Register Wants to Take on Mortgage Giant MERS

In a legal maneuver that has been in the works since shortly after the so-called “robo-signing” scandal hit last year, South Essex Register of Deeds John O’Brien has asked Attorney General Martha Coakley’s office to seek $22 million from a mortgage-holding consortium that includes Bank of America (NYSE: BAC), TD Bank (NYSE: TD) and Sovereign Bank among other major financial players.

In seeking to move against MERS — Mortgage Electronic Registration Systems — O’Brien argues the organization became in essence a shadow registry that let investors buy and sell mortgages without making what O’Brien argues are legally required changes to titles at registries of deeds around the state.

Kevin Harvey, an assistant register, said in an interview that the registry has a “fiduciary responsiblity” to collect $75 every time ownership changes on a title and a constitutional responsibility to provide the public with clear information about what person or entity owns each parcel of land in a community.

“The public has the right to know who owns the mortgage they’re paying,” Harvey said.

At issue, he said, is the “integrity of the chain of title.”

A MERS spokeswoman said the oranization would issue a statement on the matter Thursday afternoon.

Reston, Va.-baed MERS was set up by major financial institutions to speed the handling of land transactions. MERS’s website includes the slogan “process loans, not paperwork.”

In addition to big, national banks, MERS lists among its members regional players such as Eastern Bank and Webster Bank.

Foreclosure bill creates mediation process

The Washington Legislature this week moved forward on two bills meant to reduce foreclosure rates in the state and offer more guidance to indebted homeowners.

After some changes, House and Senate proposals to set up a foreclosure mediation process passed out of committee, picking up support from bankers and anti-poverty advocates alike.

“We’re joining a handful of states that have done mediation and had a lot of success,” said Rep. Tina Orwall, a Normandy Park Democrat and the primary sponsor of House Bill 1362. “I think it will help a lot of homeowners who are frustrated with the process.”

Both Orwall and Sen. Adam Kline, sponsor of Senate Bill 5275, introduced substitute bills to the ones originally heard in committee. Orwall said the substitutes were the product of negotiations with banks, anti-poverty advocates and others over the bill’s third-party mediation provisions, one of its most controversial elements.

Under the substitute bills an attorney or housing counselor could refer a homeowner to mediation, which would mean that the lender and borrower would meet with a third party to try to work out an alternative to foreclosure. The original bills would have allowed a homeowner to request mediation without a referral.

The substitute bills would also require banks to pay a $250 fee per property they foreclose on, which would fund additional housing counselors in the state.

Washington Bankers Association lobbyist Denny Eliason, who opposed the mediation provisions in the original bills, said he was satisfied with the substitutes and the negotiation process that the measures had gone through.

“I think everyone pushed away from the table with the understanding that we’re substantially there,” Eliason said of the talks. “The bill is probably 98 percent acceptable to all parties.”

Danielle Friedman of the Poverty Action Network said her organization also supported the substitute bills. She said she was pleased that everyone in the negotiations recognized the need to do something about foreclosure rates in Washington and she thought the mediation provisions in the substitute bills were still strong enough to make a difference for Washington homeowners.

According to RealtyTrac, a website that tracks foreclosure rates by state, there were 4,981 new foreclosures in January in Washington, mostly in King, Pierce and Snohomish Counties.

Fannie Mae May Rent Your Home to You After Foreclosure

If Fannie Mae is the owner of the property you may be able to stay and rent from the lender or continue a remaining lease protected under the Protecting Tenants at Foreclosure Act.

So who is affected by the rental policy? This would apply to qualified renters occupying a Fannie Mae owned home at the time of the foreclosure.  If you are a homeowner and your home is foreclosed but is owned by Fannie Mae you may be able to rent through Fannie Mae’s Deed for Lease program.

If you are renting a single family home, two units to four units, condo, co-op, or detached single family home or manufactured home, this policy applies to you.  You do have to go through an approval process and may have to go through a credit check and criminal back ground check if the house is insured by Federal Housing Authority (FHA).

You may receive a notice from a local real estate agent and or property manager who will contact you and to notify you of the options available to you.  A flyer maybe left called “Know Your Options”, this will give you more detailed information and how to inquire about this option.

Are there any requirements to lease from Fannie Mae? The property must be up to code with all local laws and local code requirements for a rental property.  You must be occupying the home at the time of the foreclosure; you may have to go through a background check and a credit check.  If a potential renter does not meet these requirements, relocation assistance maybe offered as an alternative.

Signing a new lease and relocation assistance? If you sign a new lease, you may be eligible at the end of the 12month lease for relocation assistance. The amount of the relocation assistance is equal to one month’s rent and tenant’s compliance with the terms of the lease.

How much will I be charged for rent? If you are signing a new lease with Fannie Mae, you will be subject to current rental market rates in your area.  We may determine the local market rate by researching comparables, conducting a neighborhood survey or through other methods.

Will Fannie Mae try to sell the property? Fannie Mae reserves the right to market and to try to sell the home during the term of your lease, they also may need to make improvements to the property and if sold the lease can be transferred to the new owner.

Bill signed by Governor Schwarzenegger Prevents Lenders from Obtaining a Deficiency Judgement after a Short Sale

Senate Bill 931

As of January 1, 2011, a bill signed by Governor Schwarzenegger prevents a mortgage lender from obtaining a deficiency judgement after a short sale. The bill applies to lenders who hold a first trust deed and states that if the lender has given written consent they must accept the sale profit as full payment. Any remaining amounts owed must be liquidated.

White House presses for mortgage servicing settlement

The White House Pushes for Mortgage Servicing Settlement

President Obama and his administration is pushing to obtain a settlement over mortgage-servicing breakdowns that will force America's largest banks to pay for reductions in loan principal worth billions of dollars, The Wall Street Journal reports. Some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines.  In the alternative, they are looking for the banks to fund a comparable amount of loan modifications for distressed borrowers.

A settlement deal would have to win approval from federal regulators and state attorneys general, as well as some of the nation's largest mortgage servicers, including Bank of America Corp., Wells Fargo & Co. and J.P. Morgan Chase & Co.

A settlement could help lift a cloud of uncertainty that has stalled the foreclosure process since last fall. Economists have warned that foreclosures need to proceed for the housing market to continue on a path to recovery. It's unclear how many borrowers would benefit from a deal. Servicers have thus far had difficulty managing the volume of troubled loans.

So far, most loan modifications have focused on shrinking monthly payments by lowering interest rates and extending loan terms. Banks, as well as mortgage giants Fannie Mae and Freddie Mac, have been shy to embrace principal reductions, in part due to concerns that many borrowers who can afford their loans will stop paying in the hope of being rewarded with a smaller loan. But some economists warn that rising numbers of underwater borrowers will drag on housing markets and the economy for years unless more is done to help them.

The settlement terms remain fluid, people familiar with the matter cautioned, and haven't been presented to banks. Exact dollar amounts haven't been agreed on by U.S. regulators and state attorneys general. Regulators are looking at up to 14 servicers that could be a party to the settlement.

The deal wouldn't create any new government programs to reduce principal. Instead, it would allow banks to devise their own modifications or use existing government programs, people familiar with the matter said. Banks would also have to reduce second-lien mortgages when first mortgages are modified.

Several federal agencies have been scrutinizing the nation's largest banks over breakdowns in foreclosure procedures that erupted last fall. Last week, the Office of the Comptroller of the Currency said only a small number of borrowers had been improperly foreclosed upon. But the regulator raised concerns over inadequate staffing and weak controls over certain foreclosure processes.

A settlement must satisfy an unwieldy mix of authorities, including state attorneys general and regulators such as the newly formed Bureau of Consumer Financial Protection, who support heftier fines. They must also appease banking regulators, such as the OCC, that are concerned penalties could be too stiff.

"Nothing has been finalized among the states, and it's our understanding that the federal agencies we are in discussions with have not finalized their positions," said a spokesman for Iowa Attorney General Tom Miller, who is spearheading a 50-state investigation of mortgage-servicing practices.

Last autumn, units of the nation's largest banks were forced to suspend foreclosures amid allegations that bank employees routinely signed off on foreclosure documents without personally reviewing case details. In subsequent examinations, federal bank regulators said they found deficiencies and shortcomings in document procedures and other violations of state law.

At issue now is a debate over who has been harmed by improper foreclosure practices, and how much. The OCC's examination concluded only a "small number" of borrowers were improperly foreclosed upon, and banks have argued that any settlement should reflect that fact. Other federal agencies and state officials say banks exacerbated the woes of troubled borrowers by resisting the necessary investments in staff and technology to provide timely, effective help.

Under the administration's proposed settlement, banks would have to bear the cost of all writedowns rather than passing them on to other investors. The settlement proposal focuses on pushing servicers who mishandled foreclosure procedures to eat losses, by writing down loans that they service on behalf of clients. Those clients include mortgage-finance giants Fannie Mae and Freddie Mac, as well as investors in loans that were securitized by Wall Street firms.

Bank executives say principal cuts don't necessarily improve payment patterns, and have told other parties involved in the talks that principal reductions could raise new complications. First, it will be difficult to determine who gets reductions and who doesn't. And even if banks agree to a $20 billion penalty, the number of mortgages that can be cured with that number is limited, one of these people said.

If a single settlement can't be reached, different federal agencies could seek smaller penalties through regular enforcement channels, and banks could face the prospect of separate civil actions from state attorneys general.

Any settlement could be one of the largest to hit the mortgage industry. In 2008, Bank of America agreed to a settlement valued at more than $8.6 billion related to alleged predatory lending practices by Countrywide Finance Corp., which it acquired that year.

Bankruptcy Law News: Banks Push Home Buyers to Put More Cash Down

Bankruptcy Law News: Banks Push Home Buyers to Put More Cash Down: "Banks Push Home Buyers to Put More Cash Down Potential home buyers are being forced to rethink what home they can afford. The do..."

House Republicans Bill Ends Foreclosure Aid Criticized as Harmful

The U.S. House Republicans want to end anti-foreclosure programs that have been put in place by President Barack Obama’s administration.  They say that the foreclosure rescue programs are doing more harm than good.

The House Financial Services Committee will review the Republican bills aimed at terminating four mortgage assistance programs, including the Treasury Department’s Home Affordable Modification Program, or HAMP.

“In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” Representative Spencer Bachus of Alabama, the chairman of the panel, said today. “These programs may have been well-intentioned but they’re not working and, in reality, are making things worse.”

While the Treasury Department reported that more than 30,000 homeowners permanently lowered mortgage payments in December as HAMP participation accelerated, the program has failed to reach Obama’s goal of helping 3 million to 4 million homeowners. Borrowers continue to fall out of the program at a faster rate than they join. A total of 58,020 loan modifications had been canceled through December, according to the Treasury.

‘Close the Door’

“If enacted, this legislation would close the door to struggling homeowners seeking relief in the face of the worst housing crisis in generations,” Andrea Risotto, a Treasury spokeswoman, said today in an e-mail. “The administration remains committed to reaching eligible homeowners to give them every opportunity to avoid foreclosure and will continue working to make our programs as effective as possible.”

HAMP has been criticized by housing advocates, lawmakers and watchdogs including Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, who in a January report called the program’s results “anemic” and “remarkably discouraging.”

Republican Representatives Jim Jordan of Ohio and Patrick McHenry of North Carolina last month introduced their version of a bill to terminate HAMP.

The committee also will mark up bills that would terminate the Federal Housing Authority Refinance Program, funding for the Emergency Homeowners Relief Program and the Neighborhood Stabilization Program.

Democrats’ Fight

Democrats on the House panel are preparing to fight the program cuts and push for more aid for troubled homeowners, lawmakers said today.

Representative Barney Frank of Massachusetts, the Financial Services panel’s top Democrat, said the programs are aimed at helping victims of the financial crisis and that he was “disappointed” by the Republican move.

“We will make the case that there are better ways for the federal government to cut spending than by attacking these programs,” he said in a statement.

Maxine Waters of California, the senior Democrat on the panel’s Subcommittee on Capital Markets and Government-Sponsored Enterprises, said the Republicans were “turning their backs on their constituents and their communities.”

“I have consistently said for months now that the HAMP program has failed to help some homeowners,” Waters said in a statement. “Unlike my colleagues on the other side of the aisle, who would replace it with nothing, I have consistently pushed for stronger solutions like mandatory loss-mitigation and principal reductions, and have demanded that our regulators hold servicers accountable.”

Lawmakers in the Democrat-controlled Senate haven’t introduced companion legislation.

TOTAL BANKRUPTCY FILING INCREASE AT RATE OF 8 PERCENT IN 2010, BUSINESS FILINGS INCREASE AT RATE OF 7.5 PERCENT

TOTAL BANKRUPTCY FILING INCREASE AT RATE OF 8 PERCENT IN 2010, BUSINESS FILINGS INCREASE AT RATE OF 7.5 PERCENT


Total bankruptcy filings in the United States increased 8 percent in 2010 over calendar year 2009, according to data released today from the Administrative Office of the U.S. Courts (AOUSC). Bankruptcy filings totaled 1,593,081 for the 12-month period ending Dec. 31, 2010, over the previous year’s total of 1,473,675. Total filings have steadily increased since the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Total bankruptcies reached 2,078,415 in advance of the 2005 changes to the Bankruptcy Code.

CREDIT CARD LAW AIDS TRANSPARENCY

CREDIT CARD LAW AIDS TRANSPARENCY


The Center for Responsible Lending, a nonprofit research group, released a report said that the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CreditCARD Act) has made billions of dollars in charges more transparent for consumers.  It is believed that this will help lower the costs of credit cards over the long term.  The report examines the impact of federal credit card rules on consumers one year after many of the new rules mandated by the CreditCARD Act were put in place. To recoup lost revenues, banks have rolled out new fees since passage of the CARD Act.  Click HERE to read the report.

Philadelphia Homeowner Forecloses on Wells Fargo, And Wins!

Philadelphia Homeowner Forecloses on Wells Fargo, And Wins!

Struggling homeowners dream of sticking it to their mortgage companies. Well, one man is living this dream against Wells Fargo, and he has the Real Estate Settlement Procedures Act to thank.

Patrick Rodgers is doing well for himself. He runs a thriving music promotion business, is up to date on his mortgage, and his house is not "underwater." In fact, his house is arguably worth more than he owes, which is something his mortgage company, Wells Fargo, isn't too fond of.

Mortgage terms generally require that borrowers purchase insurance that covers the market value of the home. This is mainly to protect the lender, as the borrower will have funds to repay the mortgage should something happen to the property. In 2002, Rodgers paid $180,000 for his six-bedroom Tudor, according to The Inquirer. He insured the home for this amount.

But in 2009, the paper reports that Wells Fargo decided that Rodgers' insurance wasn't sufficient. He had to insure the replacement value of the home, which was estimated to be around $1 million.

Refusing to pay the doubled insurance rate, Rodgers sent a "qualified written request," as required by the Real Estate Settlement Procedures Act, asking Wells Fargo to explain the changes.

Under the Real Estate Settlement Procedures Act, if a borrower believes there is an error or wants more information on changes to his mortgage account, he can make a qualified written request to the lender. The request must be written, include identifying information, and explain the situation. A lender must respond within 20 business days, but has 60 days to take action. A failure to comply with these rules results in damages of up to $1,000, plus court and attorneys fees.

Patrick Rodgers took this process seriously. When Wells Fargo didn't respond to his request, he took them to court. Failing to show up, the paper reports that the court issued a default judgment of $1,000 against the company. And when they didn't pay, he turned to the sheriff to collect.

Last month Wells Fargo sent Rodgers a check for $1,000 and a written response, the company told The Inquirer. However, Wells Fargo still owes him court costs and attorneys fees from the lawsuit, which occurred last fall. A sheriff's sale is scheduled at the Wells Fargo office for March 4.

Banks Push Home Buyers to Put More Cash Down 

Potential home buyers are being forced to rethink what home they can afford.  The down payments demanded by banks to buy homes have ballooned since the housing bust.  This drastically shrinks the pool of eligible buyers causing an even greater strain on the flailing real estate market.

WSJ's Mitra Kalita reports banks are requiring prospective new home buyers to come up more cash for down payments. In nine U.S. cities, the median down payment is 22%.

As housing prices drop, mortgage lenders are requiring larger downpayments on homes. Kelsey Hubbard talks to WSJ's Mitra Kalita about what the changes mean for consumers.

Last week, the Obama administration called for gradually raising down payments to a minimum of 10% on conventional loans, meaning those that can be bought or guaranteed by mortgage giants Fannie Mae and Freddie Mac. And mortgage data show that private lenders are already pushing sharply higher the required down payments, mainly to mitigate their risk as home prices continue to fall.

The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages, according to an analysis for The Wall Street Journal by real-estate portal Zillow.com. That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.

The move to force home buyers to lay out more cash is driven mostly by banks, who have found that larger down payments discourage delinquencies by increasing the buyers' exposure to loss and reducing the impact of declining prices. Many home buyers placed little, if anything, down during the boom.

A 2009 Federal Reserve Bank of St. Louis study concluded buyers who made smaller down payments were more likely to default during "unfavorable economic circumstances, such as a housing market slowdown or job loss."

Higher borrowing costs and heftier down payments could send housing prices falling further. Last week, 30-year fixed mortgage rates rose to 5.05%, their highest level since April. "If there is a scenario where the government talks about raising down payments to 20% on conventional loans, you would absolutely crush the housing market," said Peter Norden, chief executive of Real Estate Mortgage Network Inc., an Edison, N.J., brokerage.

For now, borrowers who can't afford such amounts are flocking to alternative programs, such as loans for veterans or those backed by the Federal Housing Administration, creating a parallel—and growing—nonconventional mortgage market for riskier borrowers and those who don't qualify for conventional loans. 

FHA-backed mortgages, which require 3.5% up front, made up about half of loans for home purchases last year, according to housing-research firm Zelman & Associates, but borrowers often pay higher interest rates and must pay private mortgage insurance, often driving their monthly payments higher.

"There's no question that the tightening of criteria unquestionably prices households out of the market," said Zillow economist Stan Humphries. "The middle ground buyer is the one having to fight to get a conventional mortgage."

Nikki Lavoie is among them. Six years ago, she and her then-husband bought their first home in Middletown, Del., through a veteran's loan, and have very little equity in the property. Recently divorced, Ms. Lavoie expects to make a small profit on the sale of the four-bedroom home, now under contract.

That leaves her with a 5% down payment for a town house she plans to buy and share with her 14-month-old daughter. Once, that would have been enough.

"A conventional loan…unless I had 20%, that is not even an option for me," said Ms. Lavoie, a 29-year-old who works for Delaware state government.

Because the town house is in a rural area, Ms. Lavoie qualified for a United States Department of Agriculture loan, which requires no money down. She is saving what would have been her down payment for appliances and furniture.

Higher Hurdle

Home buyers are paying a bigger part of the total in cash

The median down payment hovered around 20% in the late 1990s and began to creep downward in 2001 in the nine cities Zillow analyzed: Chicago; Stockton, Calif.; Las Vegas; Los Angeles; Miami-Fort Lauderdale; Phoenix; San Diego; San Francisco; and Tampa, Fla.

It fell as low as 4% in the fourth quarter of 2006, and in some markets came close to zero. Economists say it is no coincidence that those are the same markets sinking deeper underwater, meaning the value of homes is less than the debt owed on them.

The mortgage industry has long grappled with the question of how much of a down payment is enough. As home prices rose at faster rates than Americans' incomes in recent decades, banks began to accept lower down payments to create greater affordability and spur home-buying.

Federal Deposit Insurance Corp. Chairman Sheila Bair told an industry conference last month she supported minimum 20% down payments.

Mr. Norden, of the Real Estate Mortgage Network, said a better solution would be to demand high down payments from riskier borrowers seeking conventional loans, while allowing those with better credit histories to qualify with a lower amount, such as 10%, down.

A house in Miami, where buyers are paying higher down payments.

For banks, "the good news is lower leverage means less risk. The bad news: lower leverage means less activity," said David Berson, chief economist of the PMI Group. "A balance between the two is best."

Another byproduct of higher down payments will be a reduction in what some families can afford—or a rethinking of whether they should buy at all, said John Courson, president and CEO of the Mortgage Bankers Association.

"Many people will turn to the multifamily market," he said. "Or if you don't have whatever is deemed to be the appropriate down payment, the alternative is to be a renter while you accumulate that. You can't put a formula down that is going to fit every borrower's profile."

U.S. Loans in Foreclosure Tie Record as Lenders Delay Seizures

U.S. Loans in Foreclosure Tie Record as Lenders Delay Seizures

U.S. mortgages in the foreclosure process matched an all time high record at the end of 2010, as lenders and servicers delayed the final foreclosure to investigate charges against that alleged their foreclosure documentation was improper.

Records show what 4.63 percent of loans were in foreclosure in the fourth quarter, up from 4.39 percent in the previous three months. The combined share of foreclosures and loans with overdue payments was 14 percent, or about one in every seven mortgages.

Property seizures plunged at the end of 2010 as lenders such as Bank of America Corp. and JPMorgan Chase & Co. temporarily halted proceedings to review their handling of court documents. That left more homes in the foreclosure process with their status unresolved. Repossessions tumbled 32 percent in the fourth quarter from the prior period, according to data from RealtyTrac Inc. in Irvine, California.

“It’s clear that the process issues were driving the increase,” Jay Brinkmann, chief economist of the Washington- based Mortgage Bankers Association, said in an interview. “We would expect the foreclosure inventory to start coming down as that gets resolved and the court situations get cleared up.”

That share of mortgages in foreclosure tied the record reached in the first quarter of last year.

Foreclosure actions were started on 1.27 percent of home loans in the fourth quarter, down from 1.34 percent in the prior three months, according to the report. The share of mortgages with overdue payments dropped to 8.22 percent from 9.13 percent in the third quarter as an improving labor market and an expanding economy helped homeowners to stay current on their loans, Brinkmann said.

‘Robo-Signing’ Claims

Bank of America, JPMorgan and Ally Financial Inc. began resuming foreclosures at the end of last year. The allegations of impropriety such as “robo-signing,” the mass processing of paperwork without proper verification, have spurred an investigation by attorneys general across the country.

The foreclosure inventory of home loans held by prime borrowers, traditionally the best-performing type of mortgages, increased to a record 3.67 percent from 3.46 percent in the prior quarter, the report said. Prime loans with late payments dropped to 5.48 percent from 6.29 percent in the preceding quarter, MBA said.

Foreclosures are depressing property values and discouraging buyers who don’t want to make a deal if they think prices have further to fall. The S&P/Case-Shiller index of home values in 20 cities dropped 1.6 percent in November from a year earlier, the biggest 12-month decrease since December 2009.

Negative Equity

The median sale price nationally fell 1.1 percent in December from a year earlier, according to the National Association of Realtors. Declining home prices contribute to foreclosures because if homeowners who have lost equity fall behind on their loans they can’t sell their properties unless they are able to pay off the difference between their mortgage balance and the sale price, Brinkmann said.

At the end of last year about 15.7 million mortgaged single-family homes, or 27 percent, had negative equity, according to Zillow Inc., a Seattle-based real estate information company. It was the highest share in data going back to the first quarter of 2009.

Federal Reserve policy makers described the U.S. real estate market as “depressed” in a Jan. 26 statement following the end of a two-day meeting in Washington. The central bankers said falling home values continued to stymie the consumer spending that accounts for about three-quarters of the world’s largest economy.

The real estate market market may find some ray of hope by a broader economic recovery. U.S. gross domestic product is expected to grow 3.2 percent, the fastest pace since 2004, according to the median projection of 92 economists in a Bloomberg survey. Unemployment probably is expected to drop to 9.2 percent from 9.6 percent in 2010, the estimates show.  Whether this will truly boost the demand for real estate remains to be seen.