Real Estate News

Former Employees: Bank of America Regularly Lied to Homeowners

2013-06-15T12:20:00.002-07:00

From ProPublica

Bank of America employees regularly lied to homeowners seeking loan modifications, denied their applications for made-up reasons, and were rewarded for sending homeowners to foreclosure, according to sworn statements by former bank employees.

The employee statements were filed late last week in federal court in Boston as part of a multi-state class action suit brought on behalf of homeowners who sought to avoid foreclosure through the government’s Home Affordable Modification Program (HAMP) but say they had their cases botched by Bank of America.

In a statement, a Bank of America spokesman said that each of the former employees’ statements is “rife with factual inaccuracies” and that the bank will respond more fully in court next month. He said that Bank of America had modified more loans than any other bank and continues to “demonstrate our commitment to assisting customers who are at risk of foreclosure.”

Six of the former employees worked for the bank, while one worked for a contractor. They range from former managers to front-line employees, and all dealt with homeowners seeking to avoid foreclosure through the government’s program.

When the Obama administration launched HAMP in 2009, Bank of America was by far the largest mortgage servicer in the program. It had twice as many loans eligible as the next largest bank. The former employees say that, in response to this crush of struggling homeowners, the bank often misled them and denied applications for bogus reasons.

Sometimes, homeowners were simply denied en masse in a procedure called a “blitz,”said William Wilson, Jr., who worked as an underwriter and manager from 2010 until 2012. As part of the modification applications, homeowners were required to send in documents with their financial information. About twice a month, Wilson said, the bank ordered that all files with documentation 60 or more days old simply be denied. “During a blitz, a single team would decline between 600 and 1,500 modification files at a time,” he said in the sworn declaration. To justify the denials, employees produced fictitious reasons, for instance saying the homeowner had not sent in the required documents, when in actuality, they had.

Such mass denials may have occurred at other mortgage servicers. Chris Wyatt, a former employee of Goldman Sachs subsidiary Litton Loan Servicing, told ProPublica in 2012 that the company periodically conducted “denial sweeps” to reduce the backlog of homeowners. A spokesman for Goldman Sachs said at the time that the company disagreed with Wyatt’s account but offered no specifics.

Five of the former Bank of America employees stated that they were encouraged to mislead customers. “We were told to lie to customers and claim that Bank of America had not received documents it had requested,” said Simone Gordon, who worked at the bank from 2007 until early 2012 as a senior collector. “We were told that admitting that the Bank received documents ‘would open a can of worms,’” she said, since the bank was required to underwrite applications within 30 days of receiving documents and didn’t have adequate staff. Wilson said each underwriter commonly had 400 outstanding applications awaiting review.

Anxious homeowners calling in for an update on their application were frequently told that their applications were “under review” when, in fact, nothing had been done in months, or the application had already been denied, four former employees said.

Employees were rewarded for denying applications and referring customers to foreclosure, according to the statements. Gordon said collectors “who placed ten or more accounts into foreclosure in a given month received a $500 bonus.” Other rewards included gift cards to retail stores or restaurants, said Gordon and Theresa Terrelonge, who worked as a collector from 2009 until 2010.

This is certainly not the first time the bank has faced such allegations. In 2010, Arizona and Nevada sued Bank of America for mishandling modification applications. Last year, Bank of America settled a lawsuit brought by a former employee of a bank contractor who accused the bank of mishandling HAMP applications.

The bank has also settled two major actions by the federal government related to its foreclosure practices. In early 2012, 49 state attorneys general and the federal government crafted a settlement that, among other things, provided cash payments to Bank of America borrowers who had lost their home to foreclosure. Authorities recently began mailing out those checks of about $1,480 for each homeowner. Earlier this year, federal bank regulators arrived at a settlement that also resulted in payments to affected borrowers, though most received $500 or less.

The law suit with the explosive new declarations from former employees is a consolidation of 29 separate suits against the bank from across the country and is seeking class action certification. It covers homeowners who received a trial modification, made all of their required payments, but who did not get a timely answer from the bank on whether they’d receive a permanent modification. Under HAMP, the trial period was supposed to last three months, but frequently dragged on for much longer, particularly during the height of the foreclosure crisis in 2009 and 2010.

ProPublica began detailing the failures of HAMP from the start of the program in 2009. HAMP turned out to be a perfect storm created by banks that refused to adequately fund their mortgage servicing operations and lax government oversight.

Bank of America was far slower to modify loans than other servicers, as other analyses we’ve cited have shown. A study last year found that about 800,000 homeowners would have qualified for HAMP if Bank of America and the other largest servicers had done an adequate job of handling homeowner applications.

Paul Kiel is a reporter for ProPublica, an independent, nonprofit newsroom.

Treasury Department Extends Mortgage Relief, Refinancing Program

2013-05-31T10:12:00.000-07:00

Daily Real Estate News | Friday, May 31, 2013

The White House announced that it is extending the Making Home Affordable Program, a refinancing program that has helped home owners lower their monthly mortgage payments and obtain loan modifications. The program, originally set to expire at the end of this year, has been extended two years until Dec. 31, 2015.

The Making Home Affordable Program encompasses the Home Affordable Modification Program (HAMP), among other consumer protections.

More than 1.1 million home owners have received permanent loan modifications on their mortgages through HAMP as of March 2013. The median savings of borrowers who have participated in HAMP is $546 a month -- or 38 percent of their previous payment, according to the Treasury Department.

The program encourages lenders to lower monthly mortgage payments of struggling home owners by either reducing the interest rate on the loan or forgiving some of the principal.

“The housing market is gaining steam, but many home owners are still struggling,” said Jacob J. Lew, the Treasury secretary. “Extending the program for two years will benefit many additional families, while maintaining clear standards and accountability for an important part of the mortgage industry.”

The mortgage program was introduced by President Obama in early 2009. Banks and other lenders were slow to participate in the program, however. The government has since tweaked the program to allow more borrowers to qualify for it, after spending only $5.2 billion through March of the $29.9 billion allocated for HAMP.

Source: U.S. Department of Treasury and “Federal Program for Distressed Home Owners Is Extended,” The New York Times (May 30, 2013

Short Sales Losing Favor With Lenders?

2013-05-30T14:14:00.003-07:00

Daily Real Estate News | Thursday, May 30, 2013

Lenders may be less inclined to approve short sales due to rising home prices, according to a new report by RealtyTrac.

During the first quarter, short sales posted a 35 percent drop compared to year-ago levels.

"The decrease in short sales was a bit of surprise given that 11 million home owners nationwide still owe more on their homes than they're worth," says Daren Blomquist, spokesman for RealtyTrac.

"Rising home prices are taking away the incentive for short sales on the part of both home owners and lenders."

Foreclosure prices are on the rise, increasing 28 percent in the first quarter. The banks may be realizing they won’t necessarily lose a lot more money by letting a home go into foreclosure instead, Blomquist says.

However, foreclosure sales have been plummeting too, reaching their lowest levels since early 2008. Foreclosure sales made up 21 percent of the total market during the first quarter, which is down from 25 percent one year ago, according to RealtyTrac.

Foreclosure sales peaked in early 2009, when they made up 45 percent of all homes sold nationally.

Still, foreclosures are making up the biggest bulk of sales in certain states, such as Georgia (where 35 percent of sales were foreclosures in the first quarter), Illinois (32 percent), and California (30 percent), according to RealtyTrac.

Source: “Foreclosure sales fall to lowest level since 2008,” CNNMoney (May 30, 2013)

Some Home Owners Chip Away at Mortgage With Credit Card

2013-05-30T14:12:00.000-07:00

Daily Real Estate News | Thursday, May 30, 2013

Wells Fargo’s credit card, the Home Rebate card, has allowed its customers to pay down $50 million in mortgage balances since the card’s debut in 2007.

Every purchase a customer makes with the card counts toward a rebate credited to the principal of the borrower’s Wells Fargo mortgage.

Over a 30-year time period, the card has the potential to help chip away at a home owner’s mortgage balance by reducing the mortgage interest they owe by potentially “thousands of dollars” as well as lowering the number of payments required, Wells Fargo officials say.

As a recent HousingWire article reports: “Wells Fargo claims a cardholder with a $150,000 mortgage who spends $1,500 a month on the Home Rebate Card could shorten their payment schedule by more than a year.”

Source: “Credit Card Allows Borrowers to Simultaneously Pay off a Mortgage, Daily Bills,” HousingWire (May 29, 2013)

Short Sales Routinely Show In Credit Reports As Foreclosures

2013-05-24T08:11:00.000-07:00

By Kenneth R. Harney

May 17, 2013, 8:20 p.m.

WASHINGTON — Are large numbers of homeowners who have negotiated short sales with lenders at risk because of a startling omission in the American credit system? Do their credit reports and scores indicate that they were foreclosed upon, rather than having negotiated a mutually agreeable resolution with their lender?

The answer appears to be yes, and recently two federal agencies — the Federal Trade Commission and the Consumer Financial Protection Bureau — were asked to investigate why. The reality is this: The credit reporting system now in place does not have a separate code that distinguishes a short sale from a foreclosure. Yet there are crucial differences between the two.

In a short sale, the bank approves the sale of the house to a new buyer at a mutually acceptable price. Any unpaid remaining loan balance not covered by the sale proceeds may then be either partially or fully forgiven. The bank is an active participant throughout the process, negotiating for a higher price and higher repayment of principal from the original borrower.

In a foreclosure, the bank is essentially left holding the bag. The owners walk away at some point or live in the property rent-free until they're evicted. Frequently there is damage to the house left by the departing owners, sometimes extensive. There is little or no cooperation between them and the bank.
Both transactions are serious, negative credit events for the borrower. After all, the mortgage wasn't fully repaid. But the financial losses generated by a foreclosure typically are more severe for the lender than by a short sale.

Not only are there extended periods of nonpayment by the borrower but there are also substantial property management expenses, renovation costs, local property taxes and insurance while the house is being readied for resale. In some parts of the country, the average time to complete a foreclosure has exceeded two years.

The nation's major sources of mortgage financing — Fannie Mae, Freddie Mac and the Federal Housing Administration — all recognize the differences between short sales and foreclosures in their underwriting policies regarding new mortgages. Fannie Mae generally won't approve a new mortgage application by borrowers with a foreclosure on their credit report for up to seven years, but will consider lending to people who were involved in short sales, and who otherwise qualify in terms of recent credit behavior and available down payment, in as little as two years.

But if short sales routinely show up in credit reports coded as foreclosures, borrowers who might be able to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market. George Albright, who completed a short sale on his home in New Port Richey, Fla., in 2010, has been trying for months to get through the hoops for a Fannie Mae conventional mortgage.

According to his mortgage broker, Pam Marron, Albright has a solid 720 FICO credit score, 20% down payment cash and more than adequate monthly income and reserves for a new home. But he keeps getting rejected because his credit report indicates a foreclosure, not a short sale.

That's not unusual, Marron said, since there is no specific code to identify short sales. In a highly automated and strict underwriting environment, lenders go by the codes, according to Marron, harming creditworthy applicants like Albright.

"I did my time," Albright said. "I'm ready to move on," but because of the inadequacy of current credit reporting practices "I'm still paying more for rent than I'd be paying on a new mortgage."

After a Capitol Hill hearing May 7 on credit reporting issues, Sen. Bill Nelson (D-Fla.) sent requests to both the FTC and the CFPB to investigate what he called the "disturbing practice" of misidentifying short sales, and to "penalize responsible parties in the mortgage- and credit-reporting industries, if they don't fix this coding problem within 90 days."

Nelson said real estate industry data indicate that there have been 2.2 million short sales nationwide during the last several years. Consumers who opted for a short-sale route rather than a more costly foreclosure are now being blocked from "reentry into the housing market," he said, thereby "stifling economic recovery for all homeowners."

Officials of the main trade group for the credit reporting industry, the Consumer Data Industry Assn., were not available for comment on Nelson's short-sales complaint to the federal agencies.

kenharney@earthlink.net.
Distributed by Washington Post Writers Group.

Freddie Releases New Loan Program Early

2013-05-14T11:01:00.000-07:00

Daily Real Estate News | Tuesday, May 14, 2013

Mortgage giant Freddie Mac announced that it will make a new streamlined loan modification program for delinquent borrowers available now, instead of holding off the launch date to July 1 as originally planned.

Mortgage servicers will be able to offer a streamlined modification to borrowers who are at least 90 days late on their Freddie-owned or guaranteed mortgage. Borrowers cannot be more than 720 days delinquent on their loan, however, to qualify. Also, the loan must be at least a year old.

The new program will waive any document requirements for borrowers to receive the modification. The borrowers' modification becomes permanent after he or she makes three on-time payments during a three-month trial period.

"Today, Freddie Mac is giving a green light to its mortgage servicers to speed up financial relief for potentially thousands of families with delinquent mortgages across the nation," Freddie Mac said in a statement. “Freddie Mac is focused on adding momentum to the housing recovery by giving distressed borrowers more options to avoid foreclosure."

Source: “Freddie Mac speeds up availability of streamlined loan mods,” HousingWire (May 13, 2013)

Mortgage Relief Checks Go Out, Only to Bounce

2013-04-18T09:42:00.000-07:00

New York Times, April 18, 2013

By JESSICA SILVER-GREENBERG and BEN PROTESS

11:25 p.m. | Updated

When the bank account is running dry and the mortgage payment is coming due, the phrase “insufficient funds” is the last thing you want to hear.

Now imagine hearing those two words when trying to cash a long-awaited check from the same bank that foreclosed on you.

Many struggling homeowners got exactly that this week when they lined up to take their cut of a $3.6 billion settlement with the nation’s largest banks — lenders accused of wrongful evictions and other abuses.

Ronnie Edward, whose home was sold in a foreclosure auction, waited three years for his $3,000 check. When it arrived on Tuesday, he raced to his local bank in Tennessee, only to learn that the funds “were not available.”

Mr. Edward, 38, was taken aback. “Is this for real?” he asked.

It is unclear how many of the 1.4 million homeowners who were mailed the first round of payments covered under the foreclosure settlement have had problems with their checks. But housing advocates from California to New York and even regulators say that in recent days frustrated homeowners have bombarded them with complaints and questions.

The mishap is just the latest setback to troubled homeowners. It took more than two years to resolve a federal investigation into the foreclosure abuses. Even after the settlement in January, the checks were delayed for weeks.

“It’s the perfect ending for such a debacle,” said Michael Redman, a paralegal who runs 4closurefraud.org, a Web site for victims of foreclosure abuse. He said he had received 15 e-mails on Tuesday from homeowners whose checks bounced.

The first round of the settlement checks was mailed last week. In recent days, problems arose at Rust Consulting, a firm chosen to distribute the checks, people briefed on the matter said. After collecting the $3.6 billion from the banks, these people said, Rust failed to move the money into a central account at Huntington National Bank in Ohio, the bank that issued the checks to homeowners.

Many banks, after spotting a phone number for Huntington on the back of the checks and confirming the legitimacy of the money, agreed to process the payments. But some credit unions, check cashers and community banks apparently looked only at the account number on the unfamiliar-looking checks and ultimately found a zero balance, the people briefed on the matter said.

Rust says it does not know how many homeowners encountered the check mishap, adding only that it “was aware of 12 situations.”

Still, banking regulators, frustrated with missteps at Rust, urged the consulting firm to shore up the account Tuesday. Now, regulators say the problems are resolved, and are urging homeowners to try again. Officials worry that homeowners, weary from a process that has stretched on for years, will give up.

In a statement, the Federal Reserve assured the public that “Rust subsequently corrected problems,” adding that the Fed would “continue to monitor the payments closely.”

Rust, an oft-used middleman for class action lawsuits and government settlements, has faced similar concerns previously. In 2006, when it helped distribute payments from a class-action case involving title insurance costs, some consumers complained that the checks bounced.

Some officials say it is common for Rust to keep accounts empty. Rather than lose access to the money, the firm often fills requests for payment at the end of each day. The officials have questioned whether Rust hangs on to the cash to earn interest throughout the day. Others noted that it may be difficult to move a sum as large as $3.6 billion into a single account.

“We apologize to anyone who experienced problems trying to cash their checks,” a senior vice president at Rust, James Parks, said in a statement. “We are working hard and communicating with the banking regulators, the servicers, and other banks to ensure those issues are not repeated.”

Rust is authorizing its employees to arrange conference calls with Huntington National Bank to provide outside verification that the cash is available, a company spokesman said.

Housing advocates remain wary, however. The Northside Bank Tenant Association in Boston held a meeting on Wednesday where housing advocates addressed questions from frustrated homeowners. Also in Massachusetts, Lynn United for Change said it had received calls from at least six homeowners in the last two days.

Regulators have said that, by the end of Wednesday, homeowners successfully cashed or deposited about 342,000 checks, or roughly 25 percent of the total checks issued. That leaves more than 1 million people who have either delayed cashing the check or have had problems doing so.

The homeowners unable to cash the checks are not the only ones languishing. Many are still mired in bureaucratic delays, like Nancy Brown, of Fredericksburg, Va., who recently learned that her check will be made out jointly to her and her ex-husband, whom she has lost contact with. As a result, she fears being unable to collect the money.

Other homeowners like Yanko Matias, of Lynn, Mass., say they are afraid to cash the checks. Mr. Matias, 37, was initially wary that the $500 he received was just another empty promise — or worse, a scam.

“I just want my house back,” Mr. Matias said.

For Mr. Edward, the Tennessee man, the check mishap caps a foreclosure “nightmare” that began in 2010 when a neighbor called to tell him that his home was being advertised for foreclosure auction in the local paper. Mr. Edward, a retail supervisor who left the home later that year, said it was the first he learned of the foreclosure.

With the check cashing denied on Tuesday, Mr. Edward remarked: “This is the latest runaround.”

This post has been revised to reflect the following correction:

Correction: April 17, 2013

An earlier version of this article misstated the name of a company in one instance. It is Rust Consulting, not Rust Consultant.

HARP Program Extended Another 2 Years

2013-04-12T11:15:00.001-07:00

Daily Real Estate News | Friday, April 12, 2013

The Home Affordable Refinance Program — a government refinancing program for underwater home owners — will be expanded for another two years, the Federal Housing Finance Agency announces. HARP was originally set to expire Dec. 31, 2013, but will now be extended to the end of 2015.

"More than 2 million home owners have refinanced through HARP, proving it a useful tool for reducing risk," says FHFA acting director Edward DeMarco.

Home owners eligible to apply for refinancing under HARP must have a Fannie Mae- or Freddie Mac-backed mortgage that was guaranteed on or before May 31, 2009, must be current on their loan, and must have a current loan-to-value ratio more than 80 percent.

Source: “HARP mortgage refinancing program extended by 2 years,” Chicago Tribune (April 11, 2013)

Foreclosure Errors Found To Be More Widespread

2013-04-12T11:12:00.000-07:00

Daily Real Estate News | Friday, April 12, 2013

About 30 percent of more than 3.9 million households whose properties were foreclosed on in 2009 and 2010 nearly lost their homes due to potential bank errors, government regulators said.

Nearly 1.2 million borrowers faced foreclosure notices even after not having defaulted on their mortgage, being protected under federal laws, or having been in good standing under bank-approved plans to either modify their loan or temporarily delay their payments, according to a report from the Huffington Post. Of those borrowers, more than 244,000 did eventually lose their homes, new government data shows.

The government breaks out the data more fully of those who faced foreclosure due to errors, including:

Nearly 700 borrowers who faced foreclosure during 2009 and 2010 never defaulted on their loans.
More than 28,000 faced foreclosure who were protected under federal bankruptcy laws.
About 1,100 who faced foreclosure had been meeting all the requirements of forbearance plans that their lender had agreed to.
About 1,600 borrowers who faced foreclosure were protected by the Servicemembers Civil Relief Act of 2003, which bans foreclosures on active-duty military personnel and their families.

Payments have started being mailed this week to many of those affected, after about a dozen financial institutions agreed to make $3.6 billion in cash payouts to more than 4 million borrowers who potentially faced wrongful foreclosures from 2009 and 2010.

Source: “Foreclosure Review Finds Potentially Widespread Errors,” Huffington Post (April 9, 2013)

4.2M Borrowers to Start Receiving Foreclosure Payouts

2013-04-10T09:35:00.000-07:00

Daily Real Estate News | Wednesday, April 10, 2013

About 4.2 million eligible home owners who underwent foreclosure in 2009 and 2010 will start receiving cash payments on Friday, ranging from $300 to $125,000. The payouts are part of a $3.6 billion settlement over foreclosure mishandlings reached among 13 mortgage servicers and the government.

Military service members whose homes were repossessed while they were on active duty will receive the largest checks — $125,000. The Servicemembers Civil Relief Act prevents military personnel from being foreclosed on while on active duty.

Other home owners will receive payments from servicers that charged unfair fees or failed to do a loan modification.

Originally, the 13 servicers had agreed to conduct independent foreclosure reviews for each borrower, but the reviews proved too costly and time consuming, says Brian Hubbard, a spokesman for OCC. Also, only about 439,000 borrowers had asked for a review out of the some 4 million who were eligible.

In January, lenders revised the settlement terms to include all borrowers in default in 2009 and 2010 to be eligible for the payments, Hubbard says. For those borrowers who did request independent foreclosure reviews, they will receive double the compensation in most cases.

The following servicers are participating in the settlement: Aurora, Bank of America, Chase, Citibank, Goldman Sachs, HSBC, MetLife Bank, Morgan Stanley, PNC Mortgage, Sovereign Bank, SunTrust, U.S. Bank, and Wells Fargo. Goldman Sachs and Morgan Stanley will issue their payments to customers at a later date. All other servicers will start issuing payments to customers this week and will be completed by July.

Source: “Payments coming for borrowers in $3.6B foreclosure settlement,” CNNMoney (April 9, 2013)

White House Rolls Out 3 Foreclosure Prevention Efforts

2013-04-09T09:28:00.000-07:00

Daily Real Estate News | Tuesday, April 09, 2013

The Obama administration announced the extension or debut of three programs aimed at helping distressed home owners avoid foreclosure. The three initiatives are:

Increasing outreach in the Making Home Affordable Program: The U.S. Department of Treasury is partnering with NeighborWorks America as well as the National Foreclosure Mitigation Counseling program to increase support for struggling home owners who seek assistance through the Making Home Affordable Program, which includes the Home Affordable Modification Program (HAMP). HAMP reduces monthly payments by more than $540 each month, on average. “Through the new initiative, housing counseling agencies will help struggling home owners successfully complete and submit application documents to their mortgage company free-of-charge,” according to the White House blog.

Informing the unemployed about programs: The Department of Labor will be encouraging American Job Centers to inform unemployed home owners about federal foreclosure prevention options that are available to them. For example, there is unemployment forbearance through HAMP that allows qualifying home owners who are unemployed to reduce or suspend their mortgage payments for up to 12 months.

HUD’s new Housing Counseling Office: The Department of Housing and Urban Development has launched a Housing Counseling Office, which offers at-risk home owners free or low cost information about foreclosure prevention and loan modification programs. It also offers general information on buying or renting a home, handling foreclosures, and how to avoid scams. The office is made up of a network of 2,500 HUD-approved housing counseling agencies.

“While we are encouraged that the housing market is on the path to recovery, our job is far from finished,” according to the White House blog. “There are still many struggling home owners who need assistance. By connecting eligible home owners with existing foreclosure prevention programs, our new counseling initiatives will enable more borrowers to remain in their homes and go a long way in ensuring a brighter economic future for these families.”

Source: The White House Blog

4 Largest Mortgage Insurers Fined Over Alleged Kickbacks

2013-04-05T09:10:00.001-07:00

Daily Real Estate News | Friday, April 05, 2013

The Consumer Financial Protection Bureau has fined four of the nation’s largest mortgage insurance providers for alleged kickbacks to lenders in order to win more business, a practice the agency says has been going on for more than a decade.

The four mortgage insurance providers have been fined $15.4 million by the agency.

The CFPB alleges the mortgage insurers paid millions of dollars to mortgage lenders in return for extra business. The agency says the practice inflated borrowers’ costs because home owners were given policies that were based on business relationships and not competitive pricing.

The four companies fined by the agency are Genworth Financial Inc., American International Group Inc.’s United Guaranty unit, Radian Group, and MGIC Investment Corp. The companies did not admit or deny any wrongdoing with the allegations. They said their relationships complied with federal law.

The CFPB is also investigating lenders who took part, and they may soon face fines as well, The Wall Street Journal reports.

"In every kickback situation, there's somebody paying and there's somebody receiving," says Kent Markus, the CFPB's assistant director of enforcement. "We have more work to do on this matter."

Mortgage insurance is usually required when home buyers purchase homes with down payments of less than 20 percent.

Source: “Regulator Fines Mortgage Insurers $15 Million,” The Wall Street Journal (April 4, 2013)

New Database Allows Americans to Post Mortgage Gripes

2013-03-29T09:36:00.000-07:00

Daily Real Estate News | Friday, March 29, 2013

Americans have a lot of gripes when it comes to mortgages. Of the 90,000 consumer complaints that have been filed so far to the Consumer Financial Protection Bureau’s new consumer complaint database, 50,000 have related to mortgage issues. Complaints over loan modifications, foreclosures, and other servicing issues dominate.

The CFPB launched a database on Thursday to field consumer complaints -- the nation’s largest public database for consumer financial complaints. The database captures individual complaints on everything from mortgages to credit cards, student loans, bank accounts, and other financial services.

The public can view the complaints in the database by mortgage issue and product type and even organize the issues by name of the lender or servicer. The identity of the person who posted the complaint is not included in the database.

"By sharing these complaints with the public, we are creating greater transparency in consumer financial products and services," says Richard Cordray, CFPB director.

The agency’s Web site notes, however, that it does not verify “all the facts alleged in these complaints but we do take steps to confirm a commercial relationship between the consumer and company.”

You can find this data base at http://www.consumerfinance.gov/complaintdatabase/

Source: “Loan mod, foreclosure complaints dominate CFPB consumer reports,” HousingWire (March 28, 2013) and “CFPB enhances transparency with consumer complaint database,” HousingWire (March 28, 2013)

Mortgage Program Aims to Cut Payments

2013-03-28T08:59:00.000-07:00

Daily Real Estate News | Thursday, March 28, 2013

The Federal Housing Finance Agency is rolling out a new program designed to help more borrowers reduce their monthly mortgage payments.

Under this program, home owners who are beyond 90 days late on their mortgages automatically will become eligible for a loan modification. The program will be available only to borrowers whose loans are owned or insured by Fannie Mae or Freddie Mac.

A modification would be finalized after the borrower makes three on-time payments at the lower amount.

Some financial analysts have expressed concern that the program could encourage other borrowers to deliberately miss payments in an attempt to become eligible. FHFA has offered assurances Fannie and Freddie would take certain measures to screen out strategic defaulters.

Source: "Mortgage Program Aims to Cut Payments," Washington Post (March 28, 2013)

Are Banks Easing Up on Mortgage Standards?

2013-03-05T08:48:00.000-08:00

Daily Real Estate News | Tuesday, March 05, 2013

A very tight mortgage lending environment “promises improvements this year as the drivers of tough credit standards reverse,” according to Moody’s Analytics ResiLandscape Report. Still, lending will remain tight by historical standards, the report notes.

Tight underwriting conditions have been one of the main obstacles for the housing market recovery. But the credit agency says that those conditions began to ease somewhat this year and likely will continue to.

"Rising house prices give lenders more breathing room to extend credit," the analysts at Moody’s noted.

Over the past year and a half, large lenders have loosened up or held standards stable on prime loans for mortgage originations, according to the Survey of Senior Lending Officers.

Aiding lenders’ confidence is that mortgage delinquencies have fallen to pre-recession rates.

"Being right-side up on the mortgage improves a borrower’s credit profile. It also lowers the risk of default and increases the likelihood of trade-up buying," according to the Moody’s report.

Mortgage supply will remain constrained, but “improved consumer credit quality combined with steady growth in jobs, low mortgage interest rates and modestly rising house prices makes it clear that more households will be able to qualify for a mortgage," Moody's said. "Greater credit availability will in turn help drive stronger home sales and stronger price appreciation and help keep the housing market and the larger economy on an upward path."

Source: “Slight opening of credit spigot aids housing outlook,” HousingWire (March 4, 2013

More Home Owners Have Equity Again

2013-02-22T09:56:00.000-08:00

Daily Real Estate News | Friday, February 22, 2013

With home prices inching up, more Americans are emerging from being underwater — owing more on their mortgage than their home is currently worth.

Several reports have tried to estimate how many home owners came out from being underwater last year. CoreLogic reported that for the first nine months of 2012, about 1.4 million borrowers moved above water. Zillow recently estimated that 2 million home owners last year emerged from being underwater. And J.P. Morgan Securities reported that the number of underwater home owners fell from 11 million to 7 million last year.

“Estimates can vary for a number of reasons,” The Wall Street Journal reports. “Underwater borrowers can move back to positive equity by paying down their loan principal or by seeing prices rise. Properties can also ‘exit’ negative equity when they go through foreclosure or when the bank approves a short sale. In those cases, borrowers aren’t being returned to positive equity — instead, they simply cease to be borrowers.”

Many of the largest home gains across the country came in areas that had a high number of underwater borrowers. “If this correlation persists in the coming years, the underwater problem could fade much faster than implied by the speed of national house prices appreciation,” Goldman Sachs researchers told The Wall Street Journal.

Source: “Rising Prices Shrink Ranks of Underwater Borrowers,” The Wall Street Journal (Feb. 21, 2013)

Fannie, Freddie to Allow Walkaways in Some Cases

2013-02-01T10:26:00.000-08:00

Daily Real Estate News | Friday, February 01, 2013

Underwater borrowers who have stayed current with their mortgage payments now may be able to give up their properties and get their debts erased, according to new guidelines issued by mortgage giants Fannie Mae and Freddie Mac.

Non-delinquent borrowers who have Fannie and Freddie-backed loans and who can document a hardship, such as an illness, job change, or other situation that requires they must move can apply for a deed-in-lieu transaction. Eligible borrowers also must have a 55 percent debt-to-income ratio. Servicers will be required to confirm that the property has been left in good condition.

Borrowers who are eligible will have the debt remaining between the property’s value and size of mortgage erased.

“The goal is to make sure people who have suffered a hardship have the appropriate options to prevent foreclosure,” says Andrew Wilson, spokesman for Fannie Mae.

Borrowers may still be required some repayment, however, if the borrower has the means to do so. “Home owners applying for deed-in-lieu transactions may be asked to make cash contributions of up to 20 percent of their financial reserves, excluding retirement accounts,” Bloomberg reports about the guidelines. “Or, they may be asked to sign a promissory note for future no-interest repayments. The amount and terms can be negotiated.”

Fannie and Freddie’s new eligibility for deed-in-lieu of transactions has been met with some criticism, particularly at a time with the government-sponsored enterprises are still underwater themselves from steep losses the last few years. The GSE’s have, to date, required $190 billion of taxpayer money since 2008.

“It’s an extraordinarily generous approach for companies still in debt to American taxpayers,” Phillip Swagel, a professor at the University of Maryland’s School of Public Policy, told Bloomberg. “We’re giving people an incentive to walk away, right when the housing market is starting to right itself.”

But some argue that past programs tended to penalize borrowers on the brink of foreclosure who kept making their payments, says Julia Gordon, director of housing finance and policy at the Center for American Progress. Mortgage servicers in some cases were even advising borrowers to stop making their mortgage payment so that they could qualify for more assistance.

“Fannie and Freddie are finally recognizing that some people are stuck in their homes,” Gordon told Bloomberg. “There are a lot of families who need to move who can’t do it if they’re going to have debt hanging over their heads. There’s no winner when someone is forced to default on their mortgage -- not the investor, not the home owner, and certainly not the neighborhood.”

Source: “Fannie To Allow Walkaways by On-Time Borrowers: Mortgages,” Bloomberg (Jan. 28, 2013)

Federal Agency Releases New Rules for Foreclosures

2013-01-18T12:30:00.002-08:00

Daily Real Estate News | Friday, January 18, 2013

The Consumer Financial Protection Bureau released new guidelines for mortgage servicers on Thursday that set out to help protect home owners who may be facing foreclosure.

CFPB Director Richard Cordraysays the new rules are aimed at trying to prevent “unnecessary foreclosures” as well as “ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.”

Among the CFPB’s new guidelines:

Mortgage servicers are prohibited from foreclosing on a home owner who is seeking loan modifications. Servicers will be unable to file a foreclosure notice until a home owner is at least 120 days behind on a mortgage payment.
A foreclosure sale on the home will be prohibited until alternatives are considered. Servicers will be required to give home owners adequate time to accept an alternative to foreclosure before going ahead with a foreclosure sale. Servicers must respond to loan modification requests from home owners who apply for a loan modification at least 37 days prior to a foreclosure auction.
When a home owner has missed two consecutive payments, servicers are required to send a written notice of foreclosure alternative examples to the home owner, such as deferred payments and loan modifications.
Servicers must be easily accessible to the home owners for assistance.
Servicers will be required to publish more clear mortgage statements, which includes mortgage payments broken down by principal, interest, fees, and escrow as well as includes the amount and due date of the next payment.
Servicers must notify home owners early about any interest rate changes to their mortgage payments.
Servicers will be required to credit a home owner’s account on the date a payment arrives.

The new rules take effect January 2014.

Source: “New Rules Aim to Protect Home Owners From Foreclosure,” CNNMoney (Jan. 17, 2013)

Treasury Announces Full Repayment with Interest for Investment Through TALF Financial Crisis Response Program Designed to Unlock Credit for Consumers, Businesses

2013-01-17T10:06:00.000-08:00

US Department of the Treasury Press Release 1/15/2013

Term Asset-backed-securities Lending Facility (TALF) Helped Support Auto, Small Business, and Student Loans to Consumers and Businesses after Credit Markets Seized Up During the Financial Crisis

WASHINGTON -- Today, the U.S. Department of the Treasury announced the full repayment with interest of its investment through the Term Asset-backed-securities Lending Facility (TALF). After giving effect to today’s announcement, interest and other gains above principal repayments to date for Treasury from the program would total $173 million – with additional payments expected moving forward.

The TALF program, which the Federal Reserve Board and Treasury announced in November 2008, was one part of the federal government’s broad efforts to help unlock credit for consumers and businesses during the financial crisis. TALF supported the issuance of nearly 3 million auto loans, more than 1 million student loans, nearly 900,000 loans to small businesses, 150,000 other business loans, and millions of credit card loans.

“TALF helped finance millions of new loans to consumers and businesses after the credit markets froze during the financial crisis,” said Assistant Secretary for Financial Stability Timothy G. Massad. “Now, this program is being wound down at a profit for taxpayers.”

Under TALF, the Federal Reserve Bank of New York (FRBNY) lent funds to investors in highly rated asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS). By encouraging issuance of ABS and CMBS, which are securities backed by consumer and business loans, the TALF helped support the economy by increasing credit availability to American households and businesses.

As part of the program, Treasury originally pledged $20 billion in credit protection through the Troubled Asset Relief Program (TARP) against potential losses on TALF loans. In light of repayments over time and the number of TALF loans outstanding, Treasury’s credit protection commitment was subsequently reduced to $4.3 billion in June 2010 and to $1.4 billion in June 2012.

Today, due to the fact that the accumulated fees collected through TALF ($856 million) exceed the total principal amount of TALF loans outstanding ($556 million), Treasury’s commitment of TARP funds to provide credit protection is no longer necessary. Moreover, the early repayment of TALF loans has allowed the $100 million in temporary loans that Treasury made over the course of the program under its credit protection commitment to help finance TALF to be repaid in full with $13 million in interest.

The TALF remains a joint Treasury-Federal Reserve program supported by earnings due to the Treasury from the program and by collateral securing each TALF loan. The Treasury and Federal Reserve will continue to consult on the administration of the program. Any excess interest, fees, and gains collected above the remaining principal on outstanding TALF loans will be divided between Treasury (90 percent) and the Federal Reserve (10 percent). There will be an initial payment of approximately $177 million divided between Treasury and the Federal Reserve reflecting the excess of fees collected to date and the current remaining principal on outstanding TALF loans. There will then be additional payments as the remaining TALF loans are repaid.

Given that Treasury’s investment is being repaid in full with interest, each additional dollar Treasury collects through TALF moving forward represents an additional dollar of profit for taxpayers. The Federal Reserve is also fully protected against any losses on the remaining outstanding TALF loans, and its profits on repayment of TALF credits ultimately accrue to the taxpayer.

The final TALF loan is scheduled to mature on March 30, 2015. All loans remain well collateralized and current in payments of principal and interest.

Overall, nearly 93 percent ($387 billion) of the $418 billion in funds disbursed for TARP have already been recovered to date through repayments and other income. For more details on Treasury’s lifetime cost estimates for TARP programs, please visit Treasury’s Monthly 105(a) Report to Congress on TARP at this link.

4 Ways Buyers Can Mess Up a Loan Approval

2013-01-15T10:02:00.003-08:00

Daily Real Estate News | Tuesday, January 15, 2013

Your home buyers have gotten approved for a mortgage and now they’re just waiting to make it to the closing table. Make sure they don’t throw their loan approval into jeopardy by making one of these common mistakes:

Making a big purchase: Tell your buyers to avoid making major purchases, like buying a new car or furniture, until after they close on the home. Big purchases could change the buyer’s debt-to-income ratio that the lender used to approve the buyer’s home loan and could throw the approval into jeopardy.
Opening new credit: Inform your buyers that now isn’t the time to open up any new credit cards.
Missing any payments: Home buyers need to be extra vigilant about paying all their bills on time, even if they’re disputing one.
Cashing out: Avoid any transfers of large sums of money between your bank accounts or making any undocumented deposits — both of which could send up “red flags” to your buyer's lender.

Source: “How to Keep Your Mortgage Approval Approved,” Realty Times (Jan. 14, 2013)

Banks Near $10B Settlement Over Foreclosure Abuses

2013-01-02T09:26:00.000-08:00

Daily Real Estate News | Wednesday, January 02, 2013

Fourteen banks are reportedly nearing a $10 billion settlement with banking regulators over the banks’ past involvement in foreclosure mishandlings that included faulty paperwork and excessive fees, The New York Times reports.

About $3.75 billion of the reported settlement would go to aid home owners who lost their homes to foreclosure — more than double what was set aside from a $26 billion settlement reached in 2012 among the state attorneys general and five of the nation’s largest banks.

The majority of the money from the latest settlement would go to help home owners struggling to make their payments and remain in their homes, such as with aid like loan modifications or lowering the amount of principal on their mortgages.

Banks have faced several settlements with government officials and home owners in recent months that have aimed to hold them accountable for the 2008 financial crisis and subsequent housing slump. From 2007 to early 2012, four million Americans faced foreclosure.

“It’s certainly a victory for consumers and could help entire neighborhoods,” Lynn Drysdale, a former co-chairwoman of the National Association of Consumer Advocates, told The New York Times about the latest proposed settlement. “But the devil, as they say, is in the details, and for those people who have had to totally uproot their lives because of eviction it may still not be enough.”

The same banks involved in the $26 billion mortgage settlement--JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial — also are included in this recent settlement, The New York Times reports.

Source: “Settlement Expected on Past Abuses in Home Loans,” The New York Times (Dec. 30, 2012)

Underwater Home Owners New Target of Scammers

2012-12-14T10:24:00.002-08:00

Daily Real Estate News | Friday, December 14, 2012

Scammers are targeting home owners who’ve seen the value of their residence drop, which is prompting the Consumer Financial Protection Bureau to issue new warnings to underwater borrowers about widespread mortgage-modification scams.

Scammers try to dupe home owners by claiming to be affiliated with government agencies or programs. They make promises to obtain a mortgage modification on behalf of the underwater home owner. They will charge up-front fees for their service and usually instruct the home owner to stop paying their mortgage and not to contact their lender.

"It is absolutely unacceptable for unscrupulous con artists to take advantage of our nation's housing crisis by targeting home owners looking for help from the Troubled Asset Relief Program's Home Affordable Modification Program," says Christy Romero, special inspector general for TARP.

Home owners should beware of anyone contacting them pretending to be from a government program — such as the Home Affordable Refinance Program or the Home Affordable Modification Program — who try to charge them for a service. Government programs like HARP and HAMP do not charge for services related to counseling, refinancing, or modifying loans.

Source: “New Warning on Mortgage Mods: Demand for Up-Front Fees Is a Sure Sign of a Scam,” Credit.com (Dec. 13, 2012)

Federal Agencies Investigate Misleading Mortgage Ads

2012-11-20T10:35:00.000-08:00

Daily Real Estate News | Tuesday, November 20, 2012

Federal agencies are teaming up to investigate false mortgage advertisements across the country that are mostly targeting older Americans and veterans.

The Consumer Financial Protection Bureau and the Federal Trade Commission issued warning letters to a dozen mortgage lenders and brokers telling them to “clean up potentially misleading advertisements,” according to a CFPB release. The FTC is also investigating ads by home builders and real estate professionals.

“Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives,” says Richard Cordray, CFPB director. “Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find.”

The CFPB and FTC enforce the Mortgage Acts and Practices Advertising Rule, and these agencies are investigating companies that have released false information in mortgage-related ads that promote mortgage loans, refinancing, and reverse mortgages.

The CFPB and FTC have uncovered some of the following violations so far in their investigations:

Misrepresentations about government affiliation with some ads for mortgage products featuring seals or logos that look like the ads have been endorsed by government agencies.
Misleading information about interest rates and the terms to get those low rates.
Misleading statements about the costs of reverse mortgages.

Source: Consumer Financial Protection Bureau and “Feds Get Tough on Shady Mortgage Advertisers,” NBC News (Nov. 19, 2012)

Call Hotline to Report Disaster Fraud

2012-11-01T17:38:00.000-07:00

WASHINGTON (AP) — The government is reminding the public to use a national fraud hotline to report any suspected fraud related to relief efforts in the wake of Hurricane Sandy.

In a statement Thursday, the Justice Department, the FBI and the National Center for Disaster Fraud said scams perpetrated by criminals are always a danger in the aftermath of a natural disaster and that people can alert authorities by calling a toll-free fraud center hotline that is staffed by a live operator 24 hours a day, seven days a week. The hotline is at 866-720-5721 begin_of_the_skype_highlighting FREE 866-720-5721 end_of_the_skype_highlighting .

The center was established in 2005 by the Justice Department to investigate, prosecute and deter fraud in federal disaster relief programs following Hurricanes Katrina, Rita and Wilma

Nondelinquent Borrowers Soon to be Eligible for Short Sales

2012-10-24T11:45:00.000-07:00

Daily Real Estate News | Wednesday, October 24, 2012

Mortgage giants Fannie Mae and Freddie Mac have issued new rules, which will take effect Nov. 1, that will allow short sales for underwater borrowers who have never missed a mortgage payment. Previously, Fannie and Freddie allowed only home owners who had missed payments to qualify for a short sale.

Eligible borrowers under the new rules will need to show a hardship to qualify for a short sale, however. Hardships may include unemployment or a death of a spouse.

Inman News points out one potential flaw to the new rule, however: The nondelinquent home owners who undergo a short sale will likely take just as big a hit to their credit score than if they had missed loan payments and gone into a foreclosure.

“Under current national credit reporting practices, those nondelinquent borrowers are likely to be treated the same for credit scoring purposes as severely delinquent owners who go to foreclosure after months of nonpayment, or who simply toss back the house keys and walk away in strategic defaults,” writes Ken Harney for Inman News.

Credit agencies use no special coding to indicate that a short sale was without delinquency. Therefore, home owners could see their credit scores drop 150 points or more after the short sale.

However, officials at the Federal Housing Finance Agency, which oversees Fannie and Freddie, told Inman News they are “in discussions with the credit industry” to explore ways to fix the credit score problem for those who haven’t missed a payment but undergo a short sale.

Source: “Damage to Credit Scores Could Trip Up New Fannie, Freddie Short Sale Program,” Inman News (Oct. 23, 2012)