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OCWEN LOAN SERVICING ADMITS IN WRITING: WE DO NOT KNOW WHO OWNS YOUR LOAN

OCWEN LOAN SERVICING ADMITS IN WRITING: WE DO NOT KNOW WHO OWNS YOUR LOAN

Several of our clients have recently received letters from Ocwen Loan Servicing in response to inquiries as to who owns the homeowner’s loan. The response from Ocwen is a form letter, which states: “There is no single investor of the loan. The loan is one of many in a securitized investment trust (with name of the trust). Ocwen is the servicer of the loan, and not necessarily the owner of the loan. Although the ownership of the loan may change, the ownership has no bearing on the servicing of the loan.”

Look at that series of admissions very carefully. We know that Ocwen is a servicer, and is never an “owner” of a loan. A servicer is (allegedly) working to service the loan on behalf of some owner. Who is that owner? Ocwen does not know, and admits that the ownership may change.

Servicing rights are conveyed by a servicing contract. Who is Ocwen working for? It does not say. What rights have been conferred upon Ocwen by whoever owns the loan? Ocwen does not say. What amount is the owner claiming is owed and under what facts? Ocwen does not say.

Ocwen does admit that the loan was securitized. This admission implicates all of the securitization issues, including authority of the servicer, whether the loan was properly transferred to the trust, whether there were any paydowns or payoffs of the note through insurances, credit default swaps, reserve pools, etc. depending on the current state of the law in whatever jurisdiction a foreclosure is pending. As you know, some states have case law which permits inquiry into the issues; some do not; and some are undecided.

This letter alone warrants intensive discovery in any foreclosure case in view of the admissions of Ocwen, which admissions generate a wealth of issues of fact for discovery and trial as well.

Rhode Island foreclosure cases

Rhode Island foreclosure cases face additional uncertainty after the U.S. Court of Appeals for the First Circuit overturned a trial judge’s decision halting foreclosures while the parties attempted to find a resolution through mediation.  The appellate court, with retired U.S. Supreme Court Justice David Souter writing the decision, concluded that banks should have been given a hearing on the likelihood of success before the court effectively granted an injunction and that the amount of time and money spent on mediation should have been capped.  

Banks stick to short sales in $25B settlement relief

When 49 state attorneys and the five banks -- JP Morgan Chase, Bank of America, Ally/GMAC, Wells Fargo and Citibank -- settled their dispute in February of 2012, the banks agreed to stop improper foreclosure practices and provide $25 billion in relief for homeowners in the form of principal reductions, refinances and short sales (where a lender agrees to accept a purchase offer for less than is owed on the mortgage, releasing the homeowner from the loan).  According to the terms of the settlement, at least 60 percent of the borrower relief is to be spent on principal reductions.

Nearly $10.6 billion in mortgage relief has made its way to homeowners as part of the $25 billion national settlement reached earlier this year, according to a progress report from the Office of Mortgage Settlement Oversight.

So what is the problem? So far, the bulk of that money -- more than 85 percent -- has gone to pre-foreclosure (short) sales, which the banks were already doing before the settlement. In fact, according to data firm RealtyTrac, short sales were already on the rise before the settlement took effect in March. In the first quarter of 2012, short sales were up 25 percent year-over-year.

Of the $10.6 billion paid out so far, about $8.7 billion has gone to short sales. Only about $1 billion combined has gone toward mortgage modifications that reduce loan balances and refinances.

Of the five banks, JPMorgan Chase has spent the most money on first-mortgage principal reduction at $367 million, followed by Wells Fargo with $216.9 million, Ally at $111.3 million and Citibank with $54.3 million.

As for Bank of America: The company hasn't spent a dime on first-mortgage modifications that reduce loan balances for borrowers or on refinancing mortgages. Instead, they have spent $4.8 billion -- the most of the five banks -- on short sales.

According to the report, Bank of America has made nearly $2 billion in trial offers for first-mortgage modifications, but we'll have to wait for the follow-up report to come out next year to see where those numbers finally land.

In California, one of the hardest-hit states during the foreclosure crisis, the banks promised to spend $12 billion alone on principal reduction by 2015, but so far have spent only $335 million -- just 2.7 percent of the relief promised.

On the other hand, short sales completed in California total $3.9 billion of relief.

"The California piece of the settlement emphasized principal reduction because that is what is needed to stabilize families and neighborhoods in California, and yet the banks initial performance shows that meeting Californians' needs is not their priority," said Kevin Stein of the California Reinvestment Coalition.

The banks have spent nearly $10.6 billion in just a few months, but largely on relief efforts that further their own interests. By focusing their efforts on short sales, the banks skip the arduous foreclosure process -- they no longer have to manage, maintain and market a home -- and instead make their money right away.

While more short sales mean fewer foreclosures dragging down the real estate market, the focus on pre-foreclosure sales also means more homeowners are losing their homes and damaging their credit -- not exactly the intent of the settlement.

FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac

FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac

Programs Aligned to Expedite Assistance to Borrowers
Washington, DC – The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac are issuing new, clear guidelines to their mortgage servicers that will align and consolidate existing short sales programs into one standard short sale program. The streamlined program rules will enable lenders and servicers to quickly and easily qualify eligible borrowers for a short sale.
The new guidelines, which go into effect Nov. 1, 2012, will permit a homeowner with a Fannie Mae or Freddie Mac mortgage to sell their home in a short sale even if they are current on their mortgage if they have an eligible hardship. Servicers will be able to expedite processing a short sale for borrowers with hardships such as death of a borrower or co-borrower, divorce, disability, or relocation for a job without any additional approval from Fannie Mae or Freddie Mac.
“These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said FHFA Acting Director Edward J. DeMarco. “The new standard short sale program will also provide relief to those underwater borrowers who need to relocate more than 50 miles for a job.”
The new guidelines:

• Offer a streamlined short sale approach for borrowers most in need: To move short sales forward expeditiously for those borrowers who have missed several mortgage payments, have low credit scores, and serious financial hardships the documentation required to demonstrate need has been reduced or eliminated.
  
• Enable servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales: Common reasons for borrower hardship are death, divorce, disability, and distant employment transfer or relocation. With the program changes, servicers will be permitted to process short sales for borrowers with these hardships without any additional approval from Fannie Mae or Freddie Mac, even if the borrowers are current on their mortgage payments. Borrowers will now qualify for a short sale if they need to relocate more than 50 miles from their home for a job transfer or new employment opportunity.
  
  Fannie Mae and Freddie Mac will waive the right to pursue deficiency judgments in exchange for a financial contribution when a borrower has sufficient income or assets to make cash contributions or sign promissory notes: Servicers will evaluate borrowers for additional capacity to cover the shortfall between the outstanding loan balance and the property sales price as part of approving the short sale.

• Offer special treatment for military personnel with Permanent Change of Station (PCS) orders: Service members who are being relocated will be automatically eligible for short sales, even if they are current on their existing mortgages, and will be under no obligation to contribute funds to cover the shortfall between the outstanding loan balance and the sales price on their homes.
  
• Consolidate existing short sales programs into a single uniform program: Servicers will have more clear and consistent guidelines making it easier to process and execute short sales.
  
• Provide servicers and borrowers clarity on processing a short sale when a foreclosure sale is pending: The new guidance will clarify when a borrower must submit their application and a sales offer to be considered for a short sale, so that last- minute communications and negotiations are handled in a uniform and fair manner.
  
• Fannie Mae and Freddie Mac will offer up to $6,000 to second lien holders to expedite a short sale. Previously, second lien holders could slow down the short sale process by negotiating for higher amounts.
  This alignment comes as part of a broader FHFA effort, the Servicing Alignment Initiative, to streamline Fannie Mae and Freddie Mac programs for short sales and other foreclosure alternatives to assist struggling homeowners. FHFA announced guidelines in June that establish strict timelines for servicers considering short sales. Servicers are required to review and respond to short sales within 30 days of receipt of a short sale offer; they must provide weekly status updates to the borrower if the offer is still under review after 30 days, and they must make and communicate final decisions to the borrower within 60 days of receipt of the offer and complete borrower response package. These borrowers will not be eligible for a new mortgage backed by Fannie Mae or Freddie Mac for at least two years after a short sale.
  FHFA encourages homeowners to reach out early to their lender or servicer if they face any hardship affecting their ability to pay their mortgage. 
  

Bay State Personal Bankruptcy Filings Drop 18 Percent In 2012

Chapter 13 Filings Also Decrease From Last Year

PROVIDED BY The Warren Group

Personal bankruptcy filings in Massachusetts decreased more than 18 percent in 2012 from a year earlier, according to a new report from The Warren Group, publisher of Banker & Tradesman.

There were 11,964 Chapter 7 bankruptcies filed in Massachusetts last year, down from 14,716 filed in 2011. Chapter 7 of the U.S. bankruptcy code is the most common option for individuals seeking debt relief, and accounted for more than 74 percent of Massachusetts' bankruptcy filings last year.

"The drop in bankruptcy filings is an encouraging sign; it indicates that consumers are more optimistic about their ability to pay off debt and clean up their financial situations," said The Warren Group CEO Timothy M. Warren Jr. "If the housing market - and overall economy - continues to improve, we are sure to see even better results in 2013."

People filing under Chapter 7 bankruptcy can eliminate most debt after non-exempt assets are used to pay off creditors. In contrast, Chapter 13 requires debtors to arrange for a three- or five-year debt-repayment plan.

Filings under Chapter 13 of the U.S. bankruptcy code dropped 17 percent to 3,991 in 2012, down from 4,813 in 2011.

Chapter 11 filings, which are used for business bankruptcies and restructuring, also declined in 2012. Filings decreased 29 percent to 152, down from 215 in 2011.

A total of 16,107 filers statewide sought protection under Chapter 7, Chapter 13 and Chapter 11 of the U.S. bankruptcy code in 2012, down from 19,744 in 2011.

Bankruptcy Definitions:
Chapter 7 bankruptcy, sometimes called a straight bankruptcy, is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose, so Chapter 7 will give that person a relatively quick "fresh start."
Chapter 13 bankruptcy is also known as a reorganization bankruptcy. Chapter 13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
Chapter 11 bankruptcy is typically used for business bankruptcies and restructuring. It is not commonly used by individual consumers since it is far more complex and expensive to pursue. It allows businesses to reorganize themselves, giving them an opportunity to restructure debt and get out from under certain burdensome leases and contracts. Typically a business is allowed to continue to operate while it is in Chapter 11, although it does so under the supervision of the Bankruptcy Court and its appointees.

BofA enhances short sale incentive up to $30,000

BofA enhances short sale incentive up to $30,000

Did you get a “Golden Ticket” from Bank of America?

The nation’s largest mortgage servicer has officially released its Enhanced Relocation Assistance program in California, six months after it deemed a pilot run of the program in Florida a success.

Bank of America sent letters and overnight packages to some lucky homeowners last week, a windfall equivalent to receiving a mythical ticket to Willy Wonka’s Chocolate Factory. A client of Dream Big Real Estate received a notice that they qualify for the program, which will provide them up to $30,000 after they complete a short sale on their home.

“Bank of America is reviewing all current, in-process preapproved-price short sale agreements to determine who is eligible for this limited-time offer,” according to a statement from Bank of America. “Eligible homeowners actively participating in a preapproved-price short sale program (such as HAFA or Bank of America’s proprietary program) will receive a letter if they qualify for the additional relocation assistance.”

Here are some program details:

The enhanced program is only available for preapproved-price short sale programs, which are initiated without an offer from a buyer. Officials said it may be extended to other programs in the future.

The amount of the relocation incentive is based on the appraised value of the home. Payments made to the homeowner at the close of a short sale range from $2,500 to $30,000.

The incentive can be used to help pay off junior liens, including credit cards judgments, utility liens and tax liens.

The short sale must be initiated in 2012 and close by Sept. 26, 2013.

Homeowners will receive a 1099 form from Bank of America for the unpaid balance and the relocation incentive, and it should be included when they complete their next tax return. (Consult with your CPA or tax attorney to determine if you have a tax liability after a short sale.)

Unlike other high-dollar relocation-incentive programs, Bank of America’s enhanced program allows homeowners to raise their hands and volunteer. Want to know if you qualify for the Enhanced Relocation Assistance? Call our office today at 951-778-9700 and we’ll do the research for you.

OTHER BANK PROGRAMS

Bank of America isn’t the only institution offering relocation incentives after a short sale. Below are a few other programs:

HAFA PROGRAM: More than 20,000 short sales have been completed through the federal Home Affordable Foreclosure Alternatives program, which provides a $3,000 relocation incentive for the homeowner.

The U.S. Treasury version of the program this week increased the amount allowed to satisfy junior liens to $8,500, making the program a better alternative for California homeowners, who are more likely to have high-balance home-equity loans.

Many banks participate in this program, though not all homeowners fit the mold.

WACHOVIA: Wachovia Mortgage has been providing relocation incentives of $2,500 to $10,000 in a short sale for more than a year. The lender is well-known for its speedy response and no-nonsense negotiations.

CHASE BANK: This lender offers relocation incentives up to $45,000. Not all Chase loans qualify for the incentive — To find out if you have one of these loans, call us today at 951-778-9700.

CITIMORTGAGE: Citi says its average short sale incentive offer is $12,000 in cases where Citi owns the loan. The incentives are based on a variety of factors, including level of distress of the homeowner and loan characteristics.

WELLS FARGO: Wells also completed a trial program in Florida last year that offered $10,000 to $20,000 to a homeowner who completes a short sale or deed-in-lieu. The incentive is only available on first trust deeds that Wells itself owns, the lender said.

This is not a comprehensive list, but these are good examples of the programs available to homeowners who are in danger of losing a home to foreclosure.

Despite what you may have heard, banks prefer short sales over foreclosure or even loan modifications. Why? It’s all about the numbers.

Short sales net banks 12 percent to 25 percent more than they would gain from a foreclosure because of the time and expense to take back, repair, maintain, market and resell a property. And as many as half of loan modifications redefault within the first year, later turning into foreclosures and short sales.

Thus short sales continue to increase, especially in Southern California, as lenders streamline processes and create attractive offers to help distressed homeowners. A short sale allows a homeowner to avoid a financially devastating foreclosure, limit damage to their credit, and re-enter the housing market much more quickly as an able buyer — before home values again shoot through the roof.

More importantly, a short sale allows a homeowner to exit their house on their own terms, with dignity intact.

Want to know if you qualify for any of these programs? Call us today at 508-699-2500 Ext 11.