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Loan servicers completed nearly 37,000 new permanent loan modifications under HAMP in July, according to the latest report released today by the Treasury.

Last month was the slowest this year in terms of permanent loan modifications being started – at the same time, the number of trial modification cancellations surged to 616,839, greatly outnumbering the 421,804 active permanent modifications.

The most common causes of cancellation have been insufficient documentation, trial plan payment default, and ineligible borrowers, those with debt-to-income ratios (DTI) already lower than 31 percent.

Since the program began, 12,912 permanent mods have also been canceled.

“As a result of the requirement that servicers verify borrower eligibility through documentation prior to initiating trials on or after June 1, cancellation activity for new trials is expected to gradually decline,” the report said.

“However, the number of new cancellations is expected to exceed the number of new permanent modifications for the next few months as servicers clear their backlog of aged trials.”

The good news is that the median savings for borrowers in permanent mods is $513.09, or 36 percent of the median mortgage payment before modification.

The bad news is the median back-end DTI ratio (total monthly debt obligations) for borrowers post-mod is still super high at 63.5 percent.

Of those who received a permanent mod, 29.3 percent have received some type of principal forbearance, 56.8 percent have had their term extended, and all 100 percent snagged an interest rate reduction.

Bank of America, the top loan servicer in the United States, has completed the most permanent mods with 76,330 through July, followed by Chase’s 58,489 and Wells Fargo’s 46,732.

The Charlotte-based bank also has the most active trial modifications at 84,741, followed by Chase with 37,586 and Wells Fargo with 22,338.

The Federal Reserve issued a final rule today that effectively bans yield spread premiums paid to mortgage brokers, along with loan officers employed by depository institutions.

These loan originators will no longer be able to bump interest rates higher or steer consumers toward certain loan products in exchange for a higher commission.

This was a problem prior to the mortgage crisis, when the highest risk loans (option arms) were often accompanied with the greatest compensation.

“The new rule seeks to ensure that consumers who agree to pay the originator directly do not also pay the originator indirectly through a higher interest rate, thereby paying more in total compensation than they realize,” the Fed said in a statement.

“The final rule also prohibits a loan originator that receives compensation directly from the consumer from also receiving compensation from the lender or another party.”

However, loan originators can continue to receive compensation based on the loan amount via mortgage points.

For example, originators may collect one percent of the loan amount, or $2,000 for a $200,000 loan, in upfront closing costs.

The final rules are effective April 1, 2011.

Consumers to be Notified When Loan Changes Hands

A number of other rules were proposed today, including a provision that consumers be notified when their home loan changes hands.

The move should help facilitate loan modifications, while reducing payment confusion and mortgage-related scams.

Additionally, lenders’ cost disclosures must include a payment summary in the form of a table, which displays the interest rate and corresponding mortgage payment, along with the maximum rate/payment for the first five years and the life of the loan if it’s an adjustable-rate mortgage.

It must also include the fact that consumers may not be able to avoid increased payments by refinancing their current loan(s).

These rules are applicable come January.

One in four property listings on the market as of August 1 have experienced at least one price reduction, according to real estate search service Trulia.

That marks the fourth straight month of increases in price reduction levels, thanks to a lack of qualified (or motivated) buyers, record low mortgage rates and all.

The total dollar amount slashed from home prices in America’s 50 largest cities was a staggering $30.1 billion, and the average discount on a price-reduced home was 10 percent off the original list.

“If buyers are unqualified to buy, it doesn’t matter how low interest rates are or how discounted a home is,” said Pete Flint, co-founder and CEO of Trulia, in a release.

“I stated at the beginning of the year that I did not expect to see the housing market stabilize or recover in 2010, and I believe that prediction is being proven true today. We will b

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Should you get a loan to pay off debt? In most cases, no. Just because you can get a loan to pay off your debt, doesn’t mean you should. After all, are you really “paying it off” by using another loan? What you’re doing is delaying the inevitable and/or making the debt a bit less painful to bear (either because you lower the interest rate, payment, or lengthen the time you have to pay it off).

But I know there are circumstances where life happens and backs you into a corner, debt-wise. Whether it’s a job loss, or unexpected medical costs, life can send you in a tail spin and leave you with excessive credit card debt. Most of us have been there.

At this point you can choose to do a couple of different things. First, you need to make sure you stop the bleeding. Find a way to get more income, and/or drastically reduce your expenses to live within the means that you do have. If you do

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More young adults are turning to bankruptcy as an option to discharge large student loans
Tuition prices continue to increase each year, making it more expensive for young adults to get an education. To keep up with the rising costs, millions of college-bound students are forced to rely on student loans for financing.

However, many recent graduates may find it difficult to find a job that provides sufficient income to pay back college debt – assuming they can find a job at all in the current economy. As a result, some young Americans who owe thousands in debt are considering bankruptcy as an alternative, reports the San Francisco Chronicle.

What many young adults may not know is that it is very difficult to discharge student loans through bankruptcy. In order to do so, the borrower must prove that they are suffering from “undue hardship,” which is determined by three factors. Full article…

The Federal Reserve Bank may be forced to start foreclosing on homes and businesses
While a record number of banks and lenders are continuing to foreclosure on homeowners who are behind on their mortgage loans, current financial circumstances might force the Federal Reserve Bank of New York to step in. But the Fed will not be stepping in to help homeowners, but rather begin its own round of foreclosures.

The bailout of Bear Stearns in 2008 left the Fed with a damaged mortgage portfolio, including a number of residential and commercial properties, according to the Wall Street Journal. Although the government is working to find alternative options, it is becoming apparent that the Fed may be forced to seize a number of properties to offset its losses.

“For the Fed to come in and foreclose on properties puts it at some reputational and political risk,” former senior Fed staffer and current American Enterprise Institute economist Vincent Reinhart told the Wall Street Journal. Full article…

Consumer credit counseling provides resources and assistance to many distressed Americans who are unfamiliar with debt repayment options
Many Americans at risk of defaulting on their mortgage loans have adhered to responsible money management habits – paying their bills on time, contacting their lenders to explore repayment options, and applying for loan modifications to reduce their monthly payments. But due to high unemployment rates, debt, low credit scores and tightened restrictions, a large number of homeowners are unable to qualify for assistance, putting them at risk of foreclosure or bankruptcy.

In response, a greater number of individuals are now turning to credit counseling as a means of assistance and education, according to the Chicago Sun-Times. Credit counselors have been instrumental in working one-on-one with Americans and providing financial resources, repayment options and helping them fill out and process their paperwork. Full article…