1 Greenspan's Cheap Money
2 The Great Housing Boom
3 Subprime Explosion
4 Inflating The Bubble
5 Warning Signs
6 Housing Market Decline
7 Banks Go Into Panic Mode
8 Financial Collapse
9 Global Recession
10 Massive Government Action
Check out the CNBC complete stoty and timeline on how we got into this mess.
http://www.cnbc.com/id/31187744/
Are you looking for foreclosure help or loan modification assistance? Please visit manningloanlaw.com for a complimentary consultation - we are here to help.
Friday, July 3, 2009
Sunday, June 21, 2009
Luxury Home Owners Atop Financial Time Bomb as 'Option Pay' Adjustable Rate Mortgages Reset
Adjustable Rate Mortgages Reset
06.08.09, 6:06 AM ET
Millions Stretched Themselves Financially, Face Painful Adjustment, Default, Foreclosure - as Payments on Option Pay
Adjustable Mortgages Reset.
NEWPORT BEACH, Calif., June 8 /PRNewswire/ -- Adjustable rate mortgages (Pay Option ARM's) were widely used in the hot
housing market of recent years. Many households that took advantage of "Option Pay" loans or "teaser rate" loans - types of
adjustable rate mortgages that holds down payments for an initial period or when the borrow selects a lower payment and defers
interest and/or principle-- are facing resets of their interest rates that can cause monthly payments to balloon upward of 65% as
reported by Credit Suisse (CS). "Home owners list major payment adjustments". For example, a 1 million dollar mortgage taken
out 36 months ago with an initial payment of $2,528 per month could jump to just under $7,000 per month.
Sean Reynolds, Managing Director of Mortgage Loan Restructuring at the Law Offices of Joseph R. Manning, Jr., A Professional
Law Corporation that focuses on loan modifications, says the handwriting is on the wall, adjustments will mean multitudes of
borrowers will be unable to make the higher payments and may be forced to sell their homes, or worse, lose them to foreclosure.
The firm cites statistics from 60 Minutes indicating that Option Pay Mortgages are the next wave of defaults that are now plaguing
the Luxury Home Market. It's a predictable time bomb. Reset dates indicate as much as 70% of "Pay Option" ARM loans may
default over the next three years. Many home owners are now defaulting on the teaser rates indicating the inevitable when these
loans reset. According to CNBC 12% of all mortgages in the U.S. are not current.
Many home owners locked in rates as low as 1 percent in the early stages of their Pay Option Adjustable (ARM). In almost every
case these mortgage payments will more than double once the rate is adjusted. And that spells tragic news for homeowners --
according to Credit Suisse (CS) a third of loans are deeply delinquent and resets will begin to accelerate next spring, rising from
about $4 billion resetting in March 2010 to a peak of $14 billion in September 2011. About $500 billion of Pay Option ARM loans
are outstanding, according to the bank.
Further compounding the problem is many types of adjustable rate mortgages (ARMs) or Pay Option (ARM's) carried heavy
prepayment penalties that may make it difficult to refinance once the loan adjusts. Many of these loans also carried caps on the
amount of interest that could be deferred causing a recast in as little as two years from the date the loan was funded.
"Consumers are in a real bind, especially in California and Florida," said Sean Reynolds, Managing Director of Mortgage Loan
Restructuring at the Law Offices of Joseph R. Manning, Jr., A Professional Law Corporation that works to modify these types of
loans.
Fortunately, Sean Reynolds has been specializing in financing solutions for over 18 years, and has worked with a broad range of
clients that used Pay Option ARM to finance their homes. He is now assisting the same homeowners with loan modifications
along with real estate attorney Joseph Manning.
As a civil trial attorney and real estate attorney, Joe Manning is also prepared to litigate with lenders, brokers and servicers that
violate the rights of his clients. "Litigation is the last resort, but my office is prepared to litigate where appropriate," says attorney
Manning.
Based in Newport Beach, Calif., The Law Offices of Joseph R. Manning, Jr., A Professional Corporation,
( http://manningloanlaw.com ) is a boutique law firm that focuses on providing concierge-level service and helping consumers
save their homes through mortgage modifications.
SOURCE Law Offices of Joseph R. Manning, Jr.
Copyright 2009 PR Newswire All rights reserved.
Luxury Home Owners List Financial Time Bomb as Mortgage Resets in 2007 Come Due
Luxury Home Owners List Financial Time Bomb as Mortgage Resets in 2007 Come Due
THIS WAS WRITTEN IN 2007
Millions Stretched Themselves Financially, Face Painful Adjustment as Payments on Adjustable-Rate MortgagesReset
SAN CLEMENTE, Calif. -- Adjustable rate mortgages
(http://smrfinancial.com/payment.html) were used in the hot housing market of recent years. Many households that took advantage of "teaser rate" loans -- types of adjustable rate mortgages that hold down payments for an initial period -- are facing resets of their interest rates that can cause monthly payments to balloon upward of 10% to 50% as reported recently by www.realestatejournal.com. Luxury home owners list major payment adjustments. A 1 million dollar mortgage taken out 30 months back that started at $2,528 per month could jump to just under $7,000 per month.
SMR Financial, an Orange County mortgage firm that specializes in adjustable rate mortgages and placing consumers in home loans from $1 million and up, states adjustments will mean many borrowers will have trouble meeting the higher payments and may be forced to sell their homes, or worse, lose them to foreclosures. The firm cites statistics from www.marketwatch.com indicating default notices jumped by 145% in the last three months of 2006.
Luxury home owners list locking in rates as low as 1 percent in the early stages of their Adjustable Rate Mortgage (ARM). These mortgage payments could double once the rate is adjusted to current market conditions. And that spells tragic news for homeowners -- according to www.realestatejournal.com, a recent study by First American Real Estate Solutions, a unit of title insurer First American Corp. (NYSE:FAF), projects that one in eight households with adjustable-rate mortgages that originated in 2004 and 2005 will default on those loans.
This is further compounded by the fact that many types of adjustable rate mortgages (ARMs) or Pay Option ARMs carried heavy prepayment penalties that may make it difficult to refinance once the loan adjusts. As well, some of these loans carried caps on the amount of interest that could be deferred causing the payments to sometimes double in just over two years.
"Consumers are in a real bind, especially in California and Florida," said Sean Reynolds, president of SMR Financial, which works to cut traditional monthly mortgages by approximately 50 percent. "With California foreclosures up 160% since last year, and www.marketwatch.com reporting $2 trillion coming up for adjustment this year alone, the demand for refinancing adjustable rate mortgages will be unprecedented."
Fortunately, SMR Financial has been specializing in refinancing solutions for over 18 years, and has worked with a broad range of clients -- luxury home owners list from professional athletes, CEOs and entertainment industry professionals -- to match their needs to the right program. One alternative many of SMR's clients are seeking is negative amortization loans. Funded properly this form of financing is a viable alternative for homebuyers that need to minimize their monthly payments while shedding themselves of the thousands they will be paying through a mortgage reset.
There are certain tax advantages to adjustable rate mortgages with negative amortization as well, adds Reynolds. "With a negative amortization loan, not only are the payments reduced significantly, but since the entire payment being made is interest, it can all be deducted on federal tax returns. For many homeowners faced with a reset of thousands a month in payments, this form of financing represents a solid option -- and sometimes the only option -- to avoid disaster and get their mortgage payments back to a reasonable level."
About SMR Financial
Based in San Clemente, Calif., SMR Financial is a boutique mortgage firm that focuses on providing concierge-level service and helping consumers purchase California dream homes with market values of approximately $1 to $10 million. Luxury home owners list SMR as the leading authority that those "in the know" turn to when it comes to managing the complex financial makeup of the luxury homeowner.
Tuesday, June 2, 2009
High-End Foreclosures Are Next
Published: Wednesday, 27 May 2009 1:34 PM ET Text Size By: Diana Olick
CNBC Real Estate Reporter
I heard a startling statistic from the National Association of Realtors this morning…no not that home sales are actually increasing, but something about the high end of the market.
Chief economist Lawrence Yun said that the supply of existing homes for sale over $750,000 has reached a forty-month supply. Yep, that means it would take well over three years at the current place to sell off all of those homes.
The trouble is manifold: Jumbo loans are pricier and more difficult to get, job losses are mounting, and buyers in that price home are generally move-up buyers, so they have to sell their own homes first. I asked Mr. Yun if, given how hard it is to sell a home in that price range, he expects to see more foreclosures of high-end properties. He said absolutely.
That’s going to mean a new phase of the current housing recession. So far we’ve seen the “correction” of a boom market that was driven by faulty, exotic loan products, investors looking to make a quick buck, and average Americans using their homes as ATMs. Now the losses are being driven by traditional economic factors and by sweeping price drops across the nation.
Yesterday Fitch ratings estimated that up to 75 percent of the modifications now being done through the administration’s Making Home Affordable program will re-default in six months to a year. I’m not talking about the old mods, which were largely repayment plans that could actually raise monthly payments. I’m talking about the new mods, which lower monthly payments to 31 percent of a person’s income. I couldn’t understand Fitch’s reasoning, so I called them.
Diane Pendley, managing director at Fitch, said the problem is not on that “front-end” ratio, but on the back end, which is all of the borrowers other debt (credit cards, car loans, student loans, etc.). She said that in talking with servicers, she’s hearing other debt is so high that most of today’s troubled borrowers cannot afford any loan payment at all, even at a very modest debt to income ratio. “Just getting the house payment done doesn’t mean their lifestyle is sustainable,” she said.
Another problem is that with home prices continuing to fall, more and more borrowers, who are essentially just renting their mortgages now because they will never see any home equity, are walking away. Even if the mortgage payment is low, the property taxes and home maintenance costs are padding that payment, and without an upside to the investment, there’s simply no reason to pay.
Suffice it to say, the foreclosure crisis, on the high and low ends, is not getting any better. It’s great that we’re seeing more sales action in the “distressed” market, but that’s not a real organic recovery. Now that the administration has managed to lower interest rates for conforming loans, they have to focus on jumbos, on jumbo rates and modifications. These are not all million-dollar homes of the rich and famous. In many markets, especially urban markets, a million-dollar home is a basic three bedroom, two bath on a postage stamp lot.
Tomorrow we get the most recent data from the Mortgage Bankers Association on loan delinquencies. I’ll be watching the prime jumbos. You should be too.
RealtyCheck@cnbc.com
© 2009 CNBC, Inc. All Rights Reserved
Are you looking for foreclosure help or loan modification assistance? Please visit manningloanlaw.com for a complimentary consultation - we are here to help.
CNBC Real Estate Reporter
I heard a startling statistic from the National Association of Realtors this morning…no not that home sales are actually increasing, but something about the high end of the market.
Chief economist Lawrence Yun said that the supply of existing homes for sale over $750,000 has reached a forty-month supply. Yep, that means it would take well over three years at the current place to sell off all of those homes.
The trouble is manifold: Jumbo loans are pricier and more difficult to get, job losses are mounting, and buyers in that price home are generally move-up buyers, so they have to sell their own homes first. I asked Mr. Yun if, given how hard it is to sell a home in that price range, he expects to see more foreclosures of high-end properties. He said absolutely.
That’s going to mean a new phase of the current housing recession. So far we’ve seen the “correction” of a boom market that was driven by faulty, exotic loan products, investors looking to make a quick buck, and average Americans using their homes as ATMs. Now the losses are being driven by traditional economic factors and by sweeping price drops across the nation.
Yesterday Fitch ratings estimated that up to 75 percent of the modifications now being done through the administration’s Making Home Affordable program will re-default in six months to a year. I’m not talking about the old mods, which were largely repayment plans that could actually raise monthly payments. I’m talking about the new mods, which lower monthly payments to 31 percent of a person’s income. I couldn’t understand Fitch’s reasoning, so I called them.
Diane Pendley, managing director at Fitch, said the problem is not on that “front-end” ratio, but on the back end, which is all of the borrowers other debt (credit cards, car loans, student loans, etc.). She said that in talking with servicers, she’s hearing other debt is so high that most of today’s troubled borrowers cannot afford any loan payment at all, even at a very modest debt to income ratio. “Just getting the house payment done doesn’t mean their lifestyle is sustainable,” she said.
Another problem is that with home prices continuing to fall, more and more borrowers, who are essentially just renting their mortgages now because they will never see any home equity, are walking away. Even if the mortgage payment is low, the property taxes and home maintenance costs are padding that payment, and without an upside to the investment, there’s simply no reason to pay.
Suffice it to say, the foreclosure crisis, on the high and low ends, is not getting any better. It’s great that we’re seeing more sales action in the “distressed” market, but that’s not a real organic recovery. Now that the administration has managed to lower interest rates for conforming loans, they have to focus on jumbos, on jumbo rates and modifications. These are not all million-dollar homes of the rich and famous. In many markets, especially urban markets, a million-dollar home is a basic three bedroom, two bath on a postage stamp lot.
Tomorrow we get the most recent data from the Mortgage Bankers Association on loan delinquencies. I’ll be watching the prime jumbos. You should be too.
RealtyCheck@cnbc.com
© 2009 CNBC, Inc. All Rights Reserved
Are you looking for foreclosure help or loan modification assistance? Please visit manningloanlaw.com for a complimentary consultation - we are here to help.
Its Prime Time In Forclosures
It's Prime Time In Foreclosures
Published: Thursday, 28 May 2009 1:08 PM ET
By: Diana OlickCNBC Real Estate Reporter
CNBC.com
Published: Thursday, 28 May 2009 1:08 PM ET
By: Diana OlickCNBC Real Estate Reporter
CNBC.com
It’s not like we didn’t know it was coming, but apparently it’s coming with a vengeance.
Prime fixed-rate loans have finally leapfrogged those nasty subprimes to take the lead in the race to foreclosure. The foreclosure rate on primes has in fact doubled in the last year, and almost half of the overall increase in foreclosure starts in the first quarter of this year was due to the increase in primes.
I got a call yesterday from Scott Scredon at the Consumer Credit Counseling Services in Atlanta. He says they’ve seen a distinct change in callers. “We’re getting calls from engineers and attorneys and post graduate students,” he says. “Many of these people run through their 401Ks and their savings and start living off credit cards and then they call a counseling agency for help. So it’s a new kind of person we’re seeing today, but it’s a sign of the times.”
HOUSING NEWS
1 in 8 Homeowners Late Paying or In Foreclosure
1 in 8 Homeowners Late Paying or In Foreclosure
So I asked Jay Brinkmann, chief economist over at the Mortgage Bankers Association, why all these aggressive industry and government modification programs aren’t helping, especially if the troubled borrowers are not in those nasty, exotic subprime loans.
“We have seen already in April a step up in some of the actions filed on people who don’t qualify. But when we look at vacant homes, when we look at cases where people are simply out of work, there’s simply nothing there that can be modified or worked out if they don’t have a job,” notes Brinkmann. On top of that, more and more borrowers are redefaulting and ending up in the mod system again.
“Unfortunately, people that can’t live up to the promises they made originally when they were in a loan workout situation or simply that they were hoping things were going to get better and they did not. They then get back into the process and end up going to foreclosure. I think those factors will continue to drive the numbers up,” adds Brinkmann.
And one more thing: Freddie Mac estimates that 40% of the loans they have in foreclosure are on vacant homes. The borrowers don’t want a modification. Home prices have fallen so far that they will not see any equity for decades. So why pay?
On the bright side, if you can find it, the bulk of the trouble is still centered in four states: California, Nevada, Arizona and Florida, with Michigan, Ohio and Illinois close runners up. Brinkmann was surprised to see less of a national rise in foreclosures, but he is expecting it in the coming months.
© 2009 CNBC, Inc. All Rights Reserved
Are you looking for foreclosure help or loan modification assistance? Please visit manningloanlaw.com for a complimentary consultation - we are here to help.
Sunday, May 31, 2009
Pigs, Puppets & People in Peril by Martin Andelman
The Curious Campaign Against Loan Modification Firms
link to original article here
So, apparently we’ve got quite the foreclosure problem going on in this country. It’s true. It seems that a whole bunch of people bought homes they couldn’t afford for too much money and now they’re having trouble making their mortgage payments. Dummies. What were they thinking? Didn’t they see that The Great Depression Part 2 was just around the corner?
No need to worry though because our government has it handled. That’s right, President Obama, with the help of Treasury Secretary Tim Geithner and FDIC Chair Sheila Bair, showed up, carefully analyzed the problem, and fixed it just like that. Apparently, all troubled homeowners have to do is call a toll-free number and the government pretty much takes it from there. You can even find out if you qualify by clicking a couple of boxes on a Website. Isn’t the new technology fabulous?
Oh yeah, and the best part is… it’s all free! That’s right, President Obama says, even if we can’t refinance our mortgages, we can simply have them modified, and we shouldn’t even have to pay for a loan modification. Well, when President Obama says “free” he means about $300 billion, but that’s pretty close to free, right? Everything’s relative, as my mother used to say. I suppose President Obama considers bailing out the banks to be “reasonably priced”. So, relative to that, $300 billion is pretty much “free”. A “rounding error,” as accountants like to say.
Even if you don’t qualify for the president’s program, you don’t have to worry… the president said that all you have to do is call your bank directly and tell them you need help. I guess now, when you call your bank the electronic voice says: “Press ‘5’ if you’d like us to lower the amount you owe us. Press ‘6’ if your monthly payments are too high. Press ‘7’ if you’d like us to forget the whole thing.”
Wow… that’s change all right, but I’m not sure it’s the kind I can believe in. Why? Because it’s utter nonsense. Horsepucky. Absolute fiction. I’ve been telling people this for the past month or so, ever since I started spending my days calling banks and filming others as they try to do the same, and frankly, I’m tired of it. Call the government’s toll-free number yourself, and after that, give your bank a call and let me know how that goes. I’ll wait…
So, how’d it go? Not so well? Really, how so? You don’t mean to tell me that your bank hung up on you and the toll-free number was answered in India? Come on… really? That’s hard to believe.
Actually, it’s not. That’s exactly what happened to me when I called the oh-so-helpful Help Line, and I’ve had three banks hang up on me in the last two weeks, although I will admit that I do enjoy a smidgeon of sarcasm at times. Like when I asked my bank if they had any information on President Obama’s loan modification plan and they said no. I think I asked if they’d checked today’s mail. I wasn’t trying to be smart, it was just that the president had said I could call my bank directly almost two months before, so I thought maybe… oh, never mind.
I voted for Barack Obama because I believed him to be both smart and honest. So, imagine my disappointment at how he decided to fix the foreclosure crisis in this country: By rolling out a plan designed to help people mildly annoyed by their mortgage payments, while actively campaigning against the use of private sector loan modification firms.
So now, having given up on “smart,” I’m just praying for “honest”.
“If you have to pay, walk away.”
President Obama’s curious campaign against private sector loan modification firms began in earnest with that statement during his speech introducing his Affordability & Stability Plan back in February. Everyone clapped. “Yea! We don’t have to pay!” Everyone loves free stuff.
Somewhere along the line the president decided that the private sector firms that have been helping tens of thousands of troubled homeowners get their loans modified were just a bunch of scammers. At the time, I was in the middle of filming interviews with troubled homeowners who were all telling me how they had saved their homes by hiring private sector loan modification firms, so imagine my surprise to hear that the homeowners that I had been interviewing were lying. It was quite a shock, let me tell you.
Tabloid news shows leapt into action with shows profiling scams that had ripped off homeowners. And state regulatory agencies, such as the Departments of Real Estate, Corporations and even the State Bar Associations appeared all too happy to accept the idea that the firms offering to help homeowners obtain loan modifications were all fraudulent because they charged an upfront fee.
First of all, charging upfront for services has never been such a bad thing in this country. Charging upfront and not delivering was a bad thing, but just the charging part… not so much. And charging an upfront fee is the only way anyone would ever offer to assist someone with a loan modification, because once the mortgage was modified, the firm would have no assurance that the homeowner would pay the bill and essentially no recourse if the homeowner chose not to. Threaten to ruin the homeowner’s credit? Funny. Small claims court? Sure, if you’re interested in receiving payments of $25 a month.
How many scams in a torrent…
The California Department of Real Estate, in an interview with National Public Radio, said they were investigating 250 cases of fraud related to loan modifications, but in a state of 36 million people, and housing prices that have dropped by 30-40%, that number could only be considered endemic the way Y2K was an emergency. There had to be more than that, I reasoned, so I set out to find them.
On April 6, 2009, after Secretary Geithner and Attorney General Holder had their little moment in the sun while “Dad” was vacationing in Europe, the Associated Press reported the following:
“The Federal Trade Commission has sent warning letters to 71 companies it says were running suspicious advertisements and has filed five new civil cases to halt illegal loan modification scams.” Then, Holder went on to say: “The FBI is investigating about 2,100 mortgage fraud cases.”
Ah hah! 2,100 cases is a fair amount of cases, it seemed to me at the time. But, when I went to the FBI’s Website I found that “mortgage fraud,” has almost nothing to do with loan modification fraud. It seems that Holder wanted a number that was larger than 71, so he grabbed the 2100 from the FBI and ran. Now, you can call that whatever you want, but I was taught that what Holder did is called “lying”. Either that, or he didn’t know that “mortgage fraud,” isn’t the same thing as “loan modification fraud”.
The same AP article went on to report:There’s also been plenty of state action in running down companies engaged in fraud. Illinois Attorney General Lisa Madigan filed two lawsuits recently against alleged Chicago-area mortgage rescue scams. “We have repeatedly found that these operations are swindling desperate homeowners out of money they can’t afford to lose,” Madigan said in a release.“Plenty of state action”? And, “repeatedly”? Well I guess two is repeatedly, so never mind that one. Two in Illinois? Two foreclosure scams in Illinois. For God’s sake, aren’t there are more than two Illinois governors in prison in Illinois.
I want to get the bad guys too. Keep Guantanamo open just for them, as far as I’m concerned. But there are millions of Americans losing their homes to foreclosure. If there is a “flood” or “torrent” of loan modification scams, then there should be tens of thousands of people being defrauded by said scams. Not 11… 71… 5… and 2.
Meanwhile, back in Realityland... private sector loan modification firms throughout the country were busy earning fair compensation helping consumers get their loans modified so they could avoid foreclosure. One such firm that I interviewed, succeed in modifying 600 mortgages for distressed homeowners in April. Unfortunately, they did charge a fee for every one of them, so it goes without saying that they're a scam and should be shut down in favor of a government program?
The fact is, to-date, private sector loan modification companies are the only ones with any significant track record of success modifying mortgages on behalf of homeowners. The government programs have thus far proven themselves spectacular failures. The $320 billion Hope-4-Homeowners program, which was signed into existence by President Bush last July 30th, managed to modify just one mortgage. And that would be funny for all kinds of reasons, if it wasn’t so monumentally sad.
(I’m assuming we’ve still got most of the $320 billion left though, right? I wonder if the Treasury Department will tell me if I call and ask them.)
Okay, enough… I’m done joking around…
Ever since it began in late 2006, our government has mishandled the housing meltdown at virtually every turn. Claiming that loan modification firms are all “scams,” just because they charge an upfront fee, is only our government’s latest attempt to demonstrate how out-of-touch they really are.
Millions of people have been or are being affected. Hundreds of thousands of children will already grow up with the scars of losing homes in their youth. And no one is doing anything substantive to stop it. The programs so far are like watching someone remove sand from the beach with a small bucket. The only exception is the private sector… the ones who charge a fee… the “scams,” according to the president.
President Obama’s housing rescue plan isn’t even designed to help homeowners at risk of foreclosure. FDIC Chair, Sheila Bair, talking with ABC News in February, admitted that the President's plan would do little if anything to help those at the greatest risk of foreclosure, and without helping these folks, our economic problems are certain to continue unabated.
“Bair also said that the (program’s) huge expenditure won’t halt an avalanche of foreclosures, conceding that there are millions of homeowners that are now so far ‘underwater’ – their homes now worth less than their mortgages – that they will inevitably lose their homes.” ABC.com
What should the people who don’t qualify for the president’s plan do? Why, call their banks directly, of course. Inexplicably, the president feels certain that your bank will be all too willing to help you by reducing the amount of money you rightfully owe them. Why do you suppose President Obama would think that? I think it’s safe to assume that he personally has never actually tried to call a bank to ask for a mortgage modification. Did he ask Treasury about it?
You can ask anyone involved in obtaining a loan modification on behalf of a client and you’ll learn that the banks don’t like negotiating with third parties, and law firm third parties even less. “They refuse to acknowledge my representation of my clients all the time,” say Brian Columbana, an attorney at Mortgage Relief Center in Irvine, California.
“I send them a form telling them that a borrower has retained my firm to represent them and that they are not to contact my client… but they routinely ignore it,” Columbana says. “I’ve had numerous instances where banks called my clients to tell them that they don’t need to pay me, that they shouldn’t have hired me, that they could have used the money to pay them.”
In doing the research for this article, I filmed several loan modification firms in action. On one call, the firm’s representative was told that he had to have the borrower on the call and when he connected the borrower, the bank representative told the borrower “you don’t have to pay him”. I was shocked and interrupted the call, asking how she knew that “he” was being paid in the first place.
The bank’s representative abruptly hung up the call to avoid answering my question.The banks have proven that they don’t want to negotiate with an expert who is representing a homeowner. Chase’s message says: “Chase always works directly with our customers to offer the best solutions for your needs. Be cautious of any third parties who offer to help you obtain a loan modification and charge fees for their services.” Call Chase yourself at 800-446-8939. I got a mortgage from Chase once. I don’t remember them having a similar message cautioning me about third party mortgage brokers.
Telling me that I don’t need anyone representing me when attempting to get my bank to modifying my mortgage seems a lot like the police telling me that I don’t need a lawyer after I’ve been arrested because if I have any legal questions I can just ask the District Attorney. Gosh, thanks for that, but I think I’d prefer someone on my side of the table anyway, if it’s all the same to you.
So, how did the administration come to believe that there are so many loan modification scams in the first place? Here’s something that might have started the ball rolling:
The Washington Post, April 2009:According to the Treasury Department’s Financial Crimes Enforcement Network, financial institutions filed an estimated 65,049 suspicious activity reports from 2007 through 2008, a 30% jump from 2006.
Did they now? Suspicious Activity Reports are known by the acronym “SARS” and they’re the kind of reports banks file with Treasury when they suspect money laundering or terrorist funding. Do you suppose that money laundering and terrorist funding had a 30% increase between 2006 and 2007? No kidding. I hadn’t heard.
Do you suppose that SARS forms (FinCEN Form 109) could be used to report loan modification firms? It is a wild coincidence, don’t you think? A 30% increase over 2006… the same year more loan modifications were being requested by all those fee-charging, obviously FRAUDULENT loan modification firms? Spooky.
I asked a bank insider why a bank would file a SARS report on a loan modification firm. His response: “It would have to be vindictive.”
I looked at the form and section ‘18’ asks for the category of crime suspected. There are four options: Money Laundering, Terrorist Funding, Structuring d. Other (Please explain) ____________. There’s no loan modification box, but there is room for “other”. That blank is certainly where I would have put something, if using the form for something it wasn’t intended for, wouldn’t you?
It still doesn’t prove it though. How could I know for sure, unless I could see an actual SARS filed against a loan modification firm, and that’s impossible. Maybe not… here’s what I found on FinCEN’s Website. Apparently, they found it necessary to send out an advisory to all of the banks on April 6, 2009:
In order to assist law enforcement in its efforts to target this type of fraudulent activity, we request that, if financial institutions become aware of this type of activity, they include the term "foreclosure rescue scam" in the narrative portions of all relevant Suspicious Activity Reports filed.
That’s what you call a “gotcha’ moment”. Treasury needed to issue the advisory so the banks would know how to use the form when using it to report a suspected loan modification scam… because apparently they didn’t want it listed under “Other” in section 18 on page one. The “narrative portions” are on page three. Well, at least the advisory Treasury sent out on April 6th straightened that out. Problem solved.
I’m confused. I thought fraudulent loan modification firms were taking money and delivering nothing in return. If they were scammers delivering nothing in return, why would the banks have the opportunity to file a Suspicious Activity Report about them? I guess maybe they’re the kind of scammers that, before they abscond with your cash, they first go through the headache and hassle of actually trying to get your loan modified… and then they take your hard earned cash and go to Brazil.
Now, does that make any sense at all to anyone?
So, it’s clear what has happened here, right? The banks didn’t like paid professionals helping homeowners because they’d get more for their clients than the banks would give to a nervous amateur. The banks don’t have skilled loan modification departments because they’ve never wanted to do loan modifications in the first place. So, they started using SARS reports to report loan modification firms. And no one knew because SARS reports report terrorist funding and money laundering, which are not the kind of crimes where the accused gets contacted before an investigation is conducted.
Private Sector Loan Modification Firms Under Fire…
Stop for a moment to consider why, with the president and countless others telling homeowners not to pay someone to help with a loan modification, are tens of thousands of homeowners still doing it every day? Don’t these people watch television?
According to Greg Feldman, Managing Partner of Feldman Law Center in Irvine, California, a firm that handles loan modifications for a fee, “Homeowners are smarter than the government gives them credit for. The vast majority of the homeowners that come to us for help have already tried for months to get help from government programs and their lenders. It didn’t work, so they came to us.”
Since the beginning of this year, Feldman has completed 712 mortgage modifications, an average of 178 per month. That’s 712 families that didn’t lose their homes since January 1, 2009, well over 1,000 children that weren’t forced to leave the safety of their bedrooms as a result of services Feldman provides.
Gary Erickson, Founder of Green Credit Law Center, also in Southern California confirms what Feldman says about homeowners. “Of course people know they can do it themselves. They know they can call a government help line. They know they can call their bank… and they do all of those things all the time. But when months have gone by and they’re still getting nowhere they call us, because their home is on the line. We’ve helped modify well over a thousand loans since the first of the year,” Erickson, a former Navy Capitan, says with more than a little pride in his voice. “And yet, the government still wrongfully intimates we’re doing something wrong.”
Cheryl Beckham, a homeowner from Moreno Valley, California, one of the areas hardest hit by the mortgage meltdown, tried everything she could think of before a friend suggested she call Green Credit.
“I called HUD, the government program, for five months, but no one ever called me back,” Cheryl explains. “Then I tried my lender, Chase. So, I was calling and calling and they said my loan modification was in process, but after three months nothing ever happened. My mortgage was going to adjust again, and I knew I wouldn’t be able to pay it. So, I called a friend and he suggested I call Green Credit. They were so much nicer than Chase. And less than six weeks later that they got it done. They got my payment to where it was before it started going up, and it’s a fixed loan, which is what I wanted.”
The Mota Family, from Menefee, California, had a similar story. They purchased a home for $445, 000 using an adjustable rate mortgage. One year later, the payment very near doubled and the home’s value was cut almost in half, so Washington Mutual told them that refinancing was out of the question.
Mrs. Mota was upset by the way their bank repeatedly treated her and her husband. “It was like they would laugh at us, they hung up on us, they just kept saying that if we didn’t make our payments they were going to put us out on the street. It was so stressful. I couldn’t sleep. I was crying all the time. Then I heard an ad on the radio for Green Credit, and I said… what the heck… and we called them. They got our payment down to $800 a month. From $4,000 to $800! Then it goes up a little each year, but it caps out at $1900 a month, which we can handle no problem.”
I’ve personally interviewed twenty reputable loan modification firms for this article. All of them told me stories of how banks treat homeowners who retain their services. I interviewed homeowners too. And they told me the same things the lawyers and company executives did. Not one inconsistency between any of them. If there was any question in my mind before I began, there certainly wasn’t when I was done.
Tim McFarlin of McFarlin and Geurts… Bryan Malickson of United Legal Services in Maryland, both trusted me enough to send me information even though we’ve never met. And the same is true about Barb Weidner and Roie Raitses of 1st Foreclosure Prevention, which is in Huntington Valley, Pennsylvania. Barb and Roie went so far out of their way to help me get the information I needed, that at one point they stayed at their offices on the phone with me until nearly midnight. And they authorized me to quote them and list them in this article. Are there scammers that do things like that? I wouldn’t think so.
There are but three possibilities for troubled homeowners who want to stay in their homes…
1. The President’s Plan… No need to discuss this. Whomever it helps, it helps. I’ll be keeping score, by the way. Oh yeah, and even though it’s free, it also costs American Taxpayers $300 billion.
2. Homeowners Call Banks Directly – Hasn’t worked, will not work. 50% re-default. Like asking a Tiger to play nicely with a gazelle.
3. Private Sector Loan Modification Firms – Costs the taxpayers nothing… zero. Proven effective for homeowners. Banks don’t like it but who cares?
Our economy cannot recover until we stabilize our housing markets. President Obama has created a fund of $50 billion that is to be paid to banks for modifying mortgages. Let’s start keeping score. Let’s know the real numbers. And let’s put the bad guys in jail. But shouldn’t the people that prove themselves most effective that should be compensated with federal funds. Right now, that’s the private sector loan modification industry, sure as I’m writing these last words.
To those in congress, in the administration… President Obama… all I can say to you is: See you in D.C. I’m coming. We need to talk.
link to original article here
So, apparently we’ve got quite the foreclosure problem going on in this country. It’s true. It seems that a whole bunch of people bought homes they couldn’t afford for too much money and now they’re having trouble making their mortgage payments. Dummies. What were they thinking? Didn’t they see that The Great Depression Part 2 was just around the corner?
No need to worry though because our government has it handled. That’s right, President Obama, with the help of Treasury Secretary Tim Geithner and FDIC Chair Sheila Bair, showed up, carefully analyzed the problem, and fixed it just like that. Apparently, all troubled homeowners have to do is call a toll-free number and the government pretty much takes it from there. You can even find out if you qualify by clicking a couple of boxes on a Website. Isn’t the new technology fabulous?
Oh yeah, and the best part is… it’s all free! That’s right, President Obama says, even if we can’t refinance our mortgages, we can simply have them modified, and we shouldn’t even have to pay for a loan modification. Well, when President Obama says “free” he means about $300 billion, but that’s pretty close to free, right? Everything’s relative, as my mother used to say. I suppose President Obama considers bailing out the banks to be “reasonably priced”. So, relative to that, $300 billion is pretty much “free”. A “rounding error,” as accountants like to say.
Even if you don’t qualify for the president’s program, you don’t have to worry… the president said that all you have to do is call your bank directly and tell them you need help. I guess now, when you call your bank the electronic voice says: “Press ‘5’ if you’d like us to lower the amount you owe us. Press ‘6’ if your monthly payments are too high. Press ‘7’ if you’d like us to forget the whole thing.”
Wow… that’s change all right, but I’m not sure it’s the kind I can believe in. Why? Because it’s utter nonsense. Horsepucky. Absolute fiction. I’ve been telling people this for the past month or so, ever since I started spending my days calling banks and filming others as they try to do the same, and frankly, I’m tired of it. Call the government’s toll-free number yourself, and after that, give your bank a call and let me know how that goes. I’ll wait…
So, how’d it go? Not so well? Really, how so? You don’t mean to tell me that your bank hung up on you and the toll-free number was answered in India? Come on… really? That’s hard to believe.
Actually, it’s not. That’s exactly what happened to me when I called the oh-so-helpful Help Line, and I’ve had three banks hang up on me in the last two weeks, although I will admit that I do enjoy a smidgeon of sarcasm at times. Like when I asked my bank if they had any information on President Obama’s loan modification plan and they said no. I think I asked if they’d checked today’s mail. I wasn’t trying to be smart, it was just that the president had said I could call my bank directly almost two months before, so I thought maybe… oh, never mind.
I voted for Barack Obama because I believed him to be both smart and honest. So, imagine my disappointment at how he decided to fix the foreclosure crisis in this country: By rolling out a plan designed to help people mildly annoyed by their mortgage payments, while actively campaigning against the use of private sector loan modification firms.
So now, having given up on “smart,” I’m just praying for “honest”.
“If you have to pay, walk away.”
President Obama’s curious campaign against private sector loan modification firms began in earnest with that statement during his speech introducing his Affordability & Stability Plan back in February. Everyone clapped. “Yea! We don’t have to pay!” Everyone loves free stuff.
Somewhere along the line the president decided that the private sector firms that have been helping tens of thousands of troubled homeowners get their loans modified were just a bunch of scammers. At the time, I was in the middle of filming interviews with troubled homeowners who were all telling me how they had saved their homes by hiring private sector loan modification firms, so imagine my surprise to hear that the homeowners that I had been interviewing were lying. It was quite a shock, let me tell you.
Tabloid news shows leapt into action with shows profiling scams that had ripped off homeowners. And state regulatory agencies, such as the Departments of Real Estate, Corporations and even the State Bar Associations appeared all too happy to accept the idea that the firms offering to help homeowners obtain loan modifications were all fraudulent because they charged an upfront fee.
First of all, charging upfront for services has never been such a bad thing in this country. Charging upfront and not delivering was a bad thing, but just the charging part… not so much. And charging an upfront fee is the only way anyone would ever offer to assist someone with a loan modification, because once the mortgage was modified, the firm would have no assurance that the homeowner would pay the bill and essentially no recourse if the homeowner chose not to. Threaten to ruin the homeowner’s credit? Funny. Small claims court? Sure, if you’re interested in receiving payments of $25 a month.
How many scams in a torrent…
The California Department of Real Estate, in an interview with National Public Radio, said they were investigating 250 cases of fraud related to loan modifications, but in a state of 36 million people, and housing prices that have dropped by 30-40%, that number could only be considered endemic the way Y2K was an emergency. There had to be more than that, I reasoned, so I set out to find them.
On April 6, 2009, after Secretary Geithner and Attorney General Holder had their little moment in the sun while “Dad” was vacationing in Europe, the Associated Press reported the following:
“The Federal Trade Commission has sent warning letters to 71 companies it says were running suspicious advertisements and has filed five new civil cases to halt illegal loan modification scams.” Then, Holder went on to say: “The FBI is investigating about 2,100 mortgage fraud cases.”
Ah hah! 2,100 cases is a fair amount of cases, it seemed to me at the time. But, when I went to the FBI’s Website I found that “mortgage fraud,” has almost nothing to do with loan modification fraud. It seems that Holder wanted a number that was larger than 71, so he grabbed the 2100 from the FBI and ran. Now, you can call that whatever you want, but I was taught that what Holder did is called “lying”. Either that, or he didn’t know that “mortgage fraud,” isn’t the same thing as “loan modification fraud”.
The same AP article went on to report:There’s also been plenty of state action in running down companies engaged in fraud. Illinois Attorney General Lisa Madigan filed two lawsuits recently against alleged Chicago-area mortgage rescue scams. “We have repeatedly found that these operations are swindling desperate homeowners out of money they can’t afford to lose,” Madigan said in a release.“Plenty of state action”? And, “repeatedly”? Well I guess two is repeatedly, so never mind that one. Two in Illinois? Two foreclosure scams in Illinois. For God’s sake, aren’t there are more than two Illinois governors in prison in Illinois.
I want to get the bad guys too. Keep Guantanamo open just for them, as far as I’m concerned. But there are millions of Americans losing their homes to foreclosure. If there is a “flood” or “torrent” of loan modification scams, then there should be tens of thousands of people being defrauded by said scams. Not 11… 71… 5… and 2.
Meanwhile, back in Realityland... private sector loan modification firms throughout the country were busy earning fair compensation helping consumers get their loans modified so they could avoid foreclosure. One such firm that I interviewed, succeed in modifying 600 mortgages for distressed homeowners in April. Unfortunately, they did charge a fee for every one of them, so it goes without saying that they're a scam and should be shut down in favor of a government program?
The fact is, to-date, private sector loan modification companies are the only ones with any significant track record of success modifying mortgages on behalf of homeowners. The government programs have thus far proven themselves spectacular failures. The $320 billion Hope-4-Homeowners program, which was signed into existence by President Bush last July 30th, managed to modify just one mortgage. And that would be funny for all kinds of reasons, if it wasn’t so monumentally sad.
(I’m assuming we’ve still got most of the $320 billion left though, right? I wonder if the Treasury Department will tell me if I call and ask them.)
Okay, enough… I’m done joking around…
Ever since it began in late 2006, our government has mishandled the housing meltdown at virtually every turn. Claiming that loan modification firms are all “scams,” just because they charge an upfront fee, is only our government’s latest attempt to demonstrate how out-of-touch they really are.
Millions of people have been or are being affected. Hundreds of thousands of children will already grow up with the scars of losing homes in their youth. And no one is doing anything substantive to stop it. The programs so far are like watching someone remove sand from the beach with a small bucket. The only exception is the private sector… the ones who charge a fee… the “scams,” according to the president.
President Obama’s housing rescue plan isn’t even designed to help homeowners at risk of foreclosure. FDIC Chair, Sheila Bair, talking with ABC News in February, admitted that the President's plan would do little if anything to help those at the greatest risk of foreclosure, and without helping these folks, our economic problems are certain to continue unabated.
“Bair also said that the (program’s) huge expenditure won’t halt an avalanche of foreclosures, conceding that there are millions of homeowners that are now so far ‘underwater’ – their homes now worth less than their mortgages – that they will inevitably lose their homes.” ABC.com
What should the people who don’t qualify for the president’s plan do? Why, call their banks directly, of course. Inexplicably, the president feels certain that your bank will be all too willing to help you by reducing the amount of money you rightfully owe them. Why do you suppose President Obama would think that? I think it’s safe to assume that he personally has never actually tried to call a bank to ask for a mortgage modification. Did he ask Treasury about it?
You can ask anyone involved in obtaining a loan modification on behalf of a client and you’ll learn that the banks don’t like negotiating with third parties, and law firm third parties even less. “They refuse to acknowledge my representation of my clients all the time,” say Brian Columbana, an attorney at Mortgage Relief Center in Irvine, California.
“I send them a form telling them that a borrower has retained my firm to represent them and that they are not to contact my client… but they routinely ignore it,” Columbana says. “I’ve had numerous instances where banks called my clients to tell them that they don’t need to pay me, that they shouldn’t have hired me, that they could have used the money to pay them.”
In doing the research for this article, I filmed several loan modification firms in action. On one call, the firm’s representative was told that he had to have the borrower on the call and when he connected the borrower, the bank representative told the borrower “you don’t have to pay him”. I was shocked and interrupted the call, asking how she knew that “he” was being paid in the first place.
The bank’s representative abruptly hung up the call to avoid answering my question.The banks have proven that they don’t want to negotiate with an expert who is representing a homeowner. Chase’s message says: “Chase always works directly with our customers to offer the best solutions for your needs. Be cautious of any third parties who offer to help you obtain a loan modification and charge fees for their services.” Call Chase yourself at 800-446-8939. I got a mortgage from Chase once. I don’t remember them having a similar message cautioning me about third party mortgage brokers.
Telling me that I don’t need anyone representing me when attempting to get my bank to modifying my mortgage seems a lot like the police telling me that I don’t need a lawyer after I’ve been arrested because if I have any legal questions I can just ask the District Attorney. Gosh, thanks for that, but I think I’d prefer someone on my side of the table anyway, if it’s all the same to you.
So, how did the administration come to believe that there are so many loan modification scams in the first place? Here’s something that might have started the ball rolling:
The Washington Post, April 2009:According to the Treasury Department’s Financial Crimes Enforcement Network, financial institutions filed an estimated 65,049 suspicious activity reports from 2007 through 2008, a 30% jump from 2006.
Did they now? Suspicious Activity Reports are known by the acronym “SARS” and they’re the kind of reports banks file with Treasury when they suspect money laundering or terrorist funding. Do you suppose that money laundering and terrorist funding had a 30% increase between 2006 and 2007? No kidding. I hadn’t heard.
Do you suppose that SARS forms (FinCEN Form 109) could be used to report loan modification firms? It is a wild coincidence, don’t you think? A 30% increase over 2006… the same year more loan modifications were being requested by all those fee-charging, obviously FRAUDULENT loan modification firms? Spooky.
I asked a bank insider why a bank would file a SARS report on a loan modification firm. His response: “It would have to be vindictive.”
I looked at the form and section ‘18’ asks for the category of crime suspected. There are four options: Money Laundering, Terrorist Funding, Structuring d. Other (Please explain) ____________. There’s no loan modification box, but there is room for “other”. That blank is certainly where I would have put something, if using the form for something it wasn’t intended for, wouldn’t you?
It still doesn’t prove it though. How could I know for sure, unless I could see an actual SARS filed against a loan modification firm, and that’s impossible. Maybe not… here’s what I found on FinCEN’s Website. Apparently, they found it necessary to send out an advisory to all of the banks on April 6, 2009:
In order to assist law enforcement in its efforts to target this type of fraudulent activity, we request that, if financial institutions become aware of this type of activity, they include the term "foreclosure rescue scam" in the narrative portions of all relevant Suspicious Activity Reports filed.
That’s what you call a “gotcha’ moment”. Treasury needed to issue the advisory so the banks would know how to use the form when using it to report a suspected loan modification scam… because apparently they didn’t want it listed under “Other” in section 18 on page one. The “narrative portions” are on page three. Well, at least the advisory Treasury sent out on April 6th straightened that out. Problem solved.
I’m confused. I thought fraudulent loan modification firms were taking money and delivering nothing in return. If they were scammers delivering nothing in return, why would the banks have the opportunity to file a Suspicious Activity Report about them? I guess maybe they’re the kind of scammers that, before they abscond with your cash, they first go through the headache and hassle of actually trying to get your loan modified… and then they take your hard earned cash and go to Brazil.
Now, does that make any sense at all to anyone?
So, it’s clear what has happened here, right? The banks didn’t like paid professionals helping homeowners because they’d get more for their clients than the banks would give to a nervous amateur. The banks don’t have skilled loan modification departments because they’ve never wanted to do loan modifications in the first place. So, they started using SARS reports to report loan modification firms. And no one knew because SARS reports report terrorist funding and money laundering, which are not the kind of crimes where the accused gets contacted before an investigation is conducted.
Private Sector Loan Modification Firms Under Fire…
Stop for a moment to consider why, with the president and countless others telling homeowners not to pay someone to help with a loan modification, are tens of thousands of homeowners still doing it every day? Don’t these people watch television?
According to Greg Feldman, Managing Partner of Feldman Law Center in Irvine, California, a firm that handles loan modifications for a fee, “Homeowners are smarter than the government gives them credit for. The vast majority of the homeowners that come to us for help have already tried for months to get help from government programs and their lenders. It didn’t work, so they came to us.”
Since the beginning of this year, Feldman has completed 712 mortgage modifications, an average of 178 per month. That’s 712 families that didn’t lose their homes since January 1, 2009, well over 1,000 children that weren’t forced to leave the safety of their bedrooms as a result of services Feldman provides.
Gary Erickson, Founder of Green Credit Law Center, also in Southern California confirms what Feldman says about homeowners. “Of course people know they can do it themselves. They know they can call a government help line. They know they can call their bank… and they do all of those things all the time. But when months have gone by and they’re still getting nowhere they call us, because their home is on the line. We’ve helped modify well over a thousand loans since the first of the year,” Erickson, a former Navy Capitan, says with more than a little pride in his voice. “And yet, the government still wrongfully intimates we’re doing something wrong.”
Cheryl Beckham, a homeowner from Moreno Valley, California, one of the areas hardest hit by the mortgage meltdown, tried everything she could think of before a friend suggested she call Green Credit.
“I called HUD, the government program, for five months, but no one ever called me back,” Cheryl explains. “Then I tried my lender, Chase. So, I was calling and calling and they said my loan modification was in process, but after three months nothing ever happened. My mortgage was going to adjust again, and I knew I wouldn’t be able to pay it. So, I called a friend and he suggested I call Green Credit. They were so much nicer than Chase. And less than six weeks later that they got it done. They got my payment to where it was before it started going up, and it’s a fixed loan, which is what I wanted.”
The Mota Family, from Menefee, California, had a similar story. They purchased a home for $445, 000 using an adjustable rate mortgage. One year later, the payment very near doubled and the home’s value was cut almost in half, so Washington Mutual told them that refinancing was out of the question.
Mrs. Mota was upset by the way their bank repeatedly treated her and her husband. “It was like they would laugh at us, they hung up on us, they just kept saying that if we didn’t make our payments they were going to put us out on the street. It was so stressful. I couldn’t sleep. I was crying all the time. Then I heard an ad on the radio for Green Credit, and I said… what the heck… and we called them. They got our payment down to $800 a month. From $4,000 to $800! Then it goes up a little each year, but it caps out at $1900 a month, which we can handle no problem.”
I’ve personally interviewed twenty reputable loan modification firms for this article. All of them told me stories of how banks treat homeowners who retain their services. I interviewed homeowners too. And they told me the same things the lawyers and company executives did. Not one inconsistency between any of them. If there was any question in my mind before I began, there certainly wasn’t when I was done.
Tim McFarlin of McFarlin and Geurts… Bryan Malickson of United Legal Services in Maryland, both trusted me enough to send me information even though we’ve never met. And the same is true about Barb Weidner and Roie Raitses of 1st Foreclosure Prevention, which is in Huntington Valley, Pennsylvania. Barb and Roie went so far out of their way to help me get the information I needed, that at one point they stayed at their offices on the phone with me until nearly midnight. And they authorized me to quote them and list them in this article. Are there scammers that do things like that? I wouldn’t think so.
There are but three possibilities for troubled homeowners who want to stay in their homes…
1. The President’s Plan… No need to discuss this. Whomever it helps, it helps. I’ll be keeping score, by the way. Oh yeah, and even though it’s free, it also costs American Taxpayers $300 billion.
2. Homeowners Call Banks Directly – Hasn’t worked, will not work. 50% re-default. Like asking a Tiger to play nicely with a gazelle.
3. Private Sector Loan Modification Firms – Costs the taxpayers nothing… zero. Proven effective for homeowners. Banks don’t like it but who cares?
Our economy cannot recover until we stabilize our housing markets. President Obama has created a fund of $50 billion that is to be paid to banks for modifying mortgages. Let’s start keeping score. Let’s know the real numbers. And let’s put the bad guys in jail. But shouldn’t the people that prove themselves most effective that should be compensated with federal funds. Right now, that’s the private sector loan modification industry, sure as I’m writing these last words.
To those in congress, in the administration… President Obama… all I can say to you is: See you in D.C. I’m coming. We need to talk.
Countrywide & Bank of America Watch: The 11 State Attorney General Settlement in Context
Homeowner Relief? The Recent Countrywide Settlement in Context
A recent settlement between the California Attorney Generals office, joined by 10 additional states, resulted in one of the widest reaching predatory lending settlements in US history.
Under the landmark agreement, Countrywide Financial’s new owner, Bank of America, agreed to proceed with loan modifications on nearly $8 billion in home mortgages, potentially affecting hundreds of thousands of homeowners.
“With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide,” said Attorney General Brown. “Countrywide’s lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn’t understand and ultimately couldn’t afford.”
Tragically, California and the other states have had to step in because federal authorities shamelessly failed to even minimally regulate mortgage lending.”
According to the terms of the settlement, the loan modifications may include potentially lower interest rate fees along with certain principal reductions, depending upon the individual home owner’s agreement (see Bank of America Settlement /Attorney General Settlement)
According to the plan, the payments would be modified so that they will not exceed 1/3 of the mortgage holder’s adjusted income, after accounting for interest, taxation and insurance costs (¼ for those whose fees are not strictly escrowed according to the original terms of the loan.) For participating states, such as Illinois and California, homeowners will be eligible based upon meeting requirements, and will not have to pay restructuring fees and can get a temporary respite from pending foreclosure processes if they qualify.
While the program begins December 1, Bank of America has been positioning the agreement to help boost its public reputation, stating in a press release the “creation of a proactive home retention plan that will systemtically modify troubled mortgages” (see USA Today - B OF A Press Release)
The Bank went on to state that the settlement creates a “comprehensive program….to sustained home ownership.” Under the program, the Bank will consider options including Federal Housing Administration Hope for Homeowners refinancing, certain interest rate reduction plans and trades of home equity for reduced principal.
Banks have historically resisted lowering principal on home loans, but the swap for home equity satisfies bank’s concerns regarding the core value of the investment: when Bank of America takes a larger proportion of a smaller loan, they can potentially retain their investment, on net.
The settlement also created a “Foreclosure Relief” fund of $150 million for states to help home owners who can only afford minimal payments on their loans and an additional $70 million to help provide transition funds for those who have or will lose their homes through foreclosure. A large issue are Countrywide originated loans which were re-sold and packaged into securities to other banks and lenders - the press release states that just over 10% of eligible loans are held directly by Bank of America, leaving hundreds of thousands of home owners outside of the system vulnerable.
While the settlement covers loans that are managed by Countrywide, even if they originated from other lenders, it does not strictly cover all loans that originated from Countrywide but then we re-packaged and syndicated to other lenders, which became a common practice. As a result, you’ll want to check with your bank and your state attorney general’s office to determine whether you qualify for the loan settlement agreement.
While Bank of America states they will be contacting qualified homeowners, it’s best to reach out and see if you qualify in advance.
The effects of the settlement vary widely depending on the conditions of the loan. Although the modifications may help some homeowners, it cannot address structural problems that may still leave even adjusted rates out of reach for a growing number of homeowners.
Although critics credit Bank of America with an initial approach, many believe that is still does not go far enough and instead reflects both public and private financial pressures rather than representing a long term attempt to solve the problem. Many participating states believe that the agreement is just a first step in a larger scale modification with additional participating banks (see Washington Post)
While the Bank did not pay any fines to the government or admit any harmful actions on its part as part of the larger settlement, it did agree to what is considered one of the largest financial real estate settlements in recent years.
The suit really targets a small segment of loans which were addressed to the sub prime market with short-term, teaser interest terms that have become the target for recent scrutiny, leaving a much larger set of mortgage holders outside the direct reach of the settlement. Those with subprime or adjustable rate, pay option loans (option adjustable rate mortgages or ARMs) may see reduced interest rates under the settlement relative to the borrower’s income.
Regulators began to look at both the home owners who did not strictly fall within these guidelines, as well as the dozen or so major home lenders who did not take part in the settlement agreement (see Los Angeles Times)
Part of the settlement allows the Attorney Generals the right of first refusal on the settlement if Countrywide doesn’t reach more than 50,000 loan modification agreements before March 1, 2009, which is considerably lower than the nearly 400,000 loans which potentially qualify for the new terms.
Countrywide/B of A plans to begin contacting eligible borrowers starting December 1, although only those who are more than 60 days delinquent on their loan will receive first contact. Importantly, the settlement is still disciplined by profit potential on the part of the bank: only loan modifications that will produce revenue greater than or equal to what the banks could recoup directly through standard foreclosures will be considered, while those whose adjusted incomes are above the threshold for qualification also will not be offered modifications.
Given all of these details, you may wonder how exactly the settlement will affect your individual case – given the number of variables in play, each case will be evaluated individually by loan modification officers. To help you sort through some of these details, we have dissected some of the more intricate parts of the settlement. Always consult with an attorney or debt counselor before taking any specific actions.
What Homeowners Need to Know
Even if you quality for the settlement program, you will, generally, be notified starting on December 1. Independent of your qualifications, however, you still are obligated to make payments on your existing loan agreement until the modification fully goes into effect; as a result, you should always go forward assuming that you will have to make complete payments on the existing loan until you receive a firm modification offer (even after receiving an offer you should consult with a professional advisor to go over the details.)
Keep in mind that if your home is currently in foreclosure, the settlement does not reverse the procedure unless you meet the specific terms of the agreement - while you can consult the lender, they are not necessarily legally obligated to stop all foreclosure proceedings that have already begun, and are only suspending proceedings for those who meet the narrow terms as outlined in the agreement (this affects some 390,000 home owners, leaving many more outside of the scope.) As a result, you’ll have to contact a private attorney to help you navigate the individual details of your situation.
Keep in mind that loan modifications, under the settlement, are restricted to homeowners who are more than 60 days delinquent on their current subprime or pay option, ARM mortgages that are managed by Countrywide. If you have a loan with another lender, then your particular situation does not strictly apply to the settlement, and you will have to pursue the normal channels of working with your loan modification offices to reach a mutually acceptable agreement. Additionally, if you have another form of loan with Countrywide or if you originated your mortgage before 2004 or since the beginning of this year, then the settlement terms also will not apply in your case.
The equity of your home also plays into the equation: if you owe less than 3/4 of the current market value of your home, then the loan modification agreement also will not apply to your case. While this leaves out a large pool of borrowers, there are still other routes that you can take to reaching a new agreement, namely working with Countrywide on an individual basis to reach an agreement.
The exact terms of your modification will be determined by Countrywide as a product of the criterion they established to reflect both the income of the borrower, as well as the appraised value of the home relative to the principle amount. While most borrowers will be eligible for a reduced interest rate option or transformation of their loan to an interest-based mortgage over a shorter time period (generally, the conversions will be to five or ten year terms.)
The lowering of principle amounts is determined at the discretion of Countrywide, and is a function of the current market value of the home and your home equity position - only those who owe above 95% of the current home value might qualify (although home values can be subjective, Countrywide determines these based on 3rd party appraisals.)
Further, the exact interest rate reductions are determined by Countrywide, which can issue either temporary or permanent modification offers on interest - while some instances may provide temporary reductions at 3.5% or below, each case will be evaluated individually according to the agreement.
Keep in mind that the modification offer must be mutually agreed upon by both parties, and no fees can be levied under the terms of the settlement. If you are currently up to date on your loan, but anticipate financial pressures in the near future, then the terms of the agreement extend until June 2012 for those who qualify. (see California Attorney General News)
If you have already been through foreclosure proceedings, then you may qualify for compensation under the terms of the agreement. In particular, the agreement provides certain compensation amounts for those who qualify under the terms and have already been through proceedings may qualify for payments based upon a pool of compensation provided by Countrywide to the states (Attorney General offices expect to contact eligible individuals before the end of the year - you should contact your Attorney General’s office to determine the exact structure of this compensation.)
Although the loan modification offers will be applied nation wide, this compensation is only available to homeowners in states which participated in the settlement agreement which include California, Texas, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Arizona and Washington.
A recent settlement between the California Attorney Generals office, joined by 10 additional states, resulted in one of the widest reaching predatory lending settlements in US history.
Under the landmark agreement, Countrywide Financial’s new owner, Bank of America, agreed to proceed with loan modifications on nearly $8 billion in home mortgages, potentially affecting hundreds of thousands of homeowners.
“With this settlement, homeowners will receive direct relief from the catastrophic damage caused by Countrywide,” said Attorney General Brown. “Countrywide’s lending practices turned the American dream into a nightmare for tens of thousands of families by putting them into loans they couldn’t understand and ultimately couldn’t afford.”
Tragically, California and the other states have had to step in because federal authorities shamelessly failed to even minimally regulate mortgage lending.”
According to the terms of the settlement, the loan modifications may include potentially lower interest rate fees along with certain principal reductions, depending upon the individual home owner’s agreement (see Bank of America Settlement /Attorney General Settlement)
According to the plan, the payments would be modified so that they will not exceed 1/3 of the mortgage holder’s adjusted income, after accounting for interest, taxation and insurance costs (¼ for those whose fees are not strictly escrowed according to the original terms of the loan.) For participating states, such as Illinois and California, homeowners will be eligible based upon meeting requirements, and will not have to pay restructuring fees and can get a temporary respite from pending foreclosure processes if they qualify.
While the program begins December 1, Bank of America has been positioning the agreement to help boost its public reputation, stating in a press release the “creation of a proactive home retention plan that will systemtically modify troubled mortgages” (see USA Today - B OF A Press Release)
The Bank went on to state that the settlement creates a “comprehensive program….to sustained home ownership.” Under the program, the Bank will consider options including Federal Housing Administration Hope for Homeowners refinancing, certain interest rate reduction plans and trades of home equity for reduced principal.
Banks have historically resisted lowering principal on home loans, but the swap for home equity satisfies bank’s concerns regarding the core value of the investment: when Bank of America takes a larger proportion of a smaller loan, they can potentially retain their investment, on net.
The settlement also created a “Foreclosure Relief” fund of $150 million for states to help home owners who can only afford minimal payments on their loans and an additional $70 million to help provide transition funds for those who have or will lose their homes through foreclosure. A large issue are Countrywide originated loans which were re-sold and packaged into securities to other banks and lenders - the press release states that just over 10% of eligible loans are held directly by Bank of America, leaving hundreds of thousands of home owners outside of the system vulnerable.
While the settlement covers loans that are managed by Countrywide, even if they originated from other lenders, it does not strictly cover all loans that originated from Countrywide but then we re-packaged and syndicated to other lenders, which became a common practice. As a result, you’ll want to check with your bank and your state attorney general’s office to determine whether you qualify for the loan settlement agreement.
While Bank of America states they will be contacting qualified homeowners, it’s best to reach out and see if you qualify in advance.
The effects of the settlement vary widely depending on the conditions of the loan. Although the modifications may help some homeowners, it cannot address structural problems that may still leave even adjusted rates out of reach for a growing number of homeowners.
Although critics credit Bank of America with an initial approach, many believe that is still does not go far enough and instead reflects both public and private financial pressures rather than representing a long term attempt to solve the problem. Many participating states believe that the agreement is just a first step in a larger scale modification with additional participating banks (see Washington Post)
While the Bank did not pay any fines to the government or admit any harmful actions on its part as part of the larger settlement, it did agree to what is considered one of the largest financial real estate settlements in recent years.
The suit really targets a small segment of loans which were addressed to the sub prime market with short-term, teaser interest terms that have become the target for recent scrutiny, leaving a much larger set of mortgage holders outside the direct reach of the settlement. Those with subprime or adjustable rate, pay option loans (option adjustable rate mortgages or ARMs) may see reduced interest rates under the settlement relative to the borrower’s income.
Regulators began to look at both the home owners who did not strictly fall within these guidelines, as well as the dozen or so major home lenders who did not take part in the settlement agreement (see Los Angeles Times)
Part of the settlement allows the Attorney Generals the right of first refusal on the settlement if Countrywide doesn’t reach more than 50,000 loan modification agreements before March 1, 2009, which is considerably lower than the nearly 400,000 loans which potentially qualify for the new terms.
Countrywide/B of A plans to begin contacting eligible borrowers starting December 1, although only those who are more than 60 days delinquent on their loan will receive first contact. Importantly, the settlement is still disciplined by profit potential on the part of the bank: only loan modifications that will produce revenue greater than or equal to what the banks could recoup directly through standard foreclosures will be considered, while those whose adjusted incomes are above the threshold for qualification also will not be offered modifications.
Given all of these details, you may wonder how exactly the settlement will affect your individual case – given the number of variables in play, each case will be evaluated individually by loan modification officers. To help you sort through some of these details, we have dissected some of the more intricate parts of the settlement. Always consult with an attorney or debt counselor before taking any specific actions.
What Homeowners Need to Know
Even if you quality for the settlement program, you will, generally, be notified starting on December 1. Independent of your qualifications, however, you still are obligated to make payments on your existing loan agreement until the modification fully goes into effect; as a result, you should always go forward assuming that you will have to make complete payments on the existing loan until you receive a firm modification offer (even after receiving an offer you should consult with a professional advisor to go over the details.)
Keep in mind that if your home is currently in foreclosure, the settlement does not reverse the procedure unless you meet the specific terms of the agreement - while you can consult the lender, they are not necessarily legally obligated to stop all foreclosure proceedings that have already begun, and are only suspending proceedings for those who meet the narrow terms as outlined in the agreement (this affects some 390,000 home owners, leaving many more outside of the scope.) As a result, you’ll have to contact a private attorney to help you navigate the individual details of your situation.
Keep in mind that loan modifications, under the settlement, are restricted to homeowners who are more than 60 days delinquent on their current subprime or pay option, ARM mortgages that are managed by Countrywide. If you have a loan with another lender, then your particular situation does not strictly apply to the settlement, and you will have to pursue the normal channels of working with your loan modification offices to reach a mutually acceptable agreement. Additionally, if you have another form of loan with Countrywide or if you originated your mortgage before 2004 or since the beginning of this year, then the settlement terms also will not apply in your case.
The equity of your home also plays into the equation: if you owe less than 3/4 of the current market value of your home, then the loan modification agreement also will not apply to your case. While this leaves out a large pool of borrowers, there are still other routes that you can take to reaching a new agreement, namely working with Countrywide on an individual basis to reach an agreement.
The exact terms of your modification will be determined by Countrywide as a product of the criterion they established to reflect both the income of the borrower, as well as the appraised value of the home relative to the principle amount. While most borrowers will be eligible for a reduced interest rate option or transformation of their loan to an interest-based mortgage over a shorter time period (generally, the conversions will be to five or ten year terms.)
The lowering of principle amounts is determined at the discretion of Countrywide, and is a function of the current market value of the home and your home equity position - only those who owe above 95% of the current home value might qualify (although home values can be subjective, Countrywide determines these based on 3rd party appraisals.)
Further, the exact interest rate reductions are determined by Countrywide, which can issue either temporary or permanent modification offers on interest - while some instances may provide temporary reductions at 3.5% or below, each case will be evaluated individually according to the agreement.
Keep in mind that the modification offer must be mutually agreed upon by both parties, and no fees can be levied under the terms of the settlement. If you are currently up to date on your loan, but anticipate financial pressures in the near future, then the terms of the agreement extend until June 2012 for those who qualify. (see California Attorney General News)
If you have already been through foreclosure proceedings, then you may qualify for compensation under the terms of the agreement. In particular, the agreement provides certain compensation amounts for those who qualify under the terms and have already been through proceedings may qualify for payments based upon a pool of compensation provided by Countrywide to the states (Attorney General offices expect to contact eligible individuals before the end of the year - you should contact your Attorney General’s office to determine the exact structure of this compensation.)
Although the loan modification offers will be applied nation wide, this compensation is only available to homeowners in states which participated in the settlement agreement which include California, Texas, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Arizona and Washington.
Subscribe to:
Posts (Atom)
