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Ocwen Financial Corporation, a leading mortgage servicer, has launched an
innovative loan modification program. The program, Shared Appreciation
Modification, will help homeowners who are underwater with their mortgages.
The program writes down a homeowner's principal balance to 95% of market
value. Thus immediately creating equity of 5%. The amount that is written down
is forgiven over a period of three years. This amount is in three equal portion.
One of the conditions stipulates that the homeowner must remain current with the
mortgage over the three year period.
Ocwen makes their money when the house is sold or is refinanced. The
company collects 25% of the amount appreciated. In other word if the house
appreciates $20,000 then Ocwen get $4,000. In addition, it makes money on the
interest rate charged on the mortgage.
The pilot program was launched back in August 2010. So far it has garnered an
approval rating of 79% from homeowners, and less than 3% of borrowers
re-default.
SAM is now set to be offered in 33 states. If the program continues to be a
success, there will be less foreclosures in many communities across the nation.
Concerns about the Shared Appreciation Modification program.
There are three issues that potential borrowers should have addressed. The first
is a silent second mortgage. Can Ocwen register a second mortgage on the
house if a payment is missed during the first three years? The second is the trial
period. How long is the trial period and when does the homeowner get a
permanent loan modification? And finally, the third issue is the prepayment
penalty. If the homeowner is fortunate enough to get a windfall of money, and
decides to pay off the mortgage, how much is the penalty?
This program has good benefits. The concept has been around in the early
1970s. It faded for a few years. Then it appeared again in the 1980s. Back then
money was given to a buyer as a down payment in return for some equity in the
property. The donors were non-profit community groups, friends or family
members.
The main difference between Ocwen's SAM and the "old" model, is that the old
version was to help people get a house. Ocwen is helping them keep a house.
innovative loan modification program. The program, Shared Appreciation
Modification, will help homeowners who are underwater with their mortgages.
The program writes down a homeowner's principal balance to 95% of market
value. Thus immediately creating equity of 5%. The amount that is written down
is forgiven over a period of three years. This amount is in three equal portion.
One of the conditions stipulates that the homeowner must remain current with the
mortgage over the three year period.
Ocwen makes their money when the house is sold or is refinanced. The
company collects 25% of the amount appreciated. In other word if the house
appreciates $20,000 then Ocwen get $4,000. In addition, it makes money on the
interest rate charged on the mortgage.
The pilot program was launched back in August 2010. So far it has garnered an
approval rating of 79% from homeowners, and less than 3% of borrowers
re-default.
SAM is now set to be offered in 33 states. If the program continues to be a
success, there will be less foreclosures in many communities across the nation.
Concerns about the Shared Appreciation Modification program.
There are three issues that potential borrowers should have addressed. The first
is a silent second mortgage. Can Ocwen register a second mortgage on the
house if a payment is missed during the first three years? The second is the trial
period. How long is the trial period and when does the homeowner get a
permanent loan modification? And finally, the third issue is the prepayment
penalty. If the homeowner is fortunate enough to get a windfall of money, and
decides to pay off the mortgage, how much is the penalty?
This program has good benefits. The concept has been around in the early
1970s. It faded for a few years. Then it appeared again in the 1980s. Back then
money was given to a buyer as a down payment in return for some equity in the
property. The donors were non-profit community groups, friends or family
members.
The main difference between Ocwen's SAM and the "old" model, is that the old
version was to help people get a house. Ocwen is helping them keep a house.
Company Will Modify Your
Mortgage And Reduce The
Principal If It Can Share The Equity
Mortgage And Reduce The
Principal If It Can Share The Equity
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