Menlo Park Program Underway

Well, the applications are starting to come in and we are working closely with our partner, NCUD as they work with the homeowners who are being evicted from their homes. We have two homeowners who have qualified through the city for the program, both of which have Bank of America loans.

The real question here is whether the lenders are going to make the right financial decision. The City has vetted the homeowner to best ensure that they were victims of faulty or predatory loan practices and procedures. The lender, having decided to evict the homeowner has reached a point where they know that their end game is to only get the fair market value of the home, or less depending on the condition after eviction.

The City is willing to put in up to $100,000 to reduce the loan to a level that the homeowner can afford, leaving the lender with a performing loan that is much more likely to stay performing. Having a performing loan and up to $100,000 from the City is a much better solution for the lender than experiencing the cost of eviction and the cost of selling what would then be an REO home. Finally, the lender can get great PR value out of helping to keep someone in their home who wasn't trying to game the system.

Quite frankly, if the banks are not willing to embrace this type of strategy, the next wave or foreclosures is not too far down the road, and as we have already seen, the newt wave will have a high percentage of the high quality A and Alt A loans. As has already been demonstrated, loan modifications DO NOT WORK when the loan to value is 150% or more.