Our Military Is Protected from Foreclosure under The Servicemen Act (SCRA)


We have been approached by few military families whose home were foreclosed while the owner were performing military services overseas. This is very painful, but unfortunately, it has been done and the homes were foreclosed in clear violation of the SCRA. In one case, our law office helped getting back garnished wages of a police officer back. Two mortgage servicing companies have agreed to settle federal complaints that they wrongfully foreclosed on the homes of at least 178 military service members and to set aside a minimum of $22 million to compensate those victims. This is a great victory for the Justice Department that various lenders had settled such cases. The lenders include, of course the notorious one i.e Countrywide Home Loan Servicing and Saxon Mortgage Services. These companies knowingly and repeatedly violated the Service members Civil Relief Act, a federal law that extends an array of financial and legal protections to military personnel. The former Countrywide unit agreed to pay $20 million to approximately 160 victims of illegal foreclosures from January 2006 to May 2009. It also agreed to reimburse victims of any other illegal military foreclosures found to have occurred from May 2009 to the end of last year.
NY Times has posted one such painful story of Sgt. James B. Hourley who was away on war duties in Iraq. In violation of a law intended to protect active military personnel from creditors, agents of Deutsche Bank foreclosed on his small Michigan house, forcing Sergeant Hurley’s wife, Brandie, and her two young children to move out and find shelter elsewhere.

“When the sergeant returned in December 2005, he drove past the densely wooded riverfront property outside Hartford, Mich. The peaceful little home was still there — winter birds still darted over the gazebo he had built near the water’s edge — but it almost certainly would never be his again. Less than two months before his return from the war, the bank’s agents sold the property to a buyer in Chicago for $76,000. Since then, Sergeant Hurley has been on an odyssey through the legal system, with little hope of a happy ending — indeed, the foreclosure that cost him his home may also cost him his marriage. ”Brandie took this very badly,” said Sergeant Hurley, 45, a plainspoken man who was disabled in Iraq and is now unemployed. ”We’re trying to piece it together.”

“In March 2009, a federal judge ruled that the bank’s foreclosure in 2004 violated federal law but the battle did not end there for Sergeant Hurley. Typically, banks respond quickly to public reports of errors affecting military families. But today, more than six years after the illegal foreclosure, Deutsche Bank Trust Company and its primary co-defendant, a Morgan Stanley subsidiary called Saxon Mortgage Services, are still in court disputing whether Sergeant Hurley is owed significant damages. Exhibits show that at least 100 other military mortgages are being serviced for Deutsche Bank, but it is not clear whether other service members have been affected by the policy that resulted in the Hurley foreclosure.”

In court papers, lawyers for Saxon and the bank assert the sergeant is entitled to recover no more than the fair market value of his lost home. His lawyers argue that the defendants should pay much more than that — including an award of punitive damages to deter big lenders from future violations of the law. The law is called the Service members Civil Relief Act, and it protects service members on active duty from many of the legal consequences of their forced absence.

We suggest as a foreclosure defense attorney, and working in this field for long time, we encourage any military family (living in Nevada) to ask our free legal help in this regard. We would not charge any money upfront from any such familiy AND EVEN ADVANCE COURT COST, if they have meritorious case while their loved one were performing military services overseas. Call us at (702) 270-9100 and even get a free consultation over the phone.

What is gonna happen with trial loan modifications


This is an interesting article and the writer is skeptical about the future of 650,000 or more trial loan modifications. There are some very interesting points raised by the author. The trial loan modification process is slow and cumbersome. However, it builds hope for homeowners. Banks are taking lots of time in completing this process.

http://www.nytimes.com/2009/12/04/business/economy/04norris.html?_r=1&sq=&st=nyt&scp=2&pagewanted=print

Housing Market–Is It Recovering?


Much forecast has been made by pundits of all sorts on the housing market. I wish the statistics could have been otherwise. However, the latest trends and data is proving it otherwise. It was few weeks ago Moody report which said that it would take 10 years for the housing market to fully recover. Following is another news item supporting this doom and gloom scenario.

http://www.lvrj.com/business/housing-recovery-isnt-as-close-to-reality-as-some-statistics-suggest-63955137.html

Details of Obama Plan’s Underwriting Guidelines


July 30, 2009 MORTGAGEE LETTER 2009-23

TO: ALL APPROVED MORTGAGEES
SUBJECT: Making Home Affordable Program:
FHA’s Home Affordable Modification Loss Mitigation Option

On May 20, 2009, the President signed the “Helping Families Save Their Homes Act of 2009.” This new law provides the Federal Housing Administration (FHA) with additional loss mitigation authority to assist FHA mortgagors under the Making Home Affordable Program (MHA). The MHA Program is designed to help homeowners retain their homes and to prevent the destructive impact of foreclosures on families and communities.

One key component of MHA provides homeowners the opportunity to reduce their mortgage payments by the use of a loan modification through the Home Affordable Modification Program. When initially introduced to the public, MHA excluded FHA insured mortgages, stating that FHA would develop its own standalone program. This Mortgagee Letter announces a new FHA Loss Mitigation option, the FHA-Home Affordable Modification Program (FHA-HAMP). FHA-HAMP will provide homeowners in default a greater opportunity to reduce their mortgage payments to a sustainable level. This Mortgagee Letter is effective August 15, 2009.

Basic Program Guidelines
The new FHA-HAMP authority will allow the use of a partial claim up to 30 percent of the unpaid principal balance as of the date of default combined with a loan modification. The objective of FHA-HAMP is to assist FHA mortgagors who are in default to modify their mortgage to an affordable payment. According to Mortgagee Letter 2000-05 and subsequent guidance, disposition options (pre-foreclosure sales and deeds-in lieu of foreclosure) are available immediately upon default, if the cause of the default is incurable, i.e. the borrower has no realistic opportunity to replace the lost income or reduce expenses sufficiently to meet the mortgage obligation.

To confirm if the mortgagor is capable of making the new FHA-HAMP payment, the mortgagor must successfully complete a trial payment plan. The trial payment plan shall be for a three month period and the mortgagor must make each scheduled payment on time. The mortgagor’s monthly payment required during the trial payment plan must be the amount of the future modified mortgage payment. The Mortgagee must service the mortgage during the trial period in the same manner as it would service a mortgage in forbearance. If the mortgagor does not successfully complete the trial payment plan by making the three payments on time, the mortgagor is no longer eligible for FHA-HAMP. Prior to proceeding to foreclosure, the Mortgagee must re-examine and re-evaluate the borrower’s financial condition and confirm that none of FHA’s other Loss Mitigation options could assist the mortgagor.

The attachment to this Mortgage Letter supplements program guidelines for FHA-HAMP, including a requirement that the servicer obtain an executed Hardship Affidavit (available at https://www.hmpadmin.com/portal/docs/mod_docs/hamphardshipaffidavit.pdf) from every mortgagor and co-mortgagor seeking an FHA-HAMP. FHA-HAMP is a permanent addition to HUD’s Loss Mitigation Program as of the date of this Mortgagee Letter.

Debt to Income Ratios
To be eligible under FHA-HAMP, the front end debt to income ratio must be as close as possible, but not less than, 31 percent. This ratio is defined as the total monthly mortgage payment (PITI) for the modified mortgage divided by the mortgagor’s gross monthly income (the “Front End Ratio”). The back end debt to income ratio must not exceed 55 percent and is defined as the total monthly mortgage payment plus all recurring monthly debt divided by the mortgagor’s gross monthly income (the “Back End Ratio”). Please refer to the sections in the Attachment regarding Underwriting – Front End and Back End Debt to Income Ratios.

Calculation of Maximum Partial Claim Amount under FHA-HAMP
The maximum partial claim amount under FHA-HAMP consists of the sum of (i) arrearages, (ii) legal fees and foreclosure costs related to a canceled foreclosure action and (iii) principal reduction. Arrearages that may be included in the partial claim shall not exceed 12 months of PITI. The maximum partial claim amount under FHA-HAMP is 30 percent of the outstanding principal balance as of the date of default. The principal deferment on the modified mortgage is determined by multiplying the outstanding principal balance by 30 percent and then reducing that amount by arrearages advanced to cure the default for up to 12 months PITI, and any foreclosure costs incurred to that point subject to the requirements provided in Mortgagee Letter 2008-21. The principal deferment amount for a specific case shall be limited to such an amount that will bring the mortgagor(s) total monthly mortgage payment to 31 percent of gross monthly income.

Example

Mortgagor had a reduction of income and is delinquent 3 full mortgage payments. The unpaid principal balance on the mortgage on the date of default is $150,000 and the monthly payment is $1,220 (consisting of P&I of $920 and escrows, including MIP, of $300). The financial analysis reveals that the mortgagor’s gross monthly income is $3,500 and the total monthly other recurring debt payments are $800.

In order to fulfill the 31% Front End Ratio requirement, the mortgagor(s) total monthly mortgage payment would have to be reduced to $1,085 ($3,500 x 31%). Therefore, P&I would have to be reduced to $785 ($1,085 total monthly mortgage payment less $300 escrow and MIP). Assuming that the loan modification will have an interest rate of 6% and a P&I of $785, the new mortgage amount would have to be $130,931, resulting in a principal reduction of $19,069 ($150,000 unpaid principal balance less $130,931). In this example, the mortgagor’s Back End ratio is 53.9% ($1,885/$3,500), which satisfies the 55% Back End Ratio limitation.

In this example, the maximum principal deferment is $41,340 (30% of $150,000, less the $3,660 delinquency, or $45,000 – $3,660). However, based on their gross income, mortgagor is eligible only for a principal deferment of $19,069 plus $3,660 arrearages (which would include any foreclosure costs incurred to that point, in accord with Mortgagee Letter 2008-21) for the total Partial Claim of $22,729.

Requirements to Use FHA-HAMP

FHA-HAMP can be utilized only if the mortgagor(s) does not qualify for current loss mitigation home retention options (priority order FHA Special Forbearance, Loan Modification and Partial Claim) under existing guidelines (ML 2008-21, 2003-19, 2002-17, 2000-05). To qualify for the FHA-HAMP program, Mortgagees must evaluate the defaulted mortgage for loss mitigation actions using the aforementioned priority order. According to Mortgagee Letter 2000-05 and subsequent guidance, disposition options (pre-foreclosure sales and deeds-in lieu of foreclosure) are available immediately upon default, if the cause of the default is incurable, i.e. the borrower has no realistic opportunity to replace the lost income or reduce expenses sufficiently to meet the mortgage obligation.

If the mortgagor does not successfully execute the loan modification, the mortgagor is no longer eligible for FHA-HAMP. In such cases, per 24 CFR 203.355, the Mortgagee must re-evaluate the mortgagor’s eligibility for the other appropriate loss mitigation actions prior to commencing or continuing a foreclosure.

Mortgagee Incentives
Mortgagees that utilize FHA-HAMP are eligible to receive incentive payments. Mortgagees utilizing this initiative will be allowed to first file for a partial claim (to bring the loan current and defer principal where appropriate), followed by a loan modification claim (claim type 32). Under FHA-HAMP, the Mortgagee may receive an incentive fee of up to $1,250. This total includes $500 for the partial claim and $750 for the loan modification. Mortgagees may also claim up to $250 for reimbursement for a title search and/or recording fees.

Partial Claim Filing and Document Delivery

Mortgagees must file a claim for insurance benefits for the partial claim within the 60-day timeframe stated in ML 2003-19 to receive incentive fees for the FHA-HAMP loss mitigation action. Any previous outstanding partial claim(s) must be subordinated and the mortgage company must provide HUD’s Secretary-Held servicing contractor (see ‘Remittance’ below) with a subordination agreement to request subordination.

Monitoring
FHA will monitor Mortgagees for compliance with the terms of this Mortgagee Letter and will take administrative actions, including sanctions and penalties, against all parties for non-compliance.

Remittance

Please note that all provisions described in the aforementioned existing guidelines, such as Repayment Terms, Option Failure and Disclosures apply also, except as specifically changed under FHA-HAMP.

Mortgagees must forward all required documentation, including subordination requests, and advise all parties to send any payments for the Partial Claims to HUD’s Secretary-Held Assets Servicing Contractor which is currently located at:

C&L Service Corp. / Morris-Griffin Corp.
2488 East 81st Street, Suite 700
Tulsa, Oklahoma 74137

Toll Free Phone: (866) 377-8667 Toll Free Fax: (866) 249-0626
Local: (918) 551-5300 Local Fax: (918) 551-5399

Current information about the Secretary-Held Assets Servicing Contractor is located at:

http://www.hud.gov/offices/hsg/sfh/nsc/fmaddr.cfm

Information Collection Requirement

The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0060, 2502-0523, 2502-0429, and 1505-0216. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB Control Number.

Any questions regarding this Mortgagee Letter may be directed to HUD’s National Servicing Center (NSC) at 888-297-8685 or hsg-lossmit@hud.gov. Persons with hearing or speech impairments may reach this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

David Stevens
Assistant Secretary for Housing – Federal Housing Commissioner

Attachment – Guidelines for FHA-HAMP

Nevada Deceptive Trade Practices


Everyday many homeowners are coming to my office, seeking help from the predators who had made them victims in various ways; by promising them to lower their debts; by promising them to restructure their debts; by promising to lower their interest and principal. I have heard innumerable heart broken stories. In this posting, I would highlight some of the laws which are enforceable in Nevada statute books and can be used to catch these criminals. Again, it is advisable to seek a qualified and licensed attorney in addressing your particular issues.
Most of these deceptive trade laws are contained in NRS 598.741
1. “Buyer” means a natural person who is solicited to purchase or who purchases the services of an organization which provides credit services.
2. “Commissioner” means the Commissioner of Consumer Affairs.
3. “Division” means the Consumer Affairs Division of the Department of Business and Industry.
4. “Extension of credit” means the right to defer payment of debt or to incur debt and defer its payment, offered or granted primarily for personal, family or household purposes.
5. “Organization”:
(a) Means a person who, with respect to the extension of credit by others, sells, provides or performs, or represents that he can or will sell, provide or perform, any of the following services, in return for the payment of money or other valuable consideration:
(1) Improving a buyer’s credit record, history or rating.
(2) Obtaining an extension of credit for a buyer.
(3) Providing counseling or assistance to a person in establishing or effecting a plan for the payment of his indebtedness, unless that counseling or assistance is provided by and is within the scope of the authorized practice of a debt adjuster licensed pursuant to chapter 676 of NRS.
(4) Providing advice or assistance to a buyer with regard to subparagraph (1) or (2).
(b) Does not include: [As you can see, only licensed attorneys should modify, restructure a loan or do any credit advice] (1) A person organized, chartered or holding a license or authorization certificate to make loans or extensions of credit pursuant to the laws of this state or the United States who is subject to regulation and supervision by an officer or agency of this state or the United States.
(2) A bank, credit union or savings and loan institution whose deposits or accounts are eligible for insurance by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund or a private insurer approved pursuant to NRS 678.755.
(3) A person licensed as a real estate broker by this state where the person is acting within the course and scope of that license, unless the person is rendering those services in the course and scope of employment by or other affiliation with an organization.
(4) A person licensed to practice law in this state where the person renders services within the course and scope of his practice as an attorney at law, unless the person is rendering those services in the course and scope of employment by or other affiliation with an organization.
(5) A broker-dealer registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission where the broker-dealer is acting within the course and scope of such regulation.
(6) A person licensed as a debt adjuster pursuant to chapter 676 of NRS.
(7) A reporting agency.
6. “Reporting agency” means a person who, for fees, dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the business of assembling or evaluating information regarding the credit of or other information regarding consumers to furnish consumer reports to third parties, regardless of the means or facility of commerce used to prepare or furnish the consumer reports. The term does not include:
(a) A person solely for the reason that he conveys a decision regarding whether to guarantee a check in response to a request by a third party;
(b) A person who obtains or creates a consumer report and provides the report or information contained in it to a subsidiary or affiliate; or
(c) A person licensed pursuant to chapter 463 of NRS.
Section NRS 598.746 deals with Prohibited acts: Receiving money before complete performance; receiving money for referral to provider of credit; misleading statements; other fraudulent or deceptive acts. An organization and its agents, employees and representatives who sell or attempt to sell the services of the organization, shall not:
1. Charge or receive any money or other valuable consideration before full and complete performance of the services the organization has agreed to perform for or on behalf of the buyer.
2. Charge or receive any money or other valuable consideration solely for referral of the buyer to a retail seller who will or may extend credit to the buyer, if the credit which is or will be extended to the buyer is upon substantially the same terms as those available to the general public.
3. Make, counsel or advise any buyer to make, any statement which is untrue or misleading and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, to a consumer credit reporting agency or to any person who has extended credit to a buyer or to whom a buyer is applying for an extension of credit, with respect to a buyer’s creditworthiness, credit standing or credit capacity.
4. Make or use any untrue or misleading representations in the offer or sale of the services of an organization. For the purposes of this subsection, a “misleading representation” includes a guarantee that:
(a) The organization is able to remove information that is adverse to the buyer’s ability to obtain credit from the buyer’s credit record, history or rating.
(b) The organization is able to obtain an extension of credit for the buyer regardless of the buyer’s existing credit record, history or rating.
5. Engage, directly or indirectly, in any act, practice or course of business which operates or would operate as a fraud or deception upon any person in connection with the offer or sale of the services of an organization.
6. Remove, or assist or advise the buyer to remove from the buyer’s credit record, history or rating, information that is adverse to the buyer’s ability to obtain credit if the information is accurate and not obsolete.
7. Create, or assist or advise the buyer to create a new credit record, history or rating by using a different name, address, social security number, employee identification number or other misleading information.
8. Attempt to transfer or assign the organization’s certificate of registration.
9. Submit a buyer’s dispute to a consumer credit reporting agency without the buyer’s knowledge.
10. Call, or authorize any other person who is not the buyer to call a consumer credit reporting agency and portray himself as the buyer.

NRS 598.752 Organization to register and deposit security before advertising services or conducting business in this State; separate security not required from salesperson, agent or representative of organization; regulations.
1. Before advertising its services or conducting business in this State, an organization must register pursuant to NRS 598.721 and deposit security in the amount of $100,000 with the Division pursuant to NRS 598.726. The security must be conditioned on compliance by the organization with the provisions of NRS 598.746 to 598.772, inclusive, and the terms of its contracts with buyers.

2. If an organization has deposited the required security, a salesperson, agent or representative of the organization who sells its services is not required to deposit his own separate security. For the purposes of this subsection, a person is a salesman, agent or representative of an organization if:

(a) He does business under the same name as the organization; or

(b) The organization and the issuer of the security certify in writing that the security covers the salesperson, agent or representative.

3. The Division shall adopt such regulations as it deems necessary to carry out the provisions of this section.

NRS 598.757 Organization to provide buyer certain information in writing.
1. Before the execution of a contract between the buyer and an organization or before the receipt by the organization of any money or other valuable consideration, whichever occurs first, the organization must provide to the buyer, in writing:
(a) A statement:
(1) That the buyer has a right pursuant to 15 U.S.C. §§ 1681g and 1681h to receive disclosure of all information, except medical information, in any file on him maintained by a consumer credit reporting agency;
(2) That 15 U.S.C. § 1681j requires that this disclosure be made free to the buyer if he requests it within 30 days after receipt of notice of a denial of credit;
(3) Of the approximate cost to the buyer of receiving this disclosure when there has not been a denial of credit; and
(4) That the buyer has the right pursuant to 15 U.S.C. § 1681i to dispute the completeness or accuracy of any item contained in any file on him maintained by any consumer credit reporting agency.
(b) A detailed description of the services to be performed by the organization for the buyer and the total amount the buyer will become obligated to pay for the services.
(c) A statement that the buyer has a right to proceed against the security deposited with the Division by the organization under the circumstances and in the manner set forth in NRS 598.731 and 598.736. The statement provided pursuant to this paragraph must include the name and address of the issuer of the security.
(d) A statement that the buyer may cancel a contract for the services of an organization within 5 days after its execution by written notice mailed or delivered to the organization.
(e) A statement identifying the availability of any nonprofit association which provides services similar to those offered by the organization. The statement provided pursuant to this paragraph must include the association’s telephone number, including the association’s national toll-free telephone number, if any.
2. The written information provided pursuant to subsection 1 must be printed in at least 10-point bold type and must include the following statement or a similar statement approved by the Division:
RIGHTS OF CONSUMERS REGARDING CREDIT FILES
PURSUANT TO STATE AND FEDERAL LAW

You have the right to obtain a copy of your credit file from a consumer credit reporting agency. There is no fee if, within the past 30 days, you have been turned down for credit, employment or insurance because of information in your credit report. The consumer credit reporting agency is obligated to provide someone to help you interpret the information in your credit file.

You have a right to dispute inaccurate information by contacting the consumer credit reporting agency directly. However, neither you nor any credit service organization has the right to have accurate, current and verifiable information removed from your credit report. Generally, under the Fair Credit Reporting Act, the consumer credit reporting agency is obligated to remove accurate, negative information from your report only if it is more than 7 years old and bankruptcy information can be reported for 10 years. If you have notified a credit reporting agency that you dispute the accuracy of information in your credit file, the consumer credit reporting agency is obligated to make an investigation and modify or remove inaccurate information. The consumer credit reporting agency may not charge a fee for this service. Any relevant information and copies of all documents you have concerning the disputed information should be given to the consumer credit reporting agency. If the investigation does not resolve the dispute to your satisfaction, you may send a brief statement to the consumer credit reporting agency to keep in your credit file, explaining why you think the information in the credit file is inaccurate. The consumer credit reporting agency is obligated to include your statement or a summary of your statement about disputed information in any report it issues about you.

RIGHTS OF CONSUMERS REGARDING
CANCELLATION OF A CONTRACT

You have a right to give written notice of your intent to cancel a contract with a credit service organization for any reason within 5 working days from the date you signed it. If for any reason you do cancel a contract during this time, you do not owe any money. You have a right to sue a credit service organization if it misleads you.
3. The organization shall retain a copy of the written information it provides pursuant to the requirements of subsections 1 and 2 for not less than 2 years.

NRS 598.762 Requirements of contract for purchase of services; copy of contract must be retained by organization.
1. A contract between a buyer and an organization for the purchase of the services of the organization:
(a) Must be in writing;
(b) Must be signed by the buyer;
(c) Must be dated; and
(d) Must clearly indicate above the signature line that the buyer may cancel the contract within 5 days after its execution by giving written notice to the organization of his intent to cancel the contract. If the notice is mailed, it must be postmarked not later than 5 days after the execution of the contract.
2. A copy of each contract executed by a buyer and an organization must be retained by the organization for not less than 2 years.

NRS 598.767 Organization to maintain registered agent for service of legal process. An organization shall file with the Division the information required pursuant to NRS 77.310 and continuously maintain a registered agent for service of legal process.

NRS 598.772 Waiver of statutory rights prohibited; burden of proof upon person claiming exemption or exception from definition.

1. Any waiver by a buyer of the provisions of NRS 598.746 to 598.777, inclusive, is contrary to public policy and is void and unenforceable. Any attempt by an organization to have a buyer waive rights given by NRS 598.746 to 598.777, inclusive, is unlawful.

2. In any proceeding involving NRS 598.741 to 598.787, inclusive, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

(Added to NRS by 1987, 1520; A 1993, 2277)—(Substituted in revision for NRS 598.286)

NRS 598.777 Buyer’s action for recovery of damages or injunctive relief; attorney’s fees; punitive damages. A buyer injured by a violation of NRS 598.746 to 598.772, inclusive, or by a breach by an organization of a contract subject to those sections, may bring an action for recovery of damages, for injunctive relief or for both recovery of damages and injunctive relief. Judgment for damages must be entered for actual damages, but in no case less than the amount paid by the buyer to the organization, plus reasonable attorney’s fees and costs. If the court deems it proper, the court may award punitive damages.

(Added to NRS by 1987, 1520; A 1993, 2277)—(Substituted in revision for NRS 598.287)

NRS 598.782 Criminal penalty.
1. Except as otherwise provided in subsection 2, a person who violates any provision of NRS 598.746 to 598.772, inclusive, is guilty of a misdemeanor.
2. A person who breaches a contract subject to NRS 598.746 to 598.772, inclusive, is not guilty of a misdemeanor solely because of the breach.
NRS 598.787 Provisions and remedies not exclusive; violation constitutes deceptive trade practice.
1. The provisions of NRS 598.746 to 598.777, inclusive, are not exclusive and do not relieve the parties or the contracts subject thereto from compliance with any other applicable provision of law.
2. The remedies provided in NRS 598.772 and 598.777 for violation of any provision of NRS 598.746 to 598.772, inclusive, are in addition to any other procedures or remedies for any violation or conduct provided for in any other law.
3. Any violation of NRS 598.746 to 598.772, inclusive, constitutes a deceptive trade practice for the purposes of NRS 598.0903 to 598.0999, inclusive.

NRS 598.900 Untrue or misleading statements by organization prohibited; effect on contract. An organization shall not make any untrue or misleading representations to the buyer or in its advertising. A contract for membership in an organization where any untrue or misleading representation was made to the buyer or the buyer was made aware of the untrue or misleading representation is void and unenforceable by the organization.

NRS 598.905 Correction of violations. If an organization does not comply with the provisions of NRS 598.840 to 598.895, inclusive, or 598.905 to 598.930, inclusive, the buyer may agree in writing, after a full disclosure, to any correction of the defect if the correction is made within 30 days after he signs the contract for membership in the organization. If the buyer does not consent, or if the correction is not made within the 30-day period, the contract is rescinded, and the buyer must be given a full refund.

NRS 598.910 Effect of transfer by organization of its obligation to provide goods or services; circumstances under which buyer may rescind contract.

1. If an organization transfers its obligation to provide goods or services to a buyer to another organization which provides substantially fewer goods or services, the buyer may consent to the transfer in writing after a full disclosure to him of the goods and services to be provided by the new organization. If a buyer does not consent, his contract is rescinded, and he must be given a refund pro rata based on the amount of time he was a member of the organization.

2. The buyer may rescind the contract and the organization shall give him a refund pro rata based on the amount of time he was a member of the organization if any of the following circumstances occur:

(a) Except as otherwise provided in this paragraph, the organization moves its place of business which is geographically closest to the buyer’s residence, as indicated in the contract, more than 20 miles farther from the buyer’s residence than it was when the contract for membership was signed. The provisions of this paragraph do not apply if:

(1) The organization offers the buyer a substantially equivalent at-home ordering service through at least one other generally available channel of communication, including, without limitation, the Internet;

(2) The at-home ordering service offers the same categories of goods and services provided by the organization at the time the organization moves its place of business; and

(3) Any goods ordered by the buyer through the at-home ordering service are shipped, at the election of the buyer, to either the buyer’s residence, as indicated in the contract, or a freight receiver within 20 miles of that residence.

(b) Within 6 months after the contract for membership was signed, the organization stops providing any category of goods or services represented to the buyer to be available when he signed the contract.

NRS 598.915 Waiver of statutory rights is void. Any waiver by the buyer of the provisions of NRS 598.840 to 598.930, inclusive, is contrary to public policy and void.
NRS 598.920 Actions against organization; restitution, treble damages, attorney’s fees and costs may be awarded.
1. A cause of action or a defense of a buyer against the organization is not extinguished by the transfer, assignment or sale of the contract for membership in the organization to a third party.

2. In an action by a buyer against an organization for violation of the provisions of NRS 598.840 to 598.930, inclusive, the court may award restitution, treble damages, reasonable attorney’s fees and costs. If the course of action was based on a violation of NRS 598.900, the court may award the buyer $1,000, reasonable attorney’s fees and costs, or restitution, treble damages, reasonable attorney’s fees and costs, whichever is greater.

NRS 598.930 Remedies not exclusive; violation constitutes deceptive trade practice.
1. The remedies, duties and prohibitions of NRS 598.840 to 598.930, inclusive, are not exclusive and are in addition to any other remedies provided by law.

President of Mortgage Company Pled Guilty in Fraud


President Of Metropolitan Money Store Pleads Guilty In Over $35M Mortgage Fraud Scheme
Joy Jackson, 41, Fort Washington, Maryland, pleaded guilty to conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme. The accused promised to help homeowners facing foreclosure to keep their homes and repair their damaged credit.

According to her plea agreement, Jackson was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, Jackson and coconspirator Jennifer McCall incorporated Metropolitan Money Store, located in Lanham, Maryland, which offered foreclosure consultation and credit services to financially distressed homeowners. Also at that time, Jackson and other coconspirators incorporated Fordham & Fordham Investment Group, Ltd. (F&F) based in Lanham and Greenbelt, Maryland to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.

From September 2004 to June 2007, Jackson, McCall and others conspired to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners’ credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland.

Using the homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes, and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans on the target properties in the straw buyers’ names. At settlements, the conspirators imposed numerous fees and required “seller contributions” which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use.

In order to carry out the fraud scheme, Jackson and others obtained large cashier’s checks in the names of straw buyers and Metropolitan Money Store employees in order to conceal transactions from the lenders. Jackson misappropriated the license and bond numbers of other brokerage and credit repair companies and used them to broker loans and fraudulently improve homeowners’ credit scores by adding fictitious lines of credit to their credit histories.

During the conspiracy, Jackson and McCall provided a co-conspirator acting as a closing agent with more than $100,000 in kickback payments to process real estate closings quickly. Moreover, whenever Jackson requested, the closing agent permitted Metropolitan Money Store employees to close loans without him or any other closing agent being present. She directed others to prepare fraudulent settlement documents that contained false information. Jackson also paid bank employees to provide false income balances for straw buyers to lenders; add straw buyers and others onto accounts for lender verification purposes; transfer money into accounts to show a certain amount of money was in a bank account and thereafter return those funds to the original account; and shift money between Metropolitan Money Store and F&F accounts to facilitate loans in straw buyer’s names.

Finally, Jackson directed others to transfer the equity proceeds of homeowners into the general checking accounts of Metropolitan Money Store and F&F, as well as Jackson’s personal accounts. Jackson withdrew these funds and paid for goods and services for herself, including art, cars, clothing, credit card bills, homes, fur coats, furniture, airline trips, gambling expenses, jewelry, limousine services, student tuition and a luxury wedding for herself and a conspirator.

As a result of this scheme, the total loss attributable to Jackson, including the estimated losses to the mortgage lenders, is $16,880,884.86.

Jackson faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy. U.S. District Judge Roger W. Titus scheduled sentencing for November 16, 2009 at 9:00 a.m. As part of her plea, Jackson has agreed to pay restitution for the full amount of the victims’ losses, and forfeit three residential properties in Oxon Hill, Capitol Heights and Laurel, Maryland, and three vehicles.

Jackson is the seventh defendant to plead guilty in the Metropolitan Money Store mortgage fraud scheme. Jennifer McCall, 47, Ft. Washington, Maryland, a chief executive officer of Metropolitan Money Store and owner of JC and JC Investments LLC; Katisha Fordham, 35, Washington, D.C., a loan processor at the Metropolitan Money Store. Richard Allison, 37, Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau; Clifford McCall, 47, Lanham, Maryland, president of Burroughs & Smythe Financial Services, Inc., based in Lanham and a director of the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland; Carlisha Dixon, 31, Hyattsville, Maryland, vice president and a director of Burroughs & Smythe Financial Services, Inc.; and Chandra Jones, 31, Lanham, Maryland, the daughter of co-defendants Jennifer and Clifford McCall, each. pleaded guilty to the conspiracy and are facing a maximum sentencing of 30 years in prison. Three defendants remain scheduled for trial on July 7, 2009.

United States Attorney for the District of Marylan. Rod J. Rosenstein made the announcement.

“Joy Jackson presided over a ‘money store’ that was in the business of ripping off homeowners and mortgage lenders by submitting fraudulent paperwork to support over $16 million of loans that were never intended to be repaid,” said U.S. Attorney Rod J. Rosenstein. “Instead of helping financially distressed homeowners keep their homes as promised, she secretly used their home equity to buy luxuries for herself, includin. furs, jewelry and over $800,000 on her wedding.”

“These types of crimes create a significant loss of tax revenue, drive buyers into foreclosure, and leave lenders burdened with bad loans,” stated C. Andre’ Martin, Internal Revenue Service-Criminal Investigation Special Agent in Charge. “IRS-CI is committed to pursuing individuals who create such havoc.”

United States Attorney Rod J. Rosenstein thanked the Federal Bureau of Investigation, U.S. Secret Service, Internal Revenue Service-Criminal Investigation and the Maryland Department of Labor, Licensing and Regulation’s Division of Financial Regulation Investigative Unit for their investigative work. Mr. Rosenstei. commended Assistant United States Attorneys James A. Crowell IV and Christen Sproule, who are prosecuting the case.

Attorney Sentenced for Loan Fraud


Attorney Sentenced For Assisting In $5M Mortgage Fraud Scheme

Howard Gaines, Deerfield Beach, Florida, has been sentenced for his role in a complex mortgage fraud scheme. Gaines, an attorney and a licensed title agent with Your Title Choice, Inc., in Deerfield Beach, Florida, was sentenced by U.S. District Judge William Dimitrouleas to 8 years in prison, to be followed by 3 years of supervised release. In addition, Gaines was ordered to pay restitution in the amount of $422,465 to three lenders.

A jury convicted Gaines in December 2008 on one count of conspiracy to commit mail and wire fraud and two counts of mail fraud.

This is the sixth conviction in this case, following five earlier guilty pleas by other conspirators. According to the evidence presented at trial, Gaines, as a title agent, aided co-conspirator Anthony Dehaney and others to close on fraudulent loans. Among the fraudulent documents presented at closings were HUD 1 Settlement Forms, which falsely represented that buyers were using their own money to close on the purchases. The evidence showed that Gaines helped Dehaney close more than $10,000,000 in loans during 2004, 2005, and 2006, including $5,000,000 in fraudulent mortgages.

R. Alexander Acosta, United States Attorney for the Southern District of Florida, Jonathan I. Solomon, Special Agent in Charge, Federal Bureau of Investigation, Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service, and Alex Hager, Acting Commissioner, Florida Department of Financial Regulation, made the announcement.

Mr. Acosta commended the investigative efforts of the FBI, U.S. Postal Inspection Service, and the State of Florida Office of Financial Regulation for their work on this case. The case is being prosecuted by Assistant United States Attorneys Jeffrey Kay and Jennifer Keene of the Fort Lauderdale Office.

Summary of the Housing Act 2008


Summary of the “Housing and Economic Recovery Act of 2008″A. Summary of the “Federal Housing Finance Regulatory Reform Act of 2008″

[The Law office of Malik W. Ahmad always tries to bring the best articles and news material to educate its readers. Please if you any questions, always send via email to Malik11397@aol.com for a non binding legal advice on general issues.]

This legislation strengthens and modernizes the regulation of the housing government-sponsored enterprises – Fannie Mae and Freddie Mac (the enterprises) and the Federal Home Loan Banks (FHLBs or Banks) – and expands the housing mission of these GSEs. In addition, it creates a new program at FHA that will help at least 400,000 families save their homes from foreclosure by providing for new FHA loans after lenders take deep discounts.

I. Safety and Soundness Regulation of the Housing GSEs The “Federal Housing Finance Regulatory Reform Act of 2008″ establishes a new, independent, “world class” regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the housing government-sponsored enterprises (GSEs). The legislation endows this regulator with broad new authority, equivalent to the authority of other federal financial regulators, to ensure the safe and sound operations of the GSEs, including the power to:
• establish capital standards;
• establish prudential management standards, including internal controls, audits, risk management, and management of the portfolio;
• enforce its orders through cease and desist authority, civil money penalties, and the authority to remove officers and directors;
• restrict asset growth and capital distributions for undercapitalized institutions;
• put a regulated entity into receivership; and
• review and approve (subject to notice and comment) new product offerings.

II. Mission Improvement
The new legislation also significantly enhances the affordable housing component of the GSEs’ mission, and expands the number of families Fannie Mae and Freddie Mac (the enterprises) can serve by raising the loan limits in high cost areas (areas with median house prices that are higher than the regular conforming limit) to 150% of the conforming loan limit. Currently, this would be $625,000.

For the enterprises, the legislation tightens targeting requirements of the affordable housing goals, and rewrites those goals to ensure that the enterprises provide liquidity to both ownership and rental housing markets for low and very-low income families. The legislation requires the enterprises to serve a variety of underserved markets, such as rural areas, manufactured housing, and the preservation market. The legislation improves reporting requirements for affordable housing activities, including the expansion of the public use data base, and strengthens the new regulator’s ability to enforce compliance with the housing goals.

Finally, the legislation creates a new Housing Trust Fund and a Capital Magnet Fund, financed by annual contributions from the enterprises, which will used for the construction of affordable rental housing.
For the Federal Home Loan Banks (FHLBs), the legislation requires new affordable housing goals similar to those that apply to the enterprises for FHLB mortgage purchase programs. The legislation also requires the FHLBs to create a public use data base for such programs. Treasury-certified Community Development Financial Institutions (CDFIs) would become eligible to join FHLBs. Finally, community financial institution members of the FHLBs may use FHLB advances for community development purposes.

B. Summary of the “HOPE for Homeowners Act of 2008″

The “HOPE for Homeowners Act of 2008″ creates a new, temporary, voluntary program within FHA to back FHA-insured mortgages to distressed borrowers. The new mortgages offered by FHA-approved lenders will refinance distressed loans at a significant discount for owner-occupants at risk of losing their homes to foreclosure. In exchange, homeowners will share future appreciation with FHA.

The program is built on five principles:
1. Long-term affordability. The program is built on the idea, expressed by Federal Reserve Chairman Bernanke, that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosures. New loans will be based on a family’s ability to repay the loan, ensuring affordability and sustainable homeownership.

2. No investor or lender bailout. Investors and/or lenders will have to take significant losses in order to benefit from the proceeds of the loans refinanced with government insurance. However, these losses would be less than the losses associated with foreclosure.

3. No windfall for borrowers. Borrowers will share their new equity and future appreciation equally with FHA. Borrowers will pay for the FHA insurance.

4. Voluntary participation. This will be a voluntary program. No lenders, servicers, or investors will be compelled to participate.

5. Restore confidence, liquidity, and transparency. Credit markets are fearful and frozen in part because banks and other financial institutions do not know what their subprime mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital and stop the lending necessary for economic growth. This program will help restore confidence and get markets flowing again.

Program Oversight. The new program will be overseen by a Board made up of the Secretary of HUD, the Secretary of the Treasury, the Chairman of the Federal Reserve Board, and the Chairman of the Federal Deposit Insurance Corporation (FDIC). The Board will have the authority to develop standards within the framework of the legislation.

Eligible Borrowers. Only owner-occupants who are unable to afford their mortgage payments are eligible for the program. No investors or investor properties will qualify. Homeowners must certify, under penalty of law, that they have not intentionally defaulted on their loan to qualify for the program and must have a mortgage debt to income ratio greater than 31 percent as of March 1, 2008. Lenders must document and verify borrowers’ income with the IRS.
New Loan Amount. The size of the new FHA-insured loan will be lesser of the amount the borrower can afford to repay, as determined by the current affordability requirements of FHA; or, 90% of the current value of the home. Loans must be 30-year, fixed rate loans.
Equity & Appreciation Sharing. In order to avoid a windfall to the borrower created by the new 90% loan-to-value FHA-insured mortgage, the borrower must share the newly-created equity and future appreciation equally with FHA. This obligation will continue until the borrower sells the home or refinances the FHA-insured mortgage. Moreover, the homeowner’s access to the newly created equity will be phased-in over 5 years.

Eligible Mortgages. In order to protect against adverse selection, the program prohibits the Secretary from paying an insurance claim whenever the representations and warranties required to be made by lenders are violated, or in cases in which a borrower has an early payment default and misses the first payment. The Act provides the Board the authority to establish other protections against adverse selection, such as requiring “seasoning” for certain higher risk loans before they can be insured under the program. Appraisers of property insured by FHA must be certified by the state where the property is located, or by a nationally recognized professional appraisal organization, and have “demonstrated verifiable education” in FHA appraisal requirements.

Existing Subordinate Liens. Before participating in this program, all subordinate liens must be extinguished. This will have to be done through negotiation with the first lien holder.

Qualified Safe Harbor. The legislation provides servicers with an incentive to participate in the program by offering a safe harbor against legal liability.

Program Size. The program is authorized to insure up to $300 billion in mortgages and is expected to serve approximately 400,000 homeowners.

Program Sunset. The program will begin October 1, 2008 and sunset on September 30, 2011. CBO say the program will net nearly $250 million for taxpayers. The program is paid for by using part of the Affordable Housing Trust Fund; the GSE bill provides a further $2 billion cushion for the government by establishing a reserve fund at Treasury over ten years. If the program costs less than projected, the unused funds are returned to the Affordable Housing Trust Fund. If the program more than pays for itself (as was the case during the Roosevelt Administration), any excess savings are dedicated to reducing the national debt.

C. Summary of the “Foreclosure Prevention Act of 2008″The Foreclosure bill passed by the Senate on April 10 contains the following provisions designed to address the problems faced by families and their communities in light of the foreclosure crisis:

FHA Modernization. To ensure that additional families can access the FHA program, which provides safe, fixed-rate mortgages, significant FHA reform is included to modernize, streamline and expand the reach of the FHA program. Under this bill, the FHA loan limit is increased from 95% to 110% of area median home price with a cap at 150% of GSE limit (currently, $625,000), allowing families in all areas of the country to access homeownership through FHA. Downpayments of 3.5% will be required for any FHA loan and counseling requirements are enhanced to help provide for stable homeownership.

• Assisting Communities Devastated by Foreclosures. Homes that have been foreclosed upon and are sitting unoccupied lead to declines in neighboring house values, increased crime and significant disinvestment. To ensure that communities can mitigate these harmful effects of foreclosures, $3.92 billion is provided to communities hardest hit by foreclosures and delinquencies. These supplemental Community Development Block Grant Funds will be used to purchase foreclosed homes, at a discount, and rehabilitate or redevelop the homes to stabilize neighborhoods and stem the significant losses in house values of neighboring homes.
• Providing Pre-Foreclosure Counseling for Families in Need. To help families avoid foreclosure, this bill provides $150 million in additional funding for housing counseling. These funds will be distributed by the Neighborhood Reinvestment Corporation by the end of 2008 to ensure families can quickly get the help they need. As many as 250,000 additional families connect with their mortgage servicer or lender to explore options that will keep them in their homes as a result of these counseling funds. In addition, $30 million is provided to help provide legal services to distressed borrowers.
• Enhancing Mortgage Disclosure. To ensure that consumers are provided with timely and meaningful disclosures in connection with mortgages, the bill expands the types of home loans subject to early disclosures (within three days of application) under the Truth In Lending Act (TILA) including refinancings. The bill requires that disclosures be provided no later than 7 days prior to closing so borrowers can shop for another loan if not satisfied with the terms. The bill requires a new disclosure that informs borrowers of the maximum monthly payments possible under their loan, and also increases the range of statutory damages for TILA violations from the current $200 to $2000 to $400 to $4000.
• Preserving the American Dream for Our Nation’s Veterans. To assist returning soldiers avoid foreclosure, this bill lengthens the time a lender must wait before starting foreclosure from three months to nine months after a soldier returns from service and also provides returning soldiers with one year relief from increases in mortgage interest rates. In addition, the Department of Defense is required to establish a counseling program to ensure veterans and active service members can access assistance if facing financial difficulties. Also included is a provision that increases the VA loan guarantee amount, so that veterans have additional homeownership opportunities. The bill contains provisions to do the following: increase benefits paid to veterans with disabilities such as blindness for the purpose of adapting their housing; provide a moving benefit to servicemen and woman who are forced to move out of rental housing because the owner of the housing was foreclosed on; provide that veterans benefits received in a lump sum are treated the same for the purposes of eligibility for housing assistance as monthly benefits; and to allow the Veterans Administration to provide for improvements and structural alterations to homes of veterans with service-connected disabilities.

US Consumer Loan Aid–Has Its Limits:


November 27, 2008

U.S. Consumer Loan Aid Will Trickle Only So Far

 

 If you’re buying a home, refinancing a mortgage or seeking an auto or student loan, the new government plans to make borrowing cheaper and easier sound like a gift.

One problem, however, is that whole categories of people may be ineligible. If you are refinancing, you could be out of luck if your mortgage balance is more than your house is worth. And for all kinds of new loans, lenders have raised their standards even as their customers’ credit records are deteriorating because of late payments and other problems.

And then there is the fact that the government’s efforts may take a while to start working — if they do at all. Once again, the government hopes that the benefits to consumers will trickle down. It is not simply lending to them directly.

So while mortgage rates fell by at least a quarter of a percentage point on Tuesday, the day of the government announcement, and stayed there Wednesday, it could take months for the piece that affects credit card and small-business loans to kick in.

“It’s not going to be like flipping a light switch,” said Joe Belew, president of the Consumer Bankers Association. “You’re not going to see an avalanche of new loans. But the system is under a lot of stress, and anything that can lubricate the markets is a good thing.”

The federal government made two big moves on Tuesday. The first, already known as TALF, for Term Asset-Backed Securities Loan Facility, is a $200 billion program that will lend money to private investors who buy securities backed by student and auto loans, credit card debt and small-business loans guaranteed by the Small Business Administration.

The goal of the plan is to fix the mechanism that keeps credit flowing freely from lenders to borrowers. Lenders often package consumer loans into securities and sell them to investors. Then the lenders use the proceeds to issue more loans to consumers. But over the last two months, those investors have stopped buying.

To encourage those investors to start buying again, the Federal Reserve has agreed to lend them money at attractive interest rates to buy the securities backed by consumer debt. It is also providing an insurance policy should many of the loans underlying those securities default.

In the second part of the program, the Fed has agreed to purchase $500 billion of mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.

“This brings a major buyer into the marketplace with very deep pockets to snap up available securities, and a sizable number of them at that,” said Keith T. Gumbinger, vice president of the financial publisher HSH Associates in Pompton Plains, N.J. “With new demand for both debt- and mortgage-backed securities coming into the market, the dollar value of those investments can rise, helping to lower their yields. Mortgage rates track those yields, and decline right along with them.”

Lower mortgage rates will certainly help some consumers qualify for mortgages who may not have otherwise; lower rates translate into lower payments. The move downward will also move some borrowers to try to refinance their mortgages. But that does not necessarily mean banks will be any more likely to oblige. Another complication is that the value of many homes — even those owned by people with stellar credit — have declined, making refinancing difficult.

“At the end of the day, it still comes down not to just a rate discussion, but a discussion about qualifications as well,” said Cameron Findlay, chief economist at LendingTree. “There are fundamental elements of qualifications for loans that will inhibit the ability of this program to have any meaningful, significant impact.”

Lower mortgage rates do little when unemployment rises and wages stagnate, he added.

To qualify for the best rates, borrowers will need to have a credit score of at least 720 and a down payment of at least 10 percent and probably closer to 20 percent. Borrowers seeking to refinance will need to have the same amounts in home equity.

Still, lower rates may lure some potential homebuyers back to the market. Some brokers have already started fielding calls. “The phones are ringing,” said Joseph Taglivia, chief operating officer of Manhattan Mortgage. “There were certainly people who called to lock in a refinancing or to find out what they qualified for to purchase.”

The efforts to loosen the purse strings in other areas of consumer lending may take longer, however, if they work at all. Most of the big credit card companies are parts of banks with billions on deposit. They can already use those deposits as a ready source for new credit card loans.

“Banks may want to fund fewer of these loans out of their deposits,” said Odysseas Papadimitriou, who worked in the card industry at Capital One before starting Evolution Finance, parent company of Cardhub.com, a consumer card selection site. It is possible, he said, that they will simply swap one source of financing for another and not increase the total amount of loans that they are willing to make.

American Express is unique in that it does not have a big deposit-gathering apparatus. Joanna Lambert, a company spokeswoman, said that the company was still working through the details of the TALF program but would take advantage of it if it was eligible.

It is not yet clear how much the government program will help grease the wheels for small-business bank loans, but there is already a potential bright spot that business borrowers may not have considered. “Credit unions have been seeing so many opportunities in the marketplace,” said Christine Barry, research director at Aite Group, a financial services research and consulting firm. About 40 percent of credit unions are either lending to small businesses now or expect to start doing so soon, she said.

With auto and student loans, there may be more reason for optimism, given that many lenders in these areas are specialists who may not have access to consumer deposits to use to finance loans. The renewed opportunity to sell more loans to investors could help those consumers.

But none of the government’s moves alters some unfortunate facts. Lenders want better credit scores from consumers in every category. At the same time, millions of people are much less creditworthy than they used to be, because of the damage they have done to their credit scores through late or missed payments.

Lenders themselves have contributed to the downturn in creditworthiness by lowering the credit limits on huge numbers of customers’ credit cards. This has the effect of raising the percentage of available credit that a consumer is using, which usually causes their credit scores to fall.

Clearly, the banks do not have the confidence in how consumers will handle credit that they might have had six months ago. It is not clear whether a new source of funds will cure this skittishness.

Nor is it certain how much untapped desire to borrow exists. The fact that consumer spending fell an entire percentage point last month, as the Commerce Department reported Wednesday, may reflect something other than a lack of capital.

“If consumers are afraid to make purchases, it doesn’t really matter how much available credit you have,” said Mr. Papadimitriou of Evolution Finance.

Foreclosure Recovery Scams–Be Warned:


If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home!  Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a housing counselor

FORECLOSURE ALERT – Homeowners: Be Informed About Foreclosure Consulting Services

Las Vegas — The Nevada Division of Mortgage Lending and the Consumer Affairs Division are warning homeowners to be cautious when contracting with companies representing themselves as “foreclosure consultants”. While many of these providers are legitimate, many are not and may charge hundreds of dollars up front to negotiate with a lender on behalf of the homeowner, often without success.

“There are laws prohibiting fees being charged up front for foreclosure assistance,” says Mortgage Lending Commissioner Joe Waltuch. According to NRS 645F.400, foreclosure consultants cannot charge a fee before they have performed the services you’ve contracted for. 

“It’s important to remember, however, that those laws only take affect when the home has officially been placed in the lender’s foreclosure cycle,” continued Commissioner Waltuch. “Depending on the services offered, the foreclosure consultant may also need to be registered with the Nevada Consumer Affairs Division under the Credit Service Organization law.”

According to NRS 598.741, companies providing “counseling or assistance to a person in establishing State of Nevada or effecting a plan for the payment of his indebtedness” must be registered with Consumer Affairs. “Before signing any contracts, check with Consumer Affairs to determine if the company is registered,” says Consumer Affairs Commissioner James Campos. “It also helps to check with the Better Business Bureau for complaints and to research the company on the Internet to see what experiences other consumers have had.”

Adds Commissioner Waltuch, “Be careful when using the Internet to find these types of companies.  There are many out-of-state companies, and some lawyers, who claim they can help you. Make sure they are legitimate businesses, properly licensed to operate in Nevada.”

Consumers may also receive foreclosure assistance, including loan modification help, by working with a qualified housing counselor. Legitimate foreclosure consulting agencies are generally nonprofits that never charge an up-front fee and are usually free. Visit http://foreclosurehelp.nv.gov/HousingCounselors.html for a list of qualified Nevada housing counselors.

If you think you have been victimized by an unscrupulous foreclosure consultant, file a complaint with Consumer Affairs at http://www.fyiconsumer.org/Forms/ComplaintFormLV.pdf. For more information about foreclosure scams, visit the Foreclosure Help Website at http://foreclosurehelp.nv.gov/ForeclosureScams.html.

In addition, Commissioner Campos encourages consumers to visit the Fight Fraud Website at http://fightfraud.nv.gov/. “The site includes extensive tips on how to prevent fraud and provides downloadable complaint forms to help you respond effectively if you become a victim,” says Campos. “Visit it regularly for the latest fraud alerts.”

FORECLOSURE ALERT

If your property mortgage is delinquent and you are facing foreclosure, you may be contacted by a person or company willing to take the property off your hands to save your credit. While some of these companies are actually good and do help, others are not.

  • Do not sign anything that you do not understand or that is blank. Go through a reputable escrow company to make sure that your mortgage(s) is paid off to the satisfaction of the lender(s). If you do not do this, you may find that the person or company has title to or owns your property, yet the mortgage is still in your name. The person or company pays nothing to the mortgage(s) holder. The foreclosure happens. Your credit is ruined while the company “saving” your credit has made money from your property by renting it until the foreclosure.

If you think you’ve been a victim of this fraud, contact Nevada Consumer Affairs Division at (702) 486-7355 or (775) 688-1800.

 Common Foreclosure Scams

  1. Equity skimming: A “buyer” approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The “buyer” may suggest that you move out quickly and deed the property to him or her. The “buyer” then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

  2. Phantom help: The “rescuer” charges outrageous fees for light-duty phone calls or paperwork that the homeowner could easily do, none of which results in saving the home. This predatory scam gives homeowners a false sense of hope and prevents them from seeking qualified help.

  3. The bailout: In this scam, the homeowner is deceived into signing over title with the belief that he will be able to remain in the house as a renter and eventually buy it back over time. The terms of these scams are so onerous that the buy-back becomes impossible, the homeowner loses possession and the “rescuer” walks off with most or all of the equity.

  4. The bait-and-switch: In this scam, the homeowners think they are signing documents to bring the mortgage current, but instead actually surrender their ownership. They usually don’t even know they’ve been scammed until they’re evicted.

  5. Phony counseling agencies. Some groups calling themselves “counseling agencies” may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale.

7 Ways to Avoid Foreclosure Scams

Follow these tips from the National Consumer Law Center.

  1. Don’t panic. Get detailed information about the deadlines you face in resolving your problems. Pay special attention to the date on which you would lose legal right to ownership.
  2. Never sign a contract under pressure. Take your time, and consult a lawyer if possible.
  3. Never sign away ownership via a quitclaim deed or other means without consulting a lawyer. Be especially suspicious of offers to lease back your home, in order to buy it back over time. These offers are weighted against you.
  4. Never make your mortgage payments to anyone other than your lender. If you can’t pay, do not ignore warning letters from your lender; contact them instead.
  5. Beware of any home-sale contract in which you are not formally released from liability for your mortgage. Make sure you know the rights you are giving up and that you agree to give them up.
  6. Don’t sign anything with blank lines or spaces; information could be added later without your knowledge and consent.
  7. If you do not speak English, never use a “rescuer’s” translator. Instead, insist on using your own translator.

 Source:  http://www.hud.gov/foreclosure/index.cfm, http://www.bankrate.com/brm/news/mortgages/20050728a1.asp, and the NationalConsumerLawCenter

 

Speedier Service at Countrywide


Countrywide has started moving things faster than the previous procedure. Phones are picked up sooner than expected. I talked to one of the supervisor and she told me that they have hired more people. In fact, when I called this morning, the whole room was buzzing with sounds and seems an efficient way to run this onslaught of loan modification business. The supervisor was pleasant and eager to help. As long as your documents are in order, and you supply them ahead of time, a loan modification specialist would contact you and discuss negotiation of your loan modification. Folks, as I stated before Countrywide is under a legal agreement with the Nevada State Attorney General to do loan modification up to the tune of 600 millions dollars for the state of Nevada. Please contact me for more information.

FDIC Lays Down Home Loan Modification Plan


FDIC lays out broad home loan modification plan

Fri Nov 14, 2008 2:47pm EST
 Related NewsBy Karey Wutkowski

WASHINGTON (Reuters) – The federal agency that insures most U.S. bank deposits unveiled a plan to prevent about 1.5 million home mortgage foreclosures by promising to share any losses with mortgage companies that agree to refinance certain home loans.

The agency, the Federal Deposit Insurance Corp, said on Friday the plan would cost the government about $24.4 billion, which could be paid from the U.S. Treasury’s $700 billion bailout program for the financial industry.

So far, most of the money in the bailout program, the Troubled Asset Relief Program, or TARP, has been injected as capital into banks.

FDIC Chairman Sheila Bair, who spent weeks unsuccessfully lobbying Bush administration officials for the foreclosure prevention plan, unveiled her agency’s proposal two days after Treasury Secretary Henry Paulson dismissed the idea of the government underwriting failing home loans.

Paulson told reporters on Wednesday, “That (foreclosure plan) is a subsidy, or spending, program. The TARP was investment, not spending.”

The FDIC pushed forward with its plan, posting it on its website Friday morning (http://www.fdic.gov/consumers/loans/loanmod/index.html).

“Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow,” the FDIC said. “It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures.”

The FDIC said its plan would modify about 2.2 million mortgage loans by offering financial incentives to mortgage servicers. It would pay servicers $1,000 to cover expenses for each loan modified to the required standards, and would promise to share up to 50 percent of losses incurred if a modified loan defaults.

Eligible borrowers would include those who have missed at least two monthly payments on loans for homes they live in. Servicers would be expected to lower those borrowers’ monthly payments to about 31 percent of the borrowers’ monthly income.

The Treasury Department said on Friday that it was aggressively looking at ways to reduce skyrocketing home foreclosures under the TARP.

“We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a key part of working through the necessary housing correction and maintaining the strength of our communities,” Treasury Interim Assistant Secretary Neel Kashkari said in testimony prepared for delivery to a U.S. House of Representatives committee.

(Reporting by Karey Wutkowski; editing by John Wallace) 

Summary of the Housing and Economic Recovery Act


Summary of the “Housing and Economic Recovery Act of 2008″

 A. Summary of the “Federal Housing Finance Regulatory Reform Act of 2008

 This legislation strengthens and modernizes the regulation of the housing government-sponsored enterprises – Fannie Mae and Freddie Mac (the enterprises) and the Federal Home Loan Banks (FHLBs or Banks) – and expands the housing mission of these GSEs. In addition, it creates a new program at FHA that will help at least 400,000 families save their homes from foreclosure by providing for new FHA loans after lenders take deep discounts.The program is built on five principles:

  •  Safety and Soundness Regulation of the Housing GSEs The “Federal Housing Finance Regulatory Reform Act of 2008″ establishes a new, independent, “world class” regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the housing government-sponsored enterprises (GSEs). The legislation endows this regulator with broad new authority, equivalent to the authority of other federal financial regulators, to ensure the safe and sound operations of the GSEs, including the power to: Establish capital standards;establish prudential management standards, including internal controls, audits, risk management, and management of the portfolio;
  • enforce its orders through cease and desist authority, civil money penalties, and the authority to remove officers and directors;
  • • restrict asset growth and capital distributions for undercapitalized institutions;• put a regulated entity into receivership; and• review and approve (subject to notice and comment) new product offerings.
  • II. Mission Improvement The new legislation also significantly enhances the affordable housing component of the GSEs’ mission, and expands the number of families Fannie Mae and Freddie Mac (the enterprises) can serve by raising the loan limits in high cost areas (areas with median house prices that are higher than the regular conforming limit) to 150% of the conforming loan limit. Currently, this would be $625,000.

     B. Summary of the “HOPE for Homeowners Act of 2008″

     The “HOPE for Homeowners Act of 2008″ creates a new, temporary, voluntary program within FHA to back FHA-insured mortgages to distressed borrowers. The new mortgages offered by FHA-approved lenders will refinance distressed loans at a significant discount for owner-occupants at risk of losing their homes to foreclosure. In exchange, homeowners will share future appreciation with FHA.

    Finally, the legislation creates a new Housing Trust Fund and a Capital Magnet Fund, financed by annual contributions from the enterprises, which will used for the construction of affordable rental housing.

     For the Federal Home Loan Banks (FHLBs), the legislation requires new affordable housing goals similar to those that apply to the enterprises for FHLB mortgage purchase programs. The legislation also requires the FHLBs to create a public use data base for such programs. Treasury-certified Community Development Financial Institutions (CDFIs) would become eligible to join FHLBs. Finally, community financial institution members of the FHLBs may use FHLB advances for community development purposes.

     1. Long-term affordability. The program is built on the idea, expressed by Federal Reserve Chairman Bernanke, that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosures. New loans will be based on a family’s ability to repay the loan, ensuring affordability and sustainable homeownership.

    2. No investor or lender bailout. Investors and/or lenders will have to take significant losses in order to benefit from the proceeds of the loans refinanced with government insurance. However, these losses would be less than the losses associated with foreclosure.

    3. No windfall for borrowers. Borrowers will share their new equity and future appreciation equally with FHA. Borrowers will pay for the FHA insurance.

    4. Voluntary participation. This will be a voluntary program. No lenders, servicers, or investors will be compelled to participate.

    5. Restore confidence, liquidity, and transparency. Credit markets are fearful and frozen in part because banks and other financial institutions do not know what their subprime mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital and stop the lending necessary for economic growth. This program will help restore confidence and get markets flowing again.

      An Oversight 

      . The new program will be overseen by a Board made up of the Secretary of HUD, the Secretary of the Treasury, the Chairman of the Federal Reserve Board, and the Chairman of the Federal Deposit Insurance Corporation (FDIC). The Board will have the authority to develop standards within the framework of the legislation. Eligible Borrowers

     . Only owner-occupants who are unable to afford their mortgage payments are eligible for the program. No investors or investor properties will qualify. Homeowners must certify, under penalty of law, that they have not intentionally defaulted on their loan to qualify for the program and must have a mortgage debt to income ratio greater than 31 percent as of March 1, 2008. Lenders must document and verify borrowers’ income with the IRS.

     New Loan Amount

     Equity & Appreciation Sharing For the enterprises, the legislation tightens targeting requirements of the affordable housing goals, and rewrites those goals to ensure that the enterprises provide liquidity to both ownership and rental housing markets for low and very-low income families. The legislation requires the enterprises to serve a variety of underserved markets, such as rural areas, manufactured housing, and the preservation market. The legislation improves reporting requirements for affordable housing activities, including the expansion of the public use data base, and strengthens the new regulator’s ability to enforce compliance with the housing goals.

    . In order to avoid a windfall to the borrower created by the new 90% loan-to-value FHA-insured mortgage, the borrower must share the newly-created equity and future appreciation equally with FHA. This obligation will continue until the borrower sells the home or refinances the FHA-insured mortgage. Moreover, the homeowner’s access to the newly created equity will be phased-in over 5 years.

    Eligible Mortgages

    . In order to protect against adverse selection, the program prohibits the Secretary from paying an insurance claim whenever the representations and warranties required to be made by lenders are violated, or in cases in which a borrower has an early payment default and misses the first payment. The Act provides the Board the authority to establish other protections against adverse selection, such as requiring “seasoning” for certain higher risk loans before they can be insured under the program. Appraisers of property insured by FHA must be certified by the state where the property is located, or by a nationally recognized professional appraisal organization, and have “demonstrated verifiable education” in FHA appraisal requirements.

    Existing Subordinate Liens

    . Before participating in this program, all subordinate liens must be extinguished. This will have to be done through negotiation with the first lien holder.

    Qualified Safe Harbor

    The legislation provides servicers with an incentive to participate in the program by offering a safe harbor against legal liability.

    Program Size

    The program is authorized to insure up to $300 billion in mortgages and is expected to serve approximately 400,000 homeowners.

    Program Sunset

    The program will begin October 1, 2008 and sunset on September 30, 2011. CBO say the program will net nearly $250 million for taxpayers. The program is paid for by using part of the Affordable Housing Trust Fund; the GSE bill provides a further $2 billion cushion for the government by establishing a reserve fund at Treasury over ten years. If the program costs less than projected, the unused funds are returned to the Affordable Housing Trust Fund. If the program more than pays for itself (as was the case during the Roosevelt Administration), any excess savings are dedicated to reducing the national debt.

    C. Summary of the “Foreclosure Prevention Act of 2008″

    The Foreclosure bill passed by the Senate on April 10 contains the following provisions designed to address the problems faced by families and their communities in light of the foreclosure crisis:. To ensure that additional families can access the FHA program, which provides safe, fixed-rate mortgages, significant FHA reform is included to modernize, streamline and expand the reach of the FHA program. Under this bill, the FHA loan limit is

    1. FHA Modernization

     increased from 95% to 110% of area median home price with a cap at 150% of GSE limit (currently, $625,000), allowing families in all areas of the country to access homeownership through FHA. Downpayments of 3.5% will be required for any FHA loan and counseling requirements are enhanced to help provide for stable homeownership.

    Homes that have been foreclosed upon and are sitting unoccupied lead to declines in neighboring house values, increased crime and significant disinvestment. To ensure that communities can mitigate these harmful effects of foreclosures, $3.92 billion is provided to communities hardest hit by foreclosures and delinquencies. These supplemental Community Development Block Grant Funds will be used to purchase foreclosed homes, at a discount, and rehabilitate or redevelop the homes to stabilize neighborhoods and stem the significant losses in house values of neighboring homes.

    To help families avoid foreclosure, this bill provides $150 million in additional funding for housing counseling. These funds will be distributed by the Neighborhood Reinvestment Corporation by the end of 2008 to ensure families can quickly get the help they need. As many as 250,000 additional families connect with their mortgage servicer or lender to explore options that will keep them in their homes as a result of these counseling funds. In addition, $30 million is provided to help provide legal services to distressed borrowers.

    To ensure that consumers are provided with timely and meaningful disclosures in connection with mortgages, the bill expands the types of home loans subject to early disclosures (within three days of application) under the Truth In Lending Act (TILA) including refinancings. The bill requires that disclosures be provided no later than 7 days prior to closing so borrowers can shop for another loan if not satisfied with the terms. The bill requires a new disclosure that informs borrowers of the maximum monthly payments possible under their loan, and also increases the range of statutory damages for TILA violations from the current $200 to $2000 to $400 to $4000.

    To assist returning soldiers avoid foreclosure, this bill lengthens the time a lender must wait before starting foreclosure from three months to nine months after a soldier returns from service and also provides returning soldiers with one year relief from increases in mortgage interest rates. In addition, the Department of Defense is required to establish a counseling program to ensure veterans and active service members can access assistance if facing financial difficulties. Also included is a provision that increases the VA loan guarantee amount, so that veterans have additional homeownership opportunities. The bill contains provisions to do the following: increase benefits paid to veterans with disabilities such as blindness for the purpose of adapting their housing; provide a moving benefit to servicemen and woman who are forced to move out of rental housing because the owner of the housing was foreclosed on; provide that veterans benefits received in a lump sum are treated the same for the purposes of eligibility for housing assistance as monthly benefits; and to allow the Veterans Administration to provide for improvements and structural alterations to homes of veterans with service-connected disabilities.

    Preserving the American Dream for Our Nation’s Veterans.Enhancing Mortgage Disclosure.Providing Pre-Foreclosure Counseling for Families in Need.Assisting Communities Devastated by Foreclosures.

     . The size of the new FHA-insured loan will be lesser of the amount the borrower can afford to repay, as determined by the current affordability requirements of FHA; or, 90% of the current value of the home. Loans must be 30-year, fixed rate loans.

     

Consumers Frequently Asked Questions:


 
 

HOPE for Homeowners Frequently Asked Questions for Consumers

 

General/Program Related Questions

What is the HOPE for Homeowners Program (H4H)?

This new program, created by Congress, is intended to help borrowers at risk of default and foreclosure refinance into more affordable loans.

How can the H4H program help me?

If you are having trouble making your mortgage payments, this program may allow you to refinance your loan into a new 30-year fixed rate loan with lower payments.

Do I have to pay anything to apply?

There will be closing costs associated with HOPE for Homeowners loans; however, they may not be required to be paid out of pocket by the borrower. Please consult your lender or a HUD-approved Housing Counselor for more details.

How long will the process take?

Processing time will vary, but usually takes approximately 60 days. Please consult your lender when you apply.

What information do I need to apply?

Your lender is in the best position to answer this question based on your specific situation, but at a minimum you will need evidence of your income and assets, as well as your current mortgage information.

How long is the H4H program available?

The program began on October 1, 2008 and will end on September 30, 2011.

What interest rate will I receive?

The interest rate for the new H4H loan will be provided by the lender and is based on current market rates.

I don’t want another adjustable rate mortgage. Will this interest rate be fixed or adjustable?

All HOPE for Homeowners loans are 30-year fixed rate mortgages insured by the Federal Housing Administration (FHA).

I contacted my lender and they are not interested in participating in this program. Can I apply with HUD?

HUD does not accept loan applications or lend money directly; however, you may apply with any FHA-approved lender who is participating in the program. You may also consult a HUD-approved housing counselor.

Eligibility Questions

My lender has started foreclosure proceedings. Can I still apply for H4H?

Yes, however, time is of the essence.

Is there an income restriction?

No, but you will need to demonstrate that you have sufficient, steady income to make the new H4H mortgage payments.

I recently filed for bankruptcy. Am I still able to apply for H4H?

Yes, borrowers in bankruptcy may participate; however, you will want to consult with the person handling your bankruptcy.

My lender has already foreclosed on my home. Can I still apply for H4H?

It may be possible depending on which stage of the foreclosure process you are in. You should talk to your lender immediately for more detailed information.

I have a first and second mortgage on my home. Can I still apply for H4H?

Yes, however, all your existing lenders must agree to release the liens against your home.

I am current on my mortgage. Can I apply for H4H?

Yes.

Lender Related Questions

Can you recommend a lender?

HUD does not recommend lenders; however, a list of participating lenders is located on our website at http://www.hud.gov. In the section marked “At your service,” please click on the link “Find a HUD approved Lender in your area.”

I can’t reach my lender and I would like to apply. What should I do?

You may contact any participating lender to apply. For a list of HUD-approved lenders, please go to our website at http://www.hud.gov. In the section marked “At your service,” please click on the link “Find a HUD approved Lender in your area.”

My lender is not registered and I would like to apply. What should I do?

You may contact any participating lender to apply. For a list of HUD approved lenders please go to our website at http://www.hud.gov. In the section marked “At your service,” please click on the link “Find a HUD approved Lender in your area.”

Counseling Questions

I am not clear on what to do. How do I decide if this is the right choice for me?

You can contact a HUD-approved Housing Counselor in your area. They can help you evaluate the different options that may be available to you, and help you determine your best course of action. You can locate a housing counselor in your area on our website.

How can a housing counselor help me?

Housing counselors are knowledgeable about available programs to help struggling homeowners. They can review your specific situation, identify your options and help you make an informed decision.

Will I have to pay taxes on the portion of my loan(s) my current lender(s) “write off” or forgive?

You should contact the Internal Revenue Service at (800) TAX-1040, or your tax advisor regarding tax-related questions.

 

 

Loan Modifications Get Mixed Reviews:


Loan-modification plan gets mixed reviews

Bank of America’s new program to enable some homeowners to modify existing Countrywide mortgages may help people stay in their homes — but also could shove borrowers into a new cycle of loan failures, analysts said Monday.

The bank agreed to settle claims brought by state attorneys general in connection with risky loans Countrywide had originated. The loan-restructuring program would apply to borrowers who obtained subprime loans with adjustable or fixed rates, or who got adjustable-rate mortgages with multiple payment options.

“We will reach out to customers who may be eligible for this program,” said Dan Frahm, a Bank of America spokesman. He said that borrowers need to be seriously delinquent or at serious risk of becoming seriously delinquent. “This could even apply to individuals who are in foreclosure proceedings right now,” he said.

Bank of America bought Countrywide on July 1.

Up to 390,000 borrowers are expected to be eligible for a loan modification under the terms of the settlement. The loan restructuring could apply to about 120,000 borrowers in California, Frahm said. Bank of America will begin sending offers to borrowers Dec. 1.

The settlement is preferable to a prior program of loan workouts that Countrywide had initiated on a voluntary basis, according to California Attorney General Jerry Brown.

“This is mandatory,” Brown said. “We are going to enforce it and make sure it’s reasonable.”

But the new efforts could create a fresh round of problem loans and foreclosures a few years from now, warned Sean O’Toole, founder and chief executive with Discovery Bay-based ForeclosureRadar.com. Many of the restructured loans could produce more woes later.

 

“Maybe the loan won’t blow up now, but it will blow up in five years,” O’Toole said.

That ominous assessment is based on Countrywide’s approach in the voluntary program. In more than a few instances, O’Toole said, Countrywide’s restructured loans featured payments based on super-low interest rates of 2 percent, with payments rising over time. Put another way, the loans bear similarities to the ones at the heart of the current problems.

“A lot of what we have seen from Countrywide so far is more of the same, maybe worse,” O’Toole said.

Bank of America should restructure the loans so that the payments are high enough to pay down the principal on the mortgages, O’Toole said.

If the housing market doesn’t rebound strong, mortgage balances could still burden houses with more debt than the residences are worth, O’Toole said. He cited the restructuring of a mortgage with a $930,000 balance for a house valued at $500,000. Bank of America rewrote the loan with a fixed interest rate of 2 percent that would last five years.

“Bank of America and Countrywide are kidding themselves if they think that house will be back to $930,000 in five years,” O’Toole said.

But the program appears to at least be a starting point.

“It sounds awesome,” said Carol Hardy, interim director of Vallejo Neighborhood Housing Services. “This is a glimmer of hope. I think it will be exceedingly helpful.”

The key is the prevention of foreclosures, said Guy Schwartz, a branch manager with San Ramon-based CMG Mortgage Inc.

“Anything they can do to help people stay in their homes will help the market,” Schwartz said. “Maybe they’re just buying some time. But if they keep people in their homes, that would slow the foreclosure mess.”

And low interest rates are important in keeping the monthly payments affordable. Under some scenarios, a restructured Countrywide loan could be transformed to a mortgage with an interest rate as low as 2.5 percent during the initial years of the new loan, Bank of America spokesman Frahm said.

Under the program, mortgage and related payments should not exceed 34 percent of a borrower’s monthly income. And borrowers who have payment option ARMs could see an adjustment to their loan balance to create equity in the house.

Bank of America will not proceed with a foreclosure until they have determined if a borrower is eligible, Frahm said.

“Why not do this?” said Scott Simonich, president of San Ramon-based BWC Mortgage Services. “If BofA is going to attempt to make the deals more appropriate for people to handle the payments, it’s a positive development.”

More lenders could attempt to restructure loans in an aggressive fashion, said Jason Brown, a senior vice president with Danville-based StoneCastle Land & Home Financial.

“Bank of America is trying to find the bottom of the market,” Brown said. “Other banks will be under pressure to follow suit or be left in the dust.”

Reach George Avalos at 925-977-8477 or gavalos@bayareanewsgroup.com. Reach Eve Mitchell at 925-952-2690 or emitchell@bayareanewsgroup.com.

Persistence Pays Off When Doing Loan Modifications:


The Mortgage Professor

Persistence Pays Off When Loan Modification Saves House and Credit

  A loan modification is a change in the loan contract agreed to by the lender and the borrower. The modifications getting attention now are those designed to reduce the payment burden on borrowers faced with impending interest rate increases that will make monthly payments unaffordable to them. Many are subprime borrowers.

 By Jack Guttentag

Saturday, October 20, 2007; Page G04

Homeowners faced with this prospect, whether they are delinquent or not, should request a modification.

You are unlikely to get such a change if you don’t ask, and you should make the investment required to make the case. The stakes are very high: your house and your credit.

In most cases, the decision on a modification is not made by the firm that owns the loan. It is made by a firm servicing the loan under contract to the owner. The owner could be a single lender, or it could be a group of investors who own pieces of a mortgage-backed security collateralized by a pool of loans.

Whoever owns the loan, the servicing firm is contractually obligated to find the solution to payment problems that will minimize loss to the owner. If the lowest-cost solution is a contract modification, that’s great — everyone involved prefers a modification instead of a foreclosure. But if a foreclosure would generate lower costs for the owner, the decision will be to foreclose. The cost of foreclosure to the borrower does not enter the decision.

Yet the decision is far from cut and dried, and it can be materially affected by whether and how the borrower presents his case. I discussed this issue with Warren Brasch, a lawyer who represents borrowers seeking loan modifications. Our combined observations:

Equity: Perhaps the most important factor affecting the modification decision is the amount of equity the borrower has in the property. If the borrower has enough equity in the property to pay any deferred interest plus foreclosure expenses, foreclosure is almost bound to be the lower-cost solution.

Equity depends on property value, which the borrower is much better positioned to know than the servicer. The borrower knows or can easily find out how many houses in the neighborhood are for sale and what the trend has been in recent sale prices. In a weakening market, it is easy for the lender to overestimate value, and the borrower must prevent that.

Moral hazard: Servicers fear that if they are liberal in granting modifications, borrowers who don’t need a modification will seek one anyway. They protect themselves against this by entertaining modification proposals on a case-by-case basis, while placing the burden of proof on the borrower.

Borrowers must accept the burden of proof. In addition to the data on property value, they need to document that they cannot afford the payment increase that is pending, and they must document what they can afford.

To do so, borrowers should calculate their total debt ratio: the sum of mortgage payment, other debt payments, property taxes and homeowner’s insurance as a percent of their gross (before tax) income.

This number should be calculated as it stands now and as it would be after the rate adjustment. It should also be calculated to demonstrate what the borrower can afford. On the last, Brasch suggests that a servicer may be willing to accept 45 percent as a reasonable maximum.

Servicing cost: Servicers have an interest in minimizing modifications because they add to costs. They try to keep costs down by computerizing the servicing process to the greatest degree possible and standardizing customer support procedures so that low-paid and easily trained employees can perform them.

Modifications must be handled by a special group who are more highly trained and better-paid, and the increased cost of expanding their number cuts into the bottom line. Hence, there is a tendency to be nonresponsive in the hope that the borrower will go away.

Borrowers have to be persistent. Brasch said: “If a servicer says they will call you back . . . forget about it. You need to call them and call them constantly. They will lose your paperwork, fail to return calls, put you on hold and then hang up. It’s what they do. Keep fighting, calling, faxing. This does work!”

In deciding whether a modification would be less costly than a foreclosure, servicers usually ignore an asset possessed by the borrower that could tilt the balance toward modification. This is the right to future appreciation in the value of the borrower’s house.

In exchange for a modification that might otherwise be more costly to the owner than a foreclosure, the borrower could pledge a percent of the future appreciation, which could shift the balance to modification. I will discuss that next Saturday.

Jack Guttentag is professor of finance emeritus at the Wharton School of the University of Pennsylvania. He can be contacted through his Web site,http://www.mtgprofessor.com.

Copyright 2007 Jack Guttentag

Distributed by Inman News Features

Loan Modifications Frequently Asked Questions:


A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.

Question 1: In utilizing the Loan Modification option to bring an asset current, can the mortgagee include all fees and corporate advances?

 

Question 2: May a mortgagee perform an interior inspection of the property if they have concerns about property condition?

 

Question 3: Can a mortgagee include late charges in the Loan Modification?

 

 

Question 5: Is there a new basis interest rate which mortgagees may assess when completing a Loan Modification?

 

Answer: Yes, Mortgagee Letter 2008-21 states that the new

Answer: Mortgagee Letter 2008-21 states that accrued late charges should be waived by the mortgagee at the time of the Loan Modification.

Question 4: When utilizing a Loan Modification option, can a mortgagee capitalize an escrow advance for Homeowner’s Association fees?

 

Answer: HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow Obligations states: Mortgagees must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage.

Answer: Yes, the mortgagee may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the mortgagor’s continued ability to support the modified mortgage payment.

Answer: Mortgagee Letter 2008-21 states in part: Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.

List of Participating Lenders:


List of Lenders Who Are Participating in the HOPE for Homeowners (H4H) Program

The lenders listed below have indicated an interest in refinancing loans under the HOPE for Homeowners program.  When contacting any of the lenders listed below, you are strongly encouraged to contact your servicing lender and any subordinate lien holders since their participation is vital for you to refinance into a HOPE for Homeowners mortgage.  It is important to remember that the HOPE for Homeowners program is voluntary and your servicing lender may offer different solutions for avoiding foreclosure. 

When contacting any lender on this list, please use the contact information provided.  Do not give anyone money or pay any fees until you have spoken with your existing lender and know it is participating in the HOPE for Homeowners Program.

To view the list of lenders who are participating in the HOPE for Homeowners program click on the link below. Your browser will open a PDF document. 

 The H4H Lender List was updated on November 10, 2008. We will refresh the list on most Fridays.  
 

 

LIST OF H4H PARTICIPATING LENDERS

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Press Conference by Secretary of Treasury:


HOPE for Homeowners

 Information by State
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[HOPE for Homeowners]

The HOPE for Homeowners program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD’s Federal Housing Administration (FHA). The program begins October 1, 2008 and ends September 30, 2011.

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