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Lewi Ranieri, the creative originator of the mortgage-backed security is not taking a removed, back-seat approach to help homeowners stay in the homes.  His Selene Residential Mortgage Opportunity Fund provides hands-on solutions for defaulting homeowners.

Ranieri has assembled a savvy group of experienced advisers to help struggling owners stay in their homes.  The counselors sound more like

upbeat, can-do problem solvers than debt collectors.  The prevailing attitude is positive, friendly and result oriented.

The Selene Fund advisers offer plenty of experienced advice about restructuring debt and improving the value of the residence.  Solutions have included advancing money to perform repairs, debt counseling and budget review.  These tools are used by Selene to get the homeowners back on track and repaying a much lower mortgage level than previously existed.

Ranieri has admitted a sense of guilt about his development in the mortgage-backed securities market.  His hope is that property owners will use his fund to save their ownership and that government will come to realize that the real cure to stemming the foreclosure tide lies in voluntarily reducing mortgage amounts rather than lose the bulk of the value.

In short, the Selene Fund appears to be a mortgage short sale.  Lenders may actually save more than they lose by giving back to the original buyers.  Ranieri’s plan addresses the two key obstacles facing millions of today’s owners.  These struggling and often unemployed owners cannot afford the current mortgage payments and are not motivated to keep paying on homes with mortgages that exceed the home’s value.

What makes this housing slump so unique is the stunning loss of value spread throughout the nation.  Federal government and state driven plans are not resulting in affordable mortgage modifications.  Through Selene’s willingness to negotiate lower mortgages, but the cost side and value side of the slump are being addressed. 

Selene’s program also is designed to restore the traditional homeowner’s pride of ownership, which has slumped badly in the recession.  Ranieri wants owners to want to remain in their homes and is offering principal reductions that make it hard to say no.    

Despite repeated efforts to help struggling homeowners, the Administration has announced new, aggressive steps designed to help as many as 4 million delinquent homeowners.  The new $75 billion loan modification program has new incentives for borrowers as well as for lenders.

Previous modification plans have not met with success.  Previously, an applicant for modification entered into a trial period to assure the lender that the borrower could meet the modification terms.  Amazingly, only 5% of Freddie Mac loans were converted to permanent modifications.  On a broader scale, as of September 1, 2009, only 1.26% of all trial modifications were made permanent after three months.

In light of the present rate of foreclosures, the modification conversion is surprising.  The number of loans in foreclosure or at least one month in arrears exceeded 14% in the third quarter 2009.  Banks are under pressure to entertain and permanently convert loans.

A scale of incentives, including direct mortgage reductions, and annual initiatives are expected to raise interest from lenders and borrowers alike.  As of November 2009, only 650,000 Americans have received temporary modifications. 

The administration has recently taken more aggressive steps to assist homeowners achieve a temporary modification while completing documentation to apply for permanent adjustments. The paperwork process is cumbersome.  The administration has lessened the documentation requirements and has even hired independent firms to go door-to-door to assist troubled homeowners.

To qualify for the modification program, an applicant must have a mortgage of less than $729,750 and must show monthly payments above 31% of their pre-tax income.  It is best to begin the process before entering default status.  Citigroup has just 1800 borrowers who have converted their temporary modification program to a permanent plan.  The Citigroup service has 89,000 applicants in temporary status.

Lenders like Citigroup and Chase have retained outside services to attempt to stave off foreclosures.  It seems that many homeowners do not know where to turn and choose to ignore the pending foreclosure actions. Help is out there!  

In October 2009, the foreclosure rates were still 18.9 percent higher than they were in October a year ago. In comparison to the previous months, the rate of foreclosure has dipped, but it’s still very high when compared to previous years. At such times of distress, homeowners are most vulnerable to dubious companies. Therefore, here are some methods in ensuring that you do not fall into sweet talking and smooth operating fraud companies.

One should take advice and information from the Department of Housing and Urban Development (HUD). The counselors will advice you on a range of housing matters, including foreclosures. Also, the website of this department has a list of approved agencies state wide. Please remember that, for homeowners in financial distress, HUD counseling comes at a very low cost and is sometimes free. Refrain from working with an agency that asks for a fee before giving advice.

Any agency promising to stall the foreclosure once and for all and make it go away should not be trusted fully, since no one can give this guarantee. Any fee or service payments demanded by the agency, before the program goes into affect, should not be made unless clarified with the authorities. Before going to a local agency, check the credentials and listing at the HUD website. Ask for some customer names that have already availed the service; speak to them to learn about their experience.

During these times, the Federal Trade Commission (FTC) for the consumer information on frauds, started back in 2008, still holds good. They mentioned that the agencies trying to perpetrate fraud get the information of distressed owners through notices on newspapers and online. These agencies then send personalized letters and offers to the individuals to see if they can get them to take the bait. Extrapolating from this it would be advisable to know how these agencies who contacted you got the information.

The Federal Bureau of Investigation reports that, in the year 2008, the total mortgage fraud Suspicious Activity Reports were 63,173 cases, with a loss of $1.5 billion. Some of the most popular types of mortgage frauds that happen in America include equity skimming, property flipping and mortgage related identity theft. One should also be aware of predatory lending practices, which hurt the primary borrowers and usually result in defaults and delinquencies. These predatory practices target the elderly, distressed owners and defaulters.

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