Category Archives: Modification
Homeowner Groups Sue to Force Foreclosures
Members of the Vintage East Condominium Association in Miami Beach got tired of waiting for JPMorgan Chase & Co. (JPM) to foreclose on unit 9, so they sued the bank in February to take control of the property.
In June, more than four years after the owner stopped making payments, a judge ruled that JPMorgan lost its claim to the $144,000 mortgage. The apartment is now on the market for $87,500, and the association may stave off insolvency with proceeds from the sale and a new owner who pays monthly dues, said Jane Losson, a board member at the complex. Four of the 11 other owners at the property are also behind on dues.
“I find it an outrage that the bank had decided to do nothing and the other owners got stuck,” Losson, who’s had her Vintage East condo since 2004, said in a telephone interview. “If we get this unit sold, we’ll have a little money.”
Financially troubled condo associations are taking banks to court as foreclosure delays enable delinquent homeowners to stay in their buildings for years, often without paying dues that keep boards running. The groups start by pressuring lenders to speed up home seizures and take over payment of the monthly fees. In extreme situations, like the Vintage East case, associations may force banks to give up rights to the property.
“The lenders are stalling foreclosures,” Ben Solomon, the Miami Beach attorney for the Vintage East association, said in a telephone interview. “Our complaints say the banks abandoned their interest and either need to accept responsibility for the title or walk away.”
‘Mortgage Terminator’
Solomon, whose Association Law Group represented homeowner boards in 16 Florida counties with 15,000 delinquent owners, also won what he calls “mortgage terminator” lawsuits in claims against Bank of America Corp. (BAC), Citigroup Inc. (C), Deutsche Bank AG (DB) and Wells Fargo & Co. (WFC), according to court records.
About 60 million people, or one in five Americans, live in residences with condo or homeowner associations, according to the Community Associations Institute, a trade group in Falls Church, Virginia. States with some of the highest foreclosure rates — Florida, Nevada, California and Arizona — are also among those with the biggest share of populations in homeowner associations, said Frank Rathbun, spokesman for the 30,000- member trade group.
The associations maintain residents’ common interests such as parking lots, roofs, landscaping and trash removal.
“About 50 percent of our members said the housing crisis and economic downturn have had a severe or serious impact on their association,” Rathbun said in a telephone interview.
Pushing Banks
About one in three Californians live in that state’s 45,000 condo and homeowner associations, said Kelly Richardson, an attorney who specializes in homeowner association law. “Banks have been slow catching up to reality,” Richardson, with the firm of Richardson Harman Ober PC in Pasadena, said in a telephone interview. “When pushed, they’ll step up to the plate, but you have to push them.”
In Nevada — the state with the highest rate of foreclosure filings, according to RealtyTrac Inc. — delinquent homeowners owe associations about $150 million in back dues, said Steven Parker, president of Red Rock Financial Services, which collects debts for associations in Nevada and five other states. “It’s probably at least $1 billion for the whole country,” Parker, whose company is a unit of FirstService Corp. (FSV), said in a telephone interview from Las Vegas. “Prior to foreclosure, we get almost nothing from banks. After the foreclosure, probably 30 percent of what we’re collecting is from banks.”
Drop in Foreclosures
U.S. foreclosure filings — notices of default, auction or seizure — fell to their lowest level in almost four years in July, as lenders and government agencies increased efforts to keep delinquent borrowers in their homes and paperwork delays slowed repossessions, RealtyTrac reported Aug. 11.
Filings have plunged for 10 straight months after state attorneys general began probing a practice known as “robo- signing,” in which lenders and servicers pushed through default documents without verifying their accuracy. The decline has been steepest in Florida and other so-called judicial states that require courts to approve foreclosures.
The bank delays have left homes in the delinquency process longer. U.S. homeowners facing foreclosure averaged 587 days without making a mortgage payment in June, up from 251 days in January 2008, according to Lender Processing Services Inc. (LPS), a real estate information company in Jacksonville, Florida.
Florida Delinquencies
In Florida, where 14 percent of homes with a mortgage have a foreclosure notice, the average delinquent borrower hadn’t made a payment for 719 days, or almost two years, LPS data show. As of June 30, 18.68 percent of home loans in Florida were more than three months delinquent or in foreclosure, the most of any state and more than double the U.S. average of 7.85 percent, the Mortgage Bankers Association reported this week.
“Florida’s numbers continue to drive national numbers,” Jay Brinkmann, chief economist of the Washington-based trade group, said at an Aug. 22 news conference.
Banks often hold off on a foreclosure as long as they can to avoid paying dues, property taxes and occupancy costs, said John Rickel, chief executive officer of Association Dues Assurance Corp., a St. Clair Shores, Michigan, company that collects fees for community associations in 20 states.
“We probably have 100 to 300 banks that we’re trying to collect from right at the moment,” Rickel said in a telephone interview. “We’re always 100 percent successful in collecting against banks because they do have the funds available.”
Limiting Collections
Associations’ rights vary based on state law. In Nevada, the groups have “super priority,” which means they can collect up to nine months of back dues plus costs when a residence sells, even after a foreclosure. In other states, such as Arizona, homeowner associations can sue to garnish wages of delinquent residents, even if they have lost the property.
Florida law limits homeowner associations from collecting more than 12 months of back dues or 1 percent of the outstanding mortgage, whichever is less, after a foreclosure. That cap often doesn’t apply to banks, said Frank Silcox, president of LM Funding LLC, a Tampa, Florida-based company that advances cash to condo associations in exchange for the lien rights on past- due accounts.
“Our attorneys look for a reason the foreclosing bank isn’t entitled to the minimum,” Silcox said in a telephone interview. “Nine out of 10 times, we get the bank to pay.” In one Miami Beach condo case, LM Funding collected $52,000 — counting late fees, 18 percent interest and collection costs — instead of about $3,000 the bank would have paid under the state limit, he said.
$148,000 in Dues
About 40 percent of LM Funding’s collections come from banks, with the balance from individual homeowners and through short sales, when the lender agrees to sell a property for less than the mortgage balance, Silcox said.
Bonnie Jordan, manager of the Bermuda Dunes Condo Residence Association in Orlando, said LM Funding advanced her $150,000 and recovered an additional $148,000 in back dues, helping the 336-unit development pay its bills after owners of 115 units went into foreclosure.
“We had $375,000 in bad debt,” said Jordan, whose complex charges monthly fees of $250 to $357. “LM Funding is recouping every dime for us.”
While banks present a potentially lucrative source of delinquent dues, they’re also a challenging target because they use legal tactics to prolong the foreclosure process, said Ellen Hirsch de Haan, an attorney with Becker & Poliakoff PA in Clearwater, Florida, who represents homeowner associations.
Canceling Hearings
“The banks are setting and then canceling hearings before the final judgment is eventually entered,” she said in an e- mail, “then setting and canceling the sale date, then failing to record the certificate of title, thereby postponing the actual transfer of title to the bank for months, or even years.”
Bank of America, with 1.1 million mortgages at least 90 days delinquent, addresses non-performing loans as fast as possible while complying with the law, Jumana Bauwens, a spokeswoman for the Charlotte, North Carolina-based bank, wrote in an e-mail. Bank of America loans in which borrowers were at least three months late were valued at $32.5 billion as of March 31, up from $26.97 billion a year earlier, according to Federal Deposit Insurance Corp. data compiled by Bloomberg.
“After exhausting all home-retention efforts, it is in the best interest of servicers and investors to move the foreclosure process along while abiding by Florida laws,” Bauwens said in the e-mail. “On average, homeowners are delinquent 18 months prior to a foreclosure sale. In judicial states like Florida, the process is longer.”
Bank Trustees
To compel banks to act, Solomon’s lawsuits start by suing the homeowner for unpaid dues as a way of seeking title to the property. Then he files a claim against the bank, contending the non-performing loan restricts the association’s right to sell the property because the mortgage is worth more than the home.
The bank defendant is usually a trustee for the loan that was sold into a mortgage-backed security, a legal structure that can leave the party responsible for a mortgage unclear. Citigroup and Deutsche Bank declined to challenge lawsuits brought by Solomon because both banks were trustees, not the servicers of the delinquent loans, bank representatives said.
In March 2010, Citigroup lost a lawsuit over a Miami Beach condo with a $136,000 mortgage, according to court filings. Danielle Romero-Apsilos, a spokeswoman for the New York-based bank, declined to comment, saying Citigroup wasn’t the servicer.
Deutsche Bank
Deutsche Bank in September forfeited its right to a unit with a $149,300 mortgage to the Palm Aire Gardens Condominium Association Inc. in Pompano Beach, Florida. “Litton Loan Servicing, the loan servicer for the loan, and not Deutsche Bank as trustee, was responsible for all foreclosure activity relating to the loan,” John Gallagher, a Deutsche Bank spokesman in New York, said in an e-mail.
Donna Marie Jendritza, a spokeswoman for Litton in Houston, declined to comment on the lawsuit, citing privacy restrictions. Litton, which Goldman Sachs Group Inc. is selling to Ocwen Financial Corp., wasn’t named in the complaint or other court documents.
“We sue whoever holds the mortgage,” Solomon said. “The bottom line is the bank had a loan and the mortgage got terminated.”
No Defense
Palm Aire Gardens also won title to a unit with a $184,410 mortgage after Wells Fargo failed to mount a defense because it no longer owned the loan, a transfer that wasn’t reflected in property records, said Tom Goyda, a spokesman. The bank would have defended the mortgage if it hadn’t sold the loan, he said. The San Francisco-based bank had $9.6 billion in mortgages more than 90 days delinquent and $11.4 billion in non-performing mortgages on one- to four-family homes as of June 30, Goyda said.
JPMorgan, the lender in the Vintage East case, had $2.5 billion in second-quarter costs tied to faulty mortgages and foreclosures, it reported July 14.
“There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Chief Executive Officer Jamie Dimon said in a conference call that day. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.”
Vintage East
Thomas Kelly, a spokesman for JPMorgan in Chicago, declined to comment on the Vintage East lawsuit or other cases in which the bank lost properties to homeowner associations. The bank’s mortgage at Vintage East was on a studio apartment with $24,000 in unpaid back dues, said Losson, the board member. Other residents of the Art Deco complex, built in 1937 two blocks from the beach, loaned the association money to pay for roof and building repairs and wrote personal checks to cover insurance payments, she said.
“We’re still in precarious condition, but we can see our way out now,” said Losson, who estimated the condo association was owed $60,000 in delinquent dues. “We went up against JPMorgan Chase and we won. It’s a good story. There’s a way out of the morass.”
To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net.
To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.
The State of the Government’s Loan Modification Program
The State of the Government’s Loan Modification Program
Total Number of Trial Mods Started: 1,493,107
Canceled Trials: 740,240
- In Trial: 7.3% 109,076
- “Aged” Trials: 49.6% 36,184 (2.4%)
- Perm. Mods 36.1% 539,493
- Canceled Mods 4.6% 68,114
Visit Pro Publica’s Eye on Loan Mods for their complete coverage of the government’s foreclosure prevention program.
This Treasury Department data, reflecting activity through January 30, 2011, shows how the largest mortgage servicers participating in the administration’s $75 billion foreclosure prevention program have been performing.
The program features a 3-month trial period for modifications before they’re eligible to become permanent. However, many trials have gone much longer. The “Aged” column shows how many trials have gone longer than six months at each servicer, while the “In Trial” shows trials that have not yet lasted that long. See note below.
| Name | Trial Mods Started | In Trial | “Aged” Trials | Canceled Trials |
Permanent Mods | Canceled Mods |
|---|---|---|---|---|---|---|
| Bank of America subsidiaries (incl. Countrywide) |
358,726
|
9.1%
32,782 |
3.5%
12,394 |
57.7%
206,958 |
26.0%
93,292 |
3.7%
13,300 |
| JPMorgan Chase subsidiaries |
227,512
|
7.8%
17,728 |
1.3%
2,874 |
55.0%
125,133 |
30.5%
69,418 |
5.4%
12,359 |
| Wells Fargo Bank, NA |
215,718
|
6.3%
13,591 |
1.0%
2,084 |
54.8%
118,319 |
34.5%
74,434 |
3.4%
7,290 |
| CitiMortgage, Inc. |
128,649
|
2.8%
3,590 |
1.8%
2,307 |
58.4%
75,084 |
33.6%
43,286 |
3.4%
4,382 |
| Only GSE servicers |
113,495
|
10.5%
11,938 |
7.1%
8,045 |
30.9%
35,085 |
46.7%
53,035 |
4.8%
5,392 |
| GMAC Mortgage, Inc. |
56,867
|
7.6%
4,340 |
0.1%
78 |
23.5%
13,359 |
61.4%
34,915 |
7.3%
4,175 |
| Nationstar Mortgage LLC |
52,152
|
4.8%
2,525 |
3.4%
1,784 |
46.5%
24,242 |
41.9%
21,844 |
3.4%
1,757 |
| OneWest Bank |
49,035
|
5.9%
2,909 |
1.6%
790 |
42.2%
20,671 |
46.1%
22,616 |
4.2%
2,049 |
| Ocwen Financial Corporation, Inc. |
41,526
|
10.5%
4,378 |
2.1%
876 |
14.9%
6,190 |
59.8%
24,814 |
12.7%
5,268 |
| Select Portfolio Servicing |
40,378
|
3.4%
1,375 |
0.4%
161 |
46.5%
18,771 |
43.6%
17,622 |
6.1%
2,449 |
| Aurora Loan Services, LLC |
39,105
|
4.0%
1,578 |
0.5%
200 |
58.1%
22,710 |
33.7%
13,161 |
3.7%
1,456 |
| Saxon Mortgage Services, Inc. |
37,495
|
3.1%
1,176 |
1.0%
361 |
57.8%
21,673 |
34.5%
12,931 |
3.6%
1,354 |
| Litton Loan Servicing LP |
34,712
|
4.8%
1,682 |
0.6%
213 |
66.4%
23,060 |
23.7%
8,228 |
4.4%
1,529 |
| Smaller servicers |
33,739
|
7.1%
2,404 |
4.2%
1,403 |
28.9%
9,759 |
54.0%
18,232 |
5.8%
1,941 |
| American Home Mortgage Servicing, Inc. |
29,370
|
13.6%
4,004 |
6.5%
1,903 |
11.9%
3,501 |
61.1%
17,938 |
6.9%
2,024 |
| PNC Mortgage |
19,089
|
4.4%
841 |
0.2%
35 |
67.9%
12,953 |
25.2%
4,809 |
2.4%
451 |
| U.S. Bank National Association |
15,539
|
14.4%
2,235 |
4.4%
676 |
17.8%
2,772 |
57.4%
8,918 |
6.0%
938 |
Note: Treasury only released data for servicers with over 5,000 eligible loans. In the chart above, “Smaller servicers” refers to servicers enrolled in the program with fewer than 5,000 eligible loans. “Only GSE servicers” refers to companies that have not enrolled in the Treasury Department programs, but do service loans owned or guaranteed by Fannie Mae or Freddie Mac.
Of the 68,114 canceled permanent modifications, 937 were canceled because the homeowner paid off the loan. The rest resulted from the homeowner missing three consecutive monthly payments.
Methodology: All of the above is based on data reported by the Treasury Department.
Treasury Unveils Do-It-Yourself NPV Assessment
The U.S. Treasury on Monday announced the launch of a Web-based tool that allows homeowners themselves to conduct a net present value (NPV) assessment of their mortgage.
As part of a borrower’s evaluation for the Home Affordable Modification Program (HAMP), servicers perform an NPV test to determine if modification is a more financially sound route to take than allowing the loan to proceed to foreclosure.
Oftentimes, the reason a homeowner is denied a HAMP modification is cited as “failed NPV.”
Treasury says homeowners who are turned down for the federal modification program can use the new tool – available at CheckMyNPV.com — to compare their own result against that of their servicer.
Homeowners may also use the site, prior to applying for a HAMP modification, to conduct an NPV self-evaluation using the same underlying formula required of HAMP servicers.
Treasury notes, though, that “due to differences in input data and other industry-related data referenced by the formula, users are informed that CheckMyNPV.com provides only an estimate of a servicer’s NPV evaluation and is intended for use only as a guide.”
Homeowners can complete their net present value calculation in around 15 minutes. The website, which also offers a detailed FAQ document, is designed to be a self-service, self-education tool to encourage homeowners to learn more about HAMP and the NPV evaluation process.
Treasury is encouraging homeowners to share the information provided by the site with their servicer and discuss the factors considered in the NPV evaluation to explore all foreclosure prevention options.
MUST SEE MSNBC Nightly News Fraudclosure Series
No End in Sight to Foreclosure Quagmire
Posted by Foreclosure Fraud on May 11, 2011MSNBC Foreclosure Crisis Reports
You can view/read the main text article for the special report here:
http://www.msnbc.msn.com/id/42881365/ns/business-personal_finance/
Foreclosure Crisis: The Mortgage Loan Modification Trap
http://www.msnbc.msn.com/id/21134540/vp/42938007#42938007
Foreclosure Crisis: The Whistleblowers
http://www.msnbc.msn.com/id/21134540/vp/42938009#42938009
Foreclosure Crisis: Manufactured Loan Documents
http://www.msnbc.msn.com/id/21134540/vp/42938017#42938017
Foreclosure Crisis: The Face of Foreclosure: One Family’s Story
http://www.msnbc.msn.com/id/21134540/vp/42938294#42938294
~
State AGs Offer New Settlement Terms to Mortgage Servicers
American Banker | Wednesday, May 11, 2011
By Cheyenne Hopkins
WASHINGTON — After months of stalemate, the state attorneys general have proposed new terms to the top five mortgage servicers that drop some controversial provisions of their first attempt at a settlement, including a push to force banks to reduce principal on thousands of mortgages.
The new offer, which was expected to be discussed at a meeting between the two sides on Tuesday, moves them closer to a final agreement, but does not detail how much state AGs are seeking in penalties for servicing issues uncovered by federal and state regulators.
Banks have privately said that they will not agree to a fine above $10 billion — far below a discredited $20 billion figure floated in the press two months ago — arguing that regulators have not provided evidence that servicing problems led to wrongful foreclosures.
The AGs are considering using whatever money they receive from banks to start a “cash for keys” program to help troubled borrowers move out of their homes and speed the foreclosure process by providing them cash incentives to leave. The funds are also expected to be used to promote mortgage counseling and offer some forebearance to troubled homeowners.
While banks have not agreed to the new terms, they do appear much more beneficial than an offer made in February, which demanded sweeping changes across the servicing industry, including principal reductions. By dropping that requirement, banks have already scored a key victory, observers said.
“It makes sense for principal reduction to be off the table because it creates a tremendous number of legal and logistical obstacles that in the context of a complex settlement are obviously difficult and distracting,” said David Dunn, a partner at Hogan Lovells law firm. “It makes sense for that to come off the table for the parties to reach agreement on issues that are less difficult and controversial.”
But the term sheet would still require the servicers to enact substantial changes to their practices, and could potentially raise issues in new areas.
Under the new terms, according to several sources, servicers would be required to allow borrowers that received a trial Treasury Home Affordable Mortgage Program modification — but which were denied a permanent mod — to reapply for the program.
The state AGs are also continuing to insist that servicers stop pursuing loan modifications and foreclosures at the same time, a process known as dual tracking that has drawn complaints from confused consumers.
The revised term sheet raised some new issues, including a proposed requirement for more documentation concerning the basis of knowledge for a foreclosure and notes and assignments. The state AGs are seeking to require documentation on the appropriate transfer and delivery of endorsed notes and deeds of trust at the formation of a mortgage-backed security. Essentially, servicers would have to document that they not only have positions with the MBS but document that the securitization was formed properly.
The new term sheet would also expand protections provided by the Servicemembers Relief Act to prohibit foreclosures on servicemembers who have been permanently moved to a post in a different state.
The new settlement also includes language that servicers must make borrowers aware of loss mitigation options prior to referral to foreclosure and facilitate loss mitigation applications. But the state AGs have dropped a demand that servicers provide to the Consumer Financial Protection Bureau their formulas for calculating the net present value of a home.
It remains unclear if banks are amenable to the proposed new terms. Also unknown is whether the new requirements would be extended to the rest of the servicing industry.
“I don’t know where the banks are with this because they are working on their federal consent orders,” said Lisa DeLessio, a partner at Hudson Cook LP. “I still think it’s very unclear what this means. If the AGs reach a settlement with the banks, what will this mean for the rest of mortgage servicers? What will happen to them?”
Despite the proposed new terms, many observers were pessimistic the two sides will reach a deal anytime soon. Fed up with the delay in the process, the banking regulators already moved forward in April with a cease and desist action against the top 14 mortgage servicers.
The state AGs, meanwhile, have been beset by doubts on their own side after the initial release of their 27-page term sheet. Several Republican AGs said pursuing principal reductions were a mistake, while GOP members on Capitol Hill criticized the CFPB’s involvement in the settlement process.
Some said the process was liable to continue to drag out.
“I do not believe the prospects of a full resolution in the short term are very high as there remain divergent views among all parties,” said Andy Sandler, co-chair of BuckleySandler LLP.
Others said the AGs will not force a settlement until they can provide more details on what exactly the banks did wrong. While the banking regulators released an 18-page report detailing deficiencies at the servicers, the state AGs have not spelled out what issues they uncovered.
“There has to be some more due diligence and investigation before they have the credibility to enforce a settlement,” said Josh Rosner, managing director of the research firm Graham Fisher & Co. “If they did a credible investigation of origination and servicing and detailed the findings of that investigation it would demonstrate how troubled the situation is and how deep the economic morass is.”
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