Category Archives: Loan Modification
Bank Officials Cited in Churn of Foreclosures
Four million Americans have been foreclosed upon since the beginning of 2007. Here, a boarded up house in Islip, N.Y., in February.
By NELSON D. SCHWARTZ and J. B. SILVER-GREENBERG - Published: March 12, 2012
Managers at major banks ignored widespread errors in the foreclosure process, in some cases instructing employees to adopt make-believe titles and speed documents through the system despite internal objections, according to a wide-ranging review by federal investigators. The banks have largely focused the blame for mistakes on low-level employees, attributing many of the problems to the surge in the volume of foreclosures after the housing market collapsed and the economy weakened in 2008.
But the report concludes that managers were aware of the problems and did nothing to correct them. The shortcuts were directed by managers in some cases, according to the report, which is by the inspector general of the Department of Housing and Urban Development.
The examination is among the most extensive to date of the banks’ foreclosure practices, which caused a national uproar and prompted a $25 billion settlement between the banks and the government that was filed in federal court Monday.
“I believe the reports we just released will leave the reader asking one question — how could so many people have participated in this misconduct?” David Montoya, the inspector general of the housing department, said in a statement. “The answer — simple greed.”
What is more, rather than focusing on misconduct at outside law firms, loan processors and other third parties as some past inquiries did, the department’s investigation takes aim at internal bank processes and the chain of command. It does not name the supervisors or indicate how many knew of the problems, however.
At Bank of America, which until late last year was the nation’s largest mortgage servicer, two employees testified that they had raised concerns about whether documents were being properly notarized, but managers told them to proceed. One vice president said documents in her department were checked only for “formatting and spelling errors,” not the underlying figures or facts in the case.
“Bank of America did not establish effective control over its foreclosure process,” according to the report, to be released Tuesday. And as foreclosure cases multiplied, Bank of America’s management turned up the pressure on employees to move faster. “Despite management representations to the contrary,” the report says, “employee performance reviews demonstrated that Bank of America used defined goals and metrics to evaluate performance-based production in its document execution group.”
At Wells Fargo, now the nation’s largest mortgage servicer and originator, employees told the inspector general’s office that the company’s management had assigned them bogus titles, including “vice president of loan documentation,” even though they had no training in document review. Before becoming vice president, one employee worked at a pizza restaurant.
Related articles
- Mortgage deal: Banks impeded probe, HUD says (csmonitor.com)
- Updated: FHA Inspector General: Managers Turned Blind Eye To Foreclosure Problems (themoderatevoice.com)
- Bank managers ignored major flaws in foreclosures (sfgate.com)
- From Pizza Making To Bank Vice-President: How Big Banks Promoted Unqualified Workers To Robo-Sign Foreclosures (thinkprogress.org)
- HUD Report: Banks Hampered Foreclosure Inquiry (2012indyinfo.com)
Boom-Era Property Speculators to Get Foreclosure Aid
By Prashant Gopal – Mar 5, 2012 12:00 AM ET
The Obama administration will extend mortgage assistance for the first time to investors who bought multiple homes before the market imploded, helping some speculators who drove up prices and inflated the housing bubble.
Landlords can qualify for up to four federally-subsidized loan workouts starting around May, as long as they rent out each house or have plans to fill them, under the revamped Home Affordable Modification Program, also known as HAMP, according to Timothy Massad, the Treasury’s assistant secretary for financial stability. The program pays banks to reduce monthly payments by cutting interest rates, stretching terms, and forgiving principal.
Investors are central to the federal government’s strategy for reviving real estate with home prices down 34 percent since July 2006 and as foreclosures deplete the pool of buyers who can qualify for a mortgage. Photo: Tim Rue/Bloomberg
The government’s need to protect neighborhoods from blight and renters from eviction by keeping the current owners in place is outweighing concern that taxpayers will end up bailing out real-estate investors. The program is being enlarged after less than 1 million borrowers modified loans through HAMP, compared with the administration’s stated goal in 2009 of helping 3 million to 4 million homeowners.
“When we started the program we focused on owner-occupied houses because the need was so great and we wanted to target the efforts to that group,” said Massad. “Given where we are today, more and more people recognize that vacant properties are a problem no matter how they became vacant.”
Homeownership Rate
Investors are central to the federal government’s strategy for reviving real estate with home prices down 34 percent since July 2006 and as foreclosures deplete the pool of buyers who can qualify for a mortgage. Federal Reserve Chairman Ben S. Bernanke told homebuilders in Orlando, Florida last month that the U.S. economic recovery has been “frustratingly slow,” in part because weak housing markets are holding back consumer spending.
The homeownership rate, which peaked at 69.2 percent in June 2004, fell to 66 percent in the fourth quarter of 2011, according to the U.S. Census Bureau. A new Fannie Mae program designed to reduce the overhang of foreclosed homes is encouraging potential buyers, including private-equity firms, to purchase properties in bulk and convert them to rentals. Almost one in four home purchases in January was made by an investor, according to the National Association of Realtors. And investment and vacation properties made up 21 percent of houses in the foreclosure process in January, according to Irvine, California-based RealtyTrac Inc.
‘Huge Change’
The Obama administration announced last month that it would triple incentives to owners of mortgages that reduce home-loan debt and expand eligibility to borrowers struggling under the weight of other liabilities, such as medical bills
More Time Allowed for Foreclosure Review Requests
Image via Wikipedia
Homeowners who think they may have been financially injured due to the actions of mortgage servicers during a foreclosure have additional time to request a review of their cases. The deadline for the Independent Foreclosure Review authorized by the Office of the Comptroller of the Currency and the Federal Reserve originally schedule for April 30 has been extended to July 31.
To be eligible for a review a borrower had a mortgage on the primary residence serviced by a participating company which was in active foreclosure between January 1, 2009 and December 31, 2010. There are no costs associated with the review.
More information and a list of participating servicers can be found at: www.federalreserve.gov/consumerinfo/independent-foreclosure-review.htm or www.occ.gov/independentforeclosurereview.
Related articles
- Borrowers have until July for foreclosure review (marketwatch.com)
- Judge orders Wells Fargo to face claims of improper disclosure of foreclosure practices (alialawgroupforeclosurenews.com)
- Feds to help borrowers prove foreclosure errors (marketwatch.com)
Obama Housing Plans vs Reality
by Cora Currier
ProPublica, Feb. 14, 2012, 2:36 p.m.
The Obama administration recently unveiled a string of proposals to help struggling homeowners and get the housing market back on its feet — part of the administration’s “We Can’t Wait” election year to-do list. Of course, the White House has made big promises before about helping homeowners, only to see them disappoint time and again.
Here are the latest proposals, whether they are anything new and whether they stand a chance of going anywhere.
President Obama wants to allow homeowners whose mortgages are backed by private-sector companies to refinance at lower rates through the Federal Housing Administration. (The FHA insures many mortgages, and it is not the same as the FHFA, the regulatory agency in charge of Fannie Mae and Freddie Mac.) The president stressed that the proposal would help only “responsible” homeowners who were current on their payments — to counter Republican complaints that his housing policies reward foolhardy borrowers.
Déjà vu: This is only the latest in a long series of attempts by Obama to help homeowners refinance. There have been a few, minor attempts to push refinancing through the FHA. Via a separate program launched in 2009 that used Freddie and Fannie, more than 900,000 homeowners have refinanced, substantially fewer than the goal of 4 million homeowners.
Will it happen? Unlikely. This plan needs to get through a Congress that is staunchly opposed. “How many times have we done this?” said House Speaker John Boehner, R-Ohio.
Republicans have a number of objections. First, Obama wants the plan to be paid for with a fee on the banks in repayment for the bailout, a tactic that’s raised Wall Street hackles in previous budgets. Secondly, some Republicans balk at passing more risk on to the FHA, which is in danger of having to ask the Treasury for a subsidy for the first time in its nearly 70-year history. Even if the plan passes, its impact would likely be limited. For the Obama administration to instigate mass refinancing without Congress’ help, many say it would need to get Fannie and Freddie on board, a move the companies’ regulator has so far been reluctant to endorse.
Bill of rights
A so-called “homeowner’s bill of rights” aims to make things clearer for borrowers, requiring a standard set of forms and disclosure of fees and conflicts of interests. It also calls for help for those very close to foreclosure, including a right of appeal on the decision to foreclose. (Homeowners have claimed wrongful foreclosure for a wide variety of reasons, and have had little recourse to appeal mortgage servicers’ decisions.)
Déjà vu: This may be just a branding of efforts already under way across different agencies. The new Consumer Financial Protection Bureau says it is already developing a set of standard disclosure forms and rules aimed at preventing misleading or fraudulent practices by mortgage servicers. As for an appeal process, Treasury already has a system for complaints about foreclosures, and is reportedly expanding its review process for those denied eligibility for government loan modification programs. Advocates have criticized Treasury’s current review efforts as ineffective. And, separately, federal bank regulators are developing new standards for mortgage servicers.
Will it happen? According the White House’s announcement, a host of agencies that deal with housing will work to enact new rules in keeping with the bill of rights. But right now the bill of rights itself is simply a set of guiding principles that don’t yet have any teeth. (We’ve documented problems with enforcement on similar guidelines.) The Department of Housing and Urban Development and the CFPB did not respond to our queries on exactly how the bill of rights relates to existing efforts.
Loan modification
The administration’s plan to make it easier for homeowners to restructure their loans has two key elements. First, it lays out yet another push on principal reductions, which it argues are central to slowing the rate of foreclosures and stabilizing the market. The move triples the incentive for mortgage insurers, including Fannie and Freddie, to write down the amount owed by struggling borrowers. Secondly, it makes more borrowers eligible for HAMP, the administration’s loan modification program, and also will give some homeowners who were previously denied access to the program a chance to reapply.
Déjà vu: Like refinancing, incentives for principal reduction have been proffered again and again, with mixed success. As we’ve noted, a key obstacle is Fannie and Freddie, which guarantee mortgages and haven’t been willing to take the hit that lowering the amount a borrower owes entails even if doing so would ultimately prevent foreclosures. Meanwhile, HAMP has been beset with a host of enforcement and logistical problems.
Will it happen? As a tweak to an existing program, these changes don’t need to go through Congress. And as we explained last week, the mortgage settlement and these changes may actually breathe life into the disappointing HAMP program. But for principal reduction, the question remains: Will Fannie and Freddie give their OK? Without that, only a portion of homes in the U.S. could qualify.
Foreclosures to rentals
This plan takes foreclosed homes where mortgages were backed by Fannie and Freddie and sells them to investors who will put them on the market as rentals. Obama claims this will help heal neighborhoods blighted by empty buildings and evictions, and give a boost to real-estate sales.
Something new: This has been in the works since August 2011, and the Federal Reserve touted it recently as an important process, though Chairman Ben Bernanke cautioned it was no “silver bullet” for the housing market.
Will it happen? It’s already started, though it’s just an experiment for now. It will go through the FHFA, so it doesn’t need congressional approval. The FHFA has already put out its first call for investors for the pilot phase.
Administration Revamps HAMP to Reach More Borrowers
The Obama administration has announced changes to its flagship foreclosure prevention initiative – the Home Affordable Modification Program (HAMP) – which officials say will expand its reach to more distressed homeowners.
Among the changes, borrowers who are struggling because of debt beyond their mortgage will be eligible for a secondary evaluation with more flexible debt-to-income criteria, and eligibility will be extended to investor-owned homes that are used as rental properties.
The administration is also giving principal reductions a bigger role within the program, tripling incentives for investors that agree to write down an underwater borrower’s principal and offering these same incentives to the nation’s two biggest mortgage investors – Fannie Mae and Freddie Mac.
The deadline for HAMP will be extended for an additional year through December 31, 2013.
(developing story)
*Additional details have been provided in a blog post by Tim Massad, assistant secretary for financial stability.
Related articles
- Reduce amount due on mortgage, or grant a short sale? (besthouses2go.wordpress.com)
- Secret Docs Show Foreclosure Watchdog Doesn’t Bark or Bite (mainstreetresolutions.com)
- What went wrong with mortgage aid? (georgegmiller.wordpress.com)
- Fixing the Housing Market: The Principal of the Matter (avidlawblog.wordpress.com)
- Obama loan modification program moving slowly (marketwatch.com)
