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Sunday, December 11, 2011

Real Cash Back Available up to $35,000 to the Owner in a Short Sale - Can This Be You Too?

My clients have authorized me to personally confirm that after years of headaches in helping homeowners to process their short sales there are finally two lenders who have offered the homeowners substantials sums of money to help assist in the short sale process.  Citi approved an $14,000 "assistance" payment to one homeowner and Chase allowed another $35,000 "incentive" payment to another seller.  It seems to be true that lenders finally seem to be speeding up their short sale programs – at least for some.  
Banks have long had “cash for keys” programs in place which offer a few thousand dollars to incentivize badly delinquent borrowers to move on and avoid lengthy eviction battles. The federal Home Affordable Foreclosure Alternatives (HAFA) program also offers up to $3,000 in relocation funds for borrowers who complete a short sale.
But these new cash at closing deals are different.
“I have a couple people who are years behind, and they’re generally flagged into these programs where they get a few thousand dollars,” said Minna Reid, an agent in Connecticut who specializes in working with short sale clients. “It’s just to incentivize the people to [complete a] short sale rather than foreclose…Bank of America just seems to never foreclose anymore.”
Other who specialize in short sales report they’ve completed deals where the former homeowner walks away from the closing table with as much as $30,000 in cash.
More To Come
Sometimes banks are sending “solicitation letters” to borrowers, often those who’ve sought and failed to get a loan modification. The loans in question are those held on the bank’s own books. And those who deal in short sales report completing sales with banks like Citi, Bank of America and Chase where borrowers walked away with $12,000, $20,000 or as in my clients case, a whopping $35,000.
Anthony Lamacchia, a real estate broker in Waltham, also completed a sale involving a Chase loan in which the borrower walked away with $35,000 in November.
Gina Braza, a real estate attorney, says she too, has worked on several such deals. “I’ve begun seeing this [type of] money from people over the last year,” she said.
Four years into the foreclosure crisis, it seems banks have finally come up with a way to make this process work. 
Loans which may be in default and yet potentially salvageable through either a private or government sponsored modification aren’t getting the offers.  But for loans which may have been delinquent only a short time, but which the bank determines will be headed straight down the tubes if left to rot, owners are getting cash offers in an effort to address the problem quickly.  
The challenge for the homeowner is to be sure they are offered this kind of "incentive" if their loan is one of the ones that qualify.  The homeowner needs a professional to manage the process if they are to maximize the possibility of receiving a meaningful incentive.
Banks have wised up to the fact that if a homeowner can’t pay their mortgage, it’s very unlikely they’re keeping up with maintenance and repairs – which can cause progressive deterioration in a home’s value. Add the months’ worth of legal fees they’ll have to spend as they go through a lengthy foreclosure process; substantial maintenance fees and management fees required to keep up the properties once the owner does move out; and hefty discounts expected by buyers willing to take on distressed property, and all of a sudden even eye-popping offers of $20,000 and $30,000 cash on the closing table become more reasonable.
Cheaper Alternative
And it’s not necessarily all high-end properties that are receiving such offers. When Chase first came out of this program, it was kind of known, though they wouldn’t admit it, that they were doing them on higher-end properties.  That is no longer the case.  Both of the deals I negotiated incentives of $35,000 and $14,000 were on sales of $225,000 and $240,000, respectively.
A Chase spokesman confirmed the lender has been sending out the letters for about a year, and that it monitors homeowners for eligibility and flags people who appear to be struggling to pay their mortgage, but declined to explain what criteria the company uses to determine eligibility.
I am working on several deal with Bank of America, Citi, and Wells Fargo who so far have made similar offers but, generally in the $10,000 to $20,000 range.
But there’s one big caveat to the bonanza: All the offers seen so far seem to have involved loans being held by the banks themselves, which make up only a small portion of the delinquent loans in the country. Those loans held by Fannie and Freddie or locked in securitized investor pools are NOT eligible, and processing them still often drags on for months.  
If Fannie Mae, Freddie Mac and the securitized trusts were to wake up and recognize the advantages of providing incentives to existing homeowners in a short sale, the housing market would work through the problem loans quicker and cheaper and we may actually see a recovery in our lifetime.
Can you imagine what would happen if some of the politicians found out that borrowers that weren’t paying their mortgage were getting paid $30,000 incentives by Fannie and Freddie? The criticisms would be endless.  The sad thing is when you analyze the numbers fully, and look at the bottom line to Fannie and Freddie, it is far cheaper to offer an incentive through a short sale than be dragged through the foreclosure process.   The questions remains will they ever learn?

Friday, December 9, 2011

Rhode Island's Not So Perfect Storm of Economic and Housing Problems Is Behind the States High Foreclosure Rate

A large portion of the Rhode Island population consists of blue-collar workers who need moderate housing, despite the state being mostly known for its ritzy enclaves like Newport and its fine coastline.  So while the rest of New England felt the recession in keeping with the rest of the country, Rhode Island has the highest rate of foreclosures and serious delinquencies in the whole region.
In the fourth quarter of last year, the country's tiniest state boasted 13,300 mortgages either in the foreclosure process or more than 90 days delinquent. That meant the state's foreclosures and delinquencies were 20 percent higher than neighboring Massachusetts; 17 percent greater than western neighbor Connecticut; 34 percent more elevated than New Hampshire; 7 percent bigger than weak-economy Maine; and double Vermont's rate.
What happened to Rhode Island was unique from anywhere else in the country and created the perfect storm of economic and housing problems. The biggest underlying problem with Rhode Island was that coming into the recession the state experienced a severe undersupply of affordable homes.
"We have a different foreclosure crisis than other parts of the United States," said Nellie Gorbea, executive director of HousingWorks RI, whose members include banks, builders, Realtors, chambers of commerce, and community-based agencies and advocates.
Between the first quarters of 2000 and 2006, home prices increased at the steepest rate in the state's history, peaking at a median price of $283,500. Conversely, during the same period of time, Rhode Islanders experienced a decline in median wage. The rapid rise in home prices, up to twice the increase in other New England states, combined with declining wages, contributed to a situation of "severe housing unaffordability," Gorbea said.
None of that stopped Rhode Islanders from buying homes because we had the mortgage bubble going on. Despite the loss of wages, Rhode Island homebuyers could borrow buckets of dollars for those ever-increasing prices on homes, which, of course, pushed prices even higher.
That all seemed to work until the housing bubble deflated. Rhode Island housing prices dropped like a red brick falling off the roof of an old Pawtucket house. Over a three-year period, home prices dropped from $283,500 to $199,000 before recovering a bit to $210,000. Still, that meant a lot of Rhode Islanders faced a mortgage crisis.
About 1 in 5 Rhode Island homeowners are underwater with their mortgages, according to HousingWorks RI.
The recovery in prices hasn't been solid. At the end of second-quarter 2011, median home prices declined again to $205,000, said Stephen Antoni, president of the Rhode Island Association of Realtors and a broker associate with RE/MAX Professionals in East Greenwich.
"The recession has made people unsure as to which direction to move. They are used to looking at the house as being the No. 1 investment in their lives and in some cases the homes have been devalued by as much as 50 percent," Antoni said.
That's not Rhode Island's only problem. The state is dotted with small, multifamily buildings, most of which are older, three-unit flats. During the bubble, these were the target of small investors, and median prices for multifamily homes shot up from $96,000 in 1999 to $290,000 in 2005, reported HousingWorks RI. When the bubble burst, so did prices of the multifamily buildings, falling all the way to $90,000 in 2009, before seeing a recovery to $121,900.
That didn't help those investors who bought at or near the top of the bubble. More than 35 percent of all Rhode Island foreclosures between 2009 and 2010 were multifamily homes that form the bulk of the rental housing in many communities.
That's been a rental disaster because multifamily properties in foreclosure usually means tenants have to move. "During the first six months of 2011, 28 percent of foreclosures were in multifamily homes," Gorbea said. "We estimate that 908 rental units were lost due to 317 multifamily closures in the first six months of this year."
Basic economics says when you have less supply, prices rise, and that's what happened in Rhode Island. "The average rent for a two-bedroom apartment was $1,165 in 2010 and that's 50 percent higher than in 2001," Gorbea said. "One in four working families in Rhode Island spent more than half of their income on housing-related expenses in 2008 and 2009. We have the highest percentage of cost-burdened people in New England in regard to wages versus housing expense."
To make matters even worse, Rhode Island is not replacing its housing or even adding much in the way of new housing.
Looking over the data from this past summer, Leonard Lardaro, professor of economics at the University of Rhode Island, shakes in wonderment. "The last summer month that we have data for, we had just 53 building permits for the whole state. That's been typical in recent months. On an annualized basis, we are looking at between 600 and 700 permits a year. That's incredible."
Could things get any worse for Rhode Island? The answer is yes, because the state's unemployment numbers have been awful. Recently, Rhode Island was the fifth-worst state for unemployment with a rate of 10.8 percent, which is at least better than in 2009, when the state was No. 1 for unemployment with a rate close to 13 percent.
Although Rhode Island is a major location for defense contractors, a large percentage of jobs are service-related.
"Our employment peaked in December 2006," Lardaro said. "That's what happens when you don't have technology or other growth-oriented industries. We didn't have the insulation that a Massachusetts or Connecticut had, where the growth industries propelled the economy longer going into the recession. We went into recession well before the other states."
For the short term, Lardaro is not optimistic. "To some extent, the lack of new-home construction will help the healing, but it doesn't generate the construction employment and multipliers that thrive when you are in recovery."

Wednesday, December 7, 2011

GMAC Mortgage has more problems in Massachusetts

The drama continues as Massachusetts is calling for a congressional hearing on GMAC Mortgage, a division of Ally Financial, claiming that the taxpayer-owned bank is illegally foreclosing on people's homes in the state.  It seems as if GMAC feels they just don't have to follow the law or maybe they are too big to fail.
Massachusetts sued GMAC Mortgage and four other banks last week, saying they engaged in deceptive foreclosure practices. A day after the lawsuit was filed, GMAC Mortgage said it would stop much of its mortgage lending business in the state.  Are they punishing Massachusetts?
Ally Financial is 74 percent owned by American taxpayers after being bailed out by the government during the 2008 financial crisis.
In a letter to the U.S. House Committee on Financial Services, Attorney General Martha Coakley said Ally Financial's subsidiary GMAC had broken laws by cutting corners while foreclosing on homes, which has exacerbated the nation's foreclosure crisis.

Sunday, December 4, 2011

Massachusetts Foreclosure Petitions and the New 150 Day Right to Cure

Massachusetts Foreclosure Trend Report by the Division of Banks (DOB)

new report from the Massachusetts Division of Banks (DOB) shows that the state’s new 150-day right-to-cure law helped send foreclosure petitions plummeting last year – but it’s less clear how it’s impacting foreclosure timelines. 
The new law, which passed in early August 2010, extended the “right to cure” period which is the the time between when a lender notifies homeowner of its intent to foreclosure and when it actually does so – from 90 days to 150 days. The report states that foreclosure petitions, the first step in the foreclosure process, dropped from 487 in July 2010 to 153 in August 2010, and didn’t exceed 100 per month for the rest of the year.
DOB Deputy commission Mayte Rivera is unrealistic at best when saying the extended petition period “is helping consumers have more time to catch up, and gives them an opportunity to modify the loan. It’s good to see that there’s an effort on the lending side and the servicer’s side to work with the borrowers.”  
Such a large decline might not have been expected, since the law contained a provision allowing lenders to foreclose in 90 days if they could show they made a good-faith effort to contact the borrower and modify the loan. It was hoped this might encourage modifications.

But lenders often haven’t used that provision, opting instead to simply wait out the 150 days, according to bankers and regulators.
“Banks were required to file an affidavit that might expose them to liability, and they were reluctant to take that step,” said Kevin Kiley, chief operating officer for the Massachusetts Bankers Association. “Notwithstanding that, I think banks are reaching out aggressively to borrowers to help keep them in their homes. It’s in the borrower’s interest and the lender’s interest to keep the loan current and to keep people in their homes.”
Consumer advocates agreed that simply having more time to get a modification done is a benefit to homeowners.  To a degree that may be true, but most lenders take considerably longer that 150 days to review a mortgagor for a modification.
“Going from 90 [days] to 150 allows more time for homeowners to fix their mortgages, which is a good thing, and there’s nothing in this report which contradicts that,” said Aaron Gornstein, executive director of the Citizen’s Housing and Planning Association (CHAPA). The fact that banks weren’t taking advantage of the law’s incentives to reduce the timeline, he said, “doesn’t mean the law isn’t working.”  It also doesn't mean it is working.

Effect of the Robo Signing Scandel

I disagree with Deputy Commissioner Rivera and I question how much the new law has contributed to the drop.  Initially it makes sense that their would be a large drop, but once the initial time lag had passed, it would seem the the banks would be back on the same schedule.  I believe that the largest factor contributing to the drop was the nationwide robo-signing scandal, which caused several large national banks to stop issuing foreclosures last fall.  They have begun to realize that they must have their paperwork in order BEFORE they start the foreclosure process, thanks to some landmark cases such as the Ibanez case in Massachusetts. A potentially influential ruling issued by the U.S. District Court in Boston this week both endorsed the Mortgage Electronic Registration System (MERS) while at the same time supported the notion that in order to properly foreclose the lender or its servicers MUST POSSESS both the mortgage and the note.  The question remains as to whether the Supreme Judicial Court will agree with him in its upcoming ruling in Eaton vs Fannie Mae.  
A Long Process

Other data in the report suggests that the banks’ own slowness in disposing of distressed properties may mean that most foreclosures had been taking far more than 150 days to work through in any case and that the new law isn't likely having any further impact. 
To begin with, in the vast majority of cases lenders wait months before beginning foreclosure proceedings in the first place. Loans delinquent between two and five months accounted for 63.3 percent of the notifications sent in 2010, with an additional 31.4 percent more than five months behind before the lender sent a right to cure notice, according to the report.
callout_DOB_twgAnd the time between the bank notifying the homeowner of its intent to foreclose and actually foreclosing is stretching out, too. Prior to the passage of the 150-day law last summer, lenders could begin foreclosure proceedings 90 days after notifying the homeowner, meaning that a notification issued at the beginning of May could have resulted in a petition being filed by the end of July. Even taking into account the adoption of the law, any notifications made in the first half of the year could have resulted in a petition by its end.
But data in the report shows that 11,922 petitions filed in 2010 – 53.7 percent of the total – dealt with properties whose owners had been notified in 2009 of a possible foreclosure. A further 3,947 petitions filed last year were for properties whose owners had been notified in 2007 and 2008.
Such lengthy timelines may, in part, reflect owners who had caught up for a period and then re-defaulted, or lenders re-foreclosing on properties which had had their titles clouded by the Ibanez decision, said Kiley.
Stuck In The Middle

The report also shows that middle-income homeowners are the most impacted by the foreclosure crisis, with loan amounts between $150,000 and $300,000 representing the majority of those eventually transferred into the foreclosure process.
Worcester County had the largest number of notices sent in 2010, with 1,155 – 17.4 percent of the total. It also had the largest number of foreclosure sales, with 1,737. Worcester County makes up only 12 percent of the state’s population, according to U.S. Census figures.
Eight communities – Boston, Worcester, Brockton, Lynn, Lowell, Lawrence, Plymouth, and Fitchburg – account for almost one quarter of the state’s foreclosure notices, with a combined total of 1,545, or 23 percent.
To those looking for a bright spot, those numbers do provide encouragement that the regulatory agency is aiming its efforts at helping homeowners at the right places, Rivera said.
“It’s consistent with where we’ve focused a lot of our attention statewide, with foreclosure counseling,” she said. “The division is really focusing with our foreclosure assistance services on helping those communities.”
Nearly two-thirds, or 64.2 percent, of last year’s foreclosure notices were for fixed-rate loans, while 30.9 percent were for adjustable-rate mortgages. More than 66 percent of the loans had interest rates higher than 6 percent.

Saturday, December 3, 2011

Essex Register of Deeds Weighs in on the Coakley lawsuit against MERS and Banks

Southern Essex District Register of Deeds John O’Brien issued a statement saying he was “greatly pleased that Attorney General Coakley is taking on MERS and the big banks and holding them accountable for their deliberate failure to pay the proper assignment fees, for their filing of fraudulent robo-signed documents along with fraudulent notary signatures at the registries of deeds which have corrupted the integrity of our land recordation system, for all the unlawful foreclosures they have committed and for their failure to do what was right and make the proper loan modifications to homeowners in need.”

More on Martha Coakley - Press Release, Complaint and All

This post has it all!   This was sent to me by a good friend. Thanks Brian!  It has links to all the relevant news items on MERS including a link to a copy of the recent complaint filed by Martha Coakley.

 The Commonwealth of Massachusetts
Office of the Attorney General
(617) 727-2200
 (617) 727-4765 TTY

FOR IMMEDIATE RELEASE:                                           MEDIA CONTACT:
December 1, 2011                                                                  Press Office
                                                                                                (617) 727-2543

Files Suit After More Than Year of 50-State Negotiations

WHAT:           Massachusetts Attorney General Martha Coakley will hold a press conference this afternoon to announce that her office has filed the nation’s first comprehensive lawsuit against the five major national banks regarding the foreclosure crisis.  The lawsuit was filed today in Suffolk Superior Court against Bank of America, Wells Fargo, JP Morgan Chase, Citi, and Ally Financial.  It also names Mortgage Electronic Registration System, Inc. and its parent, MERSCORP Inc, as defendants. 

The AG’s lawsuit seeks accountability for the banks’ unlawful and deceptive conduct in the foreclosure process, including unlawful foreclosures, false documentation and robo-signing, MERS, and deceptive practices related to loan modifications.

WHO:             Massachusetts Attorney General Martha Coakley
WHEN:          TODAY at 1:00 PM              

WHERE:     Massachusetts Attorney General’s Office
   One Ashburton Place
                        20th Floor
                        Boston, MA   

CALL IN:       For those who cannot attend the press conference, you may listen to the audio by dialing into the conference number below. A prompt will then ask you for the Access Code. Please note that you will not be able to ask questions via the conference line.

PHONE NUMBER     877-820-7831
ACCESS CODE          379877


December 1, 2011
CONTACT: Michelle DeMarco, 850.487.5833

. ----------------------------------------------

Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC All Named As Defendants; Mortgage Electronic Registration System (“MERS”) Also Sued 

BOSTON – Five national banks have been sued in connection with their roles in allegedly pursuing illegal foreclosures on properties in Massachusetts as well as deceptive loan servicing, Attorney General Martha Coakley announced today.  The lawsuit was filed today in Suffolk Superior Court against Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC.  It also names Mortgage Electronic Registration System, Inc. (“MERS”) and its parent, MERSCORP Inc., as defendants.

“The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” said AG Coakley.  “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”

In the complaint  , the Attorney General alleges these five entities engaged in unfair and deceptive trade practices in violation of Massachusetts’ law by:
  • Pervasive use of fraudulent documentation in the foreclosure process, including so-called “robo-signing”;
  • Foreclosing without holding the actual mortgage (“Ibanez” violations);
  • Corrupting Massachusetts’ land recording system through the use of MERS;
  • Failing to uphold loan modification promises to Massachusetts homeowners.

According to the complaint, the banks used false documentation in the foreclosure process, including so-called “robo-signing”, whereby bank personnel signed affidavits that were untrue, or not based on the signor’s actual knowledge.  An entity wishing to foreclose on a property must demonstrate it has filed an affidavit in compliance with Massachusetts law.  By  October 2010, the banks’ flagrant disregard of affidavit and notary process requirements became widely known.  Filings with various Registers of Deeds provided to the Attorney General’s Office revealed the pervasive use of mortgage service employees to sign hundreds of affidavits and sworn statements without personal knowledge of the information contained in those affidavits.   Evidence also suggests these practices were not confined to the foreclosure process, but also used in the assignment, transfer and modification of mortgages secured by property in Massachusetts.


Second, these five entities participated in unlawful foreclosures when they commenced foreclosures on mortgages where they were not the holders of those mortgages.  The Supreme Judicial Court (SJC), in Commonwealth v Ibanez, recently upheld Massachusetts law and stated that “only the present holder of a mortgage is authorized to foreclose on the mortgaged property.”  The complaint alleges that these entities ignored this fundamental legal mandate and proceeded to foreclosure even though they did not hold the mortgage, and thus had no legal authority to conduct the foreclosure.  The banks’ failure to obtain a valid assignment of the mortgage prior to foreclosure has adversely impacted titles to hundreds, if not thousands, of properties in the Commonwealth.  The complaint alleges that the banks falsely claimed to be the holder of a mortgage in several foreclosure documents even though they failed to obtain a valid assignment of the mortgage.


Third, the complaint alleges that these banks have undermined our public land record system through the use of MERS, a private electronic registry system.  According to the complaint, the creation and use of MERS was adopted by these defendants primarily to avoid land registration and recording requirements, including payment of recording and registration fees, and to facilitate sales of mortgage loans.  The use of MERS has resulted in a lack of transparency as to the entities that have the legal authority to enforce mortgages, and unfairly conceals from borrowers the true identity of the holder of the debt.  Since 1997, more than 63 million home loans have been registered on the MERS System, accounting for more than 60 percent of all newly-originated mortgage loans.  The complaint also alleges that through the use of the MERS system, the banks unlawfully failed to register assignments of mortgages and transfers of the beneficial interests in mortgages.


Finally, the complaint alleges the banks deceived and misrepresented to borrowers the process, requirements, and availability of loan modifications.   The banks publically claimed to be engaged in widespread loan modifications aimed at preserving home ownership and avoiding unnecessary foreclosures.   Through the National Homeownership Retention Program, which commenced on November 6, 2008, these banks represented that they would work with borrowers to help them avoid unnecessary foreclosures by reducing monthly mortgage payments to affordable and sustainable levels.  The complaint alleges these banks misled borrowers about their eligibility for this program and the amount of relief available, failed to achieve a significant level of modifications, and often strung along borrowers for months in trial modifications that were ultimately rejected. 

The AG’s lawsuit seeks civil penalties, restitution for harm to borrowers and compensation for registration fees that were avoided. The lawsuit also seeks to hold the banks accountable through permanent injunctive relief to provide a solution for prior unlawful foreclosures and to require that the banks, going forward, register assignments and other documents in accordance with Massachusetts law.

The lawsuit follows more than a year of negotiations with the banks over a 50-state settlement focused around the issues of fraudulent documents, including “robo-signing.”  AG Coakley had made clear that she would not sign on to an agreement with the banks if it included broad liability release regarding MERS and other issues or if she did not believe the banks had come to the table with an offer in the best interest of Massachusetts.

AG Coakley’s office has been a national leader in holding banks and investment giants accountable for their roles in the economic crisis.  AG Coakley has obtained recoveries from Morgan Stanley, Goldman Sachs, Royal Bank of Scotland, Countrywide, Fremont Investment & Loan, Option One, and others on behalf of Massachusetts homeowners.  As a result of these actions, her office has recovered more than $600 million in relief for investors and borrowers, helped keep more than 25,400 people in their homes, and returned nearly $60 million in taxpayer funds back to the Commonwealth.

More information about AG Coakley’s work during the lending crisis can be found here  .

The lawsuit is being handled by Attorney General Martha Coakley’s Consumer Protection Division, including Assistant Attorneys General Amber Villa, John Stephan, Sara Cable, and Justin Lowe; Acting Division Chief David Monahan; Chris Barry-Smith, Chief of the Public Protection & Advocacy Bureau and Stephanie Kahn, Deputy Chief of the Public Protection & Advocacy Bureau.

Friday, December 2, 2011

Good Riddance GMAC Mortgage

GMAC Mortgage is not happy with Martha Coakley and the Commonwealth of Massachusetts.  As of Monday, GMAC Mortgage, the mortgage lender of Ally Financial Inc., will cease purchases of wholesale and correspondent-originated loans in Massachusetts.
The move seems to have been spurred by Attorney General Martha Coakley's lawsuit against several large banks over foreclosure and loan modification practices, which was announced yesterday afternoon.
"GMAC Mortgage has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable....The company is disappointed that it can no longer participate in offering certain financing options in Massachusetts; however, it has an obligation to manage risks and deploy capital in an appropriate manner and in a way that protects the investment of the U.S. taxpayer," the company said in a statement.
"The costs related to the mortgage business overall have increased and when additional litigation costs are added to the equation the business case in certain channels such as correspondent and broker are no longer viable," Gina Proia, chief communications officer for Ally Financial, GMAC's parent company, said in an email to Banker & Tradesman.  
Brokers and lenders around the state expressed dismay over the news.  While many homeowners with GMAC mortgages are saying good riddance as they have failed to help the struggling homeowners.
GMAC's withdrawal is "very surprising," said Jerami A. Marshal, chief operating officer of Reliant Mortgage Company in Beverly.  "This is another blow to the mortgage industry, and further limits the availability of funds to the Massachusetts homeowner."
"I think it's unfortunate that a company like GMAC has decided to exit correspondent lending. They're a quality company, and they have a lot of great products," said Paul Gershkowitz, president of Greenpark Mortgage Corp in Needham.
But their biggest worry wasn't so much GMAC's move itself but whether it would inspire other banks to follow them.
 "The most important thing is going to be to watch what other major lenders in the U.S. do...if you see Wells, Chase, Citi [and others] following suit, that would be a terrible thing for homeowners in Massachusetts," Gershkowitz added.
"Losing GMAC will not impact us in any big way, they don't do anything that other lenders do not have," agreed Amy Tierce of Fairway Independent Mortgage Corp. in Needham.
Ally Bank, GMAC's parent company, ranked 36th among Massachusetts lenders so far in 2011, originating 1,670 loans for $401 million in volume.  
Some are already working on contingency plans in case the other major banks follow suit. The broker community was already reeling from Bank of America's decision earlier this year to withdraw from the correspondent and wholesale channels.
"The bigger trend now is lenders leaving [the wholesale and correspondent channels] than lenders coming in to fill the void," said Geof McLaughlin, a broker with Mortgage Master of Walpole. "Let's hope this is a one-off."

Thursday, December 1, 2011

Attorney General Martha Coakley Should Be Congratulated as Massachusetts Sued Five Major Banks

Attorney General Martha Coakley should be congratulated as Massachusetts sued five major banks Thursday over deceptive foreclosure practices such as the "robo-signing" of documents, potentially undermining negotiations between lenders and state prosecutors across the nation over the same issue.
The lawsuit named Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and GMAC. It was filed in Massachusetts by Attorney General Martha Coakley.
The complaint claims the banks violated Massachusetts law with "unlawful and deceptive" conduct in the foreclosure process, including unlawful foreclosures, false documentation, robo-signing, and deceptive practices related to loan modifications.
The lawsuit comes as talks have been dragging on for more than a year between major banks and the attorneys general from all 50 states over fraudulent foreclosure practices that drove millions of Americans from their homes following the bursting of the housing bubble.
In October 2010, major banks temporarily suspended foreclosures following revelations of widespread fraudulent foreclosure practices by banks. The talks have been designed to institute new guidelines for mortgage lending nationwide. It was anticipated to be the biggest overhaul of a single industry since the 1998 multistate tobacco settlement.
However, over the past year, several obstacles have arisen. Attorneys general of different states have disagreed over what terms to offer the banks. In September, California announced it would not agree to a settlement over foreclosure abuses that state and federal officials have been working on for more than a year.
Coakley, along with New York Attorney General Eric Schneiderman and Delaware's Beau Biden, have argued that banks should not be protected from future civil liability. Other states, including Kentucky, Minnesota and Nevada, have raised concerns about the extent of legal civil immunity the banks would receive as part of a settlement.
Both sides have also argued over the amount of money that should be placed in a reserve account for property owners who were improperly foreclosed upon. Many of the larger points of the deal, including a $25 billion cost for the banks, have been worked out, according to people briefed on the internal discussions but who are not authorized to speak publicly about them.
The settlement is expected to be announced sometime this month.
The lead negotiator on behalf of state prosecutors, Iowa Attorney General Tom Miller, said in a statement that he hopes Massachusetts would join the broader settlement that's still being worked on.
"We're optimistic that we'll settle on terms that will be in the interests of Massachusetts," Miller said.

Wednesday, November 30, 2011

MERS - Judge Young's Ruling is Both Positive and Negative.

Judge Young's ruling is both positive and negative.  A potentially influential ruling issued by the U.S. District Court in Boston this week both endorses the Mortgage Electronic Registration System (MERS) - and supports the notion that in order to properly foreclose the lender or its servicers must possess both the mortgage and the note. the question remains as to whether the Supreme Judicial Court will agree with him in its upcoming ruling in Eaton vs Fannie Mae. 
The federal ruling, Culhane v. Aurora Loan Services of Nebraska, grants summary judgment to the servicer, saying that the law is so clear in the case that Milton homeowner Oratai Culhane was not entitled to a trial on the matter of whether Aurora could foreclose on her home. But over 59 precisely argued pages, District Judge William G. Young took the opportunity of the Culhane case to take a panoramic view of the current state of mortgage law in the commonwealth.
On the one hand, the ruling's ringing endorsement of MERS will be of tremendous comfort to the industry.
"It is as if by clever design that the MERS system fits perfectly into the Massachusetts model for the separation of legal and beneficial ownership of mortgages," Young wrote in the decision.
Young had some criticisms of how MERS works in practice and in law, saying that the power of sale written into the standard MERS mortgage contract was null and void under Massachusetts law, and saying he was "deeply troubled that, with little to no oversight, individuals without any tie to or knowledge of the company on whose behalf they are acting may assign mortgages."
But, according to MERS "The bottom line in this case is clear: MERS complies with the letter of the law, MERS held legal title to the mortgage, and, its assignment to the servicer was valid," MERSCORP's Vice President for Corporate Communications Janis Smith said in a statement. Other courts have also endorsed MERS' standing in the state, including U.S. Federal Bankruptcy court in the In re Marron case in June.
The decision also touched on another important issue, possession of the note, currently being deliberated by the Massachusetts Supreme Judicial Court in the Eaton v. Fannie Mae case.
Young's discussion of the still-pending Eaton case, however, may cause a lot more anxiety among lenders and servicers than his kind words for MERS will relieve. He is the first to endorse the ruling in Eaton that the note and the mortgage have to be united under Massachusetts law in order for the servicer to be able to foreclose.
"The assignment was necessary to comply with the common law of Massachusetts requiring unity of the note and mortgage in the same entity prior to foreclosing," Young wrote. "Aurora, as Deutsche's loan servicer, has an interest in the underlying debt; Aurora also physically possesses the collateral file, including the note. With the assignment of legal title to the mortgage from MERS, Aurora became the mortgagee of record as well, thus perfecting its standing to bring a foreclosure action against Culhane."
That reading differs from the bankruptcy court, meaning the federal courts have now split on how to interpret the law, making it even more important for the Supreme Judicial Court decision to resolve the issue in its ruling to come.
If the SJC agrees with Young - particularly his notion that the note has to be physically in the possession in of the mortgage holder or its servicer - it could throw an even bigger monkey wrench into the foreclosure works than that introduced by the Ibanez and Bevilacqua decisions.
Unlike the orderly record-keeping of the servicer in Culhane, many loans issued during the boom have seen their notes go astray. And even if the servicers' ducks are in all in a row, "we're going to see an unending number of people bringing in cases, forcing foreclosing lenders to prove that they hold the note," said Joel Aaron Stein, chair of 2011 Title Insurance and National Affairs Committee for the Real Estate Bar Association (REBA).
"Ibanez and Belivacqua will be like a pebble in the heel of your shoe," said Ed Bloom, a partner at Sherin and Lodgen and president of REBA.