States urge OCC and OTS to push for affordable mortgage modifications
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States urge OCC and OTS to push for affordable mortgage modifications

February 5, 2009

The three Ds of foreclosureJeff Mifsudforeclosure, mortgage payments, Federal Housing Administration, FHA, sub-prime, Mortgage Seminars LLC
I must admit, I really didn't want to start off the year with
the topic of foreclosures! However, given how many loan originators
throughout the country are seeking advice on how they can assist
past clients who are currently struggling to make their mortgage
payments, I decided to go ahead and address the topic and offer
some resources that can help you to help them.
As any regular readers of my column well know, I specialize in
Federal Housing Administration (FHA) loans and training loan
originators and mortgage companies on how to do them. I've also
spent a lot of my time with clients who have come to me with the
hopes that I can help them clean up the mess left from the
explosion of their "time bomb loans" (my name for the sub-prime
products). Unfortunately, I've had more than ample opportunity to
study the "psychology of a foreclosure," particularly prior to the
implosion of the sub-prime sector of the mortgage industry and
continuing with the Wall Street implosion. Ill be honest: I've been
amazed, and at times horrified, by what some people do to their
homes upon foreclosure. I've narrowed down the elements and
describe this (often, sadly predictable) phenomenon as the three
Ds: Denial, disgust and destruction.
The denial phase is when the homeowneryou got itdenies the fact
foreclosure is imminent unless they act to prevent it from
occurring. Today, more than ever, lenders are willing to work out a
solution with their borrower rather than let them foreclose. But
many homeowners either don't know what to do about it, or simply
are in a state of, well, denial. The next phase is disgust, which
outwardly manifests itself with the expression of extreme disgust
and anger, even hatred, toward the lender. However, looking more
closely, the disgust is more of an (unconscious, perhaps)
expression of the inner turmoil they feel at finding themselves in
this unimaginable circumstance. They may have feelings of guilt,
embarrassment and anger directed at themselves, as well as at the
fact that they have landed (and/or were unwitting parties to
putting themselves) in this position. Sadly, not saying much for
the better side of the human spirit, this often leads to a final
phase: Destruction.
While certainly not an automatic given, when the destruction
phase does in fact follow denial and disgust, the (former)
homeowner actually causes destruction to the property. Youve
probably all experienced the holes kicked in the walls, windows
smashed in and/or the house being stripped of all remotely valuable
fixtures, such as kitchen cabinets, copper and the like.
What can we, as concerned loan originators, do to help
homeowners who are facing this predicament before it reaches the
level of crisis? The most critical first step in helping the
homeowner is to get him to a reputable and effective counseling
agency that will guide him through the process. Most importantly,
he should be assured that the fact of this situation in and of
itself does not make him "bad" or, necessarily, even a fiscally
irresponsible person. Just knowing that others experience
foreclosureespecially in today's climate, in every socio-economic
strataand live to tell about it can go a long way toward avoiding
the three Ds of foreclosure.
Here's a list I've compiled for you of HUD resources and links
where you can direct the homeowner for help:
• Tips for avoiding foreclosure: www.hud.gov/foreclosure/foreclosuretips.cfm
• Avoid foreclosure rescue scams: www.occ.treas.gov/ftp/advisory/2008-1.html
• Seek counseling: www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
• Explore loan workout solutions with your lender:
http://portal.hud.gov/portal/page?_pageid=73,1827467&_dad=portal&_schema...
• Utilize state resources: www.hud.gov/foreclosure/local.cfm
• HOPE NOW Alliance: www.hopenow.com
• Foreclosure timeline: www.hud.gov/foreclosure/fctimeline.cfm
• Know the foreclosure laws in your state: www.foreclosurelaw.org
You may have past clients who, for whatever reason, are
currently experiencing difficulty. And even your clients that are
doing fine are likely to know someone that is suffering financially
and/or on the brink of foreclosure. Thus, I suggest you draft a
letter with some of the information in this article and send it to
your database. It will benefit you in three ways:
1. You may help prevent homeowners from losing their home;
2. You will enhance your credibility and project an image of one
who really cares for the welfare of your (past) clients; and
3. You may well be able to reach someone before things are
irreversible and refinance them into an FHA loan. In your letter,
you can offer a free mortgage review and welcome any questions.
Wishing you focus, success and only the best in 2009. Go
FHA!
Jeff Mifsud founded Southfield, Mich.-based Mortgage Seminars LLC in 2004,
has been an FHA originator for 12 years, is a contributor to
LoanToolbox.com and is a former FHA underwriter. Jeff may be
reached at (877) 342-9100 or e-mail jeff@mseminars.com.

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