials reviewed by someone who works in this industry BEFORE you approach your lender

4- Have your loss mitigation package prepared, and begin the loan modification review process

If you really enjoy your home and you intend to stay there long-term, just realize that you’re not going to be seeing any price appreciation for quite some time. Now is the time to begin focusing on paying down your debt, re-structuring your financials, and building up cash reserves… not riding the real estate bull.

Some will say, “Well, then you’re just renting.” And I would agree. But what’s the alternative? Rent  somewhere else? Not so fast. If you live in a home at the median value or above, just how likely are you to find a comparable property available for rent? The vast majority of homes for rent are BELOW the median value in any given area. Furthermore, what few units may be available to rent will face significantly increased demand from other foreclosure refugees. And, you’ll be constrained in any changes you may want to make to the property, subject to inspections and a much lower level of privacy and choice.

Oh, and if you think, “Well, I’ll just rent for a few years and then I’ll buy another home in a few years,” I’ve got some questions for you. How do you know? Do you expect it to be easy to obtain a loan? Credit’s been tightening for awhile now, and there’s a lot of clamoring to increase the size of required down payments. Do you have the self-discipline to save 5-10% of the purchase price in just a few years? What if they reduce the debt ratios for future borrowers, and they’ll only allow you to spend 28% of your monthly income on a mortgage payment… or even less? Then what?

Let’s do some simple math. For simplicity’s sake, let’s say that you plan to walk away from your current home, and you think you’ll be able to buy a comparable home for $100,000 in two years. That means you’ll need to save $5,000 in two years. Since savings accounts aren’t paying anything, the entire down payment will come from your contributions. $5,000 / 24 months is $208 every single month. Do you have the self-discipline to save that much each and every month? And not spend it on anything else? I think a lot of people would say, “Yes, I can.” I would say that most Americans can’t. How do I know that? Because very, very few Americans have $5,000 in the bank right now. So you’ll have to do some serious behavior modification if this is your plan. You’ll also have to hope that they don’t require more than 5% as a down payment. You’ll also have to hope that interest rates don’t rise significantly, as many are expecting.

So, if your plan is to cut your home loose and replace it later, you’re going to have to hope that a LOT of factors go your way. If just one of those factors goes against you, your plan may be foiled.

So there’s your choice. You may not like your options, but if you weigh the factors intelligently, you’re more likely to make a better long-term decision. Take all of these factors into consideration before you decide whether it’s better to cut your current home loose or prevent foreclosure and keep your home.