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Mitt Romney to Lenders: Take the Loss and Help People Recover, To Government: Get out of the Way
Presidential hopeful Mitt Romney spent nearly an hour talking to struggling home and business owners Monday morning in Florida, the next stop in the Republican primary contest and one of the states hardest-hit by the foreclosure crisis that wrecked the economy in 2007.
At a round table in a Tampa, Fla. hotel, Candice Tammey told Romney about how she’d lost her job in the staffing industry three years ago and eventually stopped paying her mortgage after her bank wouldn’t negotiate a loan modification.
“I’m going to be living in my home until I’m kicked out. I don’t have a choice at this point,” she said, adding that employers seemed “inundated” with other job applicants. She said she had her health and that she’s keeping a positive outlook. “There’s light at the end of the tunnel,” she said. “I don’t see it quite yet but I know that it’s there, so I’m encouraged — I know that there’s something better out there for me and for us as a country.”
“It will get better,” Romney said, according to CNN’s online video stream of the event. “It will not always be like this. This is a detour from America’s history. … I can’t predict when it will get better but if I’m fortunate enough to become president, I will care very deeply about getting it better in a big hurry.”
It’s the first time Romney’s talked foreclosures since he told the Las Vegas Review-Journal that the only thing the government should do is get out of the way.
“Don’t try to stop the foreclosure process. Let it run its course and hit the bottom,” Romney said last October. “Allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up. … The Obama administration has slow walked the foreclosure process … that has long existed and as a result we still have a foreclosure overhang.”
Romney stuck to that message as homeowners told him of their struggles.
Richard Wood of Bradenton, Fla., told Romney he’d folded his title insurance company in October 2010. “I invested in some real estate, some rental properties, made what I considered to be very conservative investments during the boom times and right now I am negotiating with the same bank who has mortgages on each of those and an approximate $200,000 deficiency,” he said. “We have been exploring the possibility of moving to another to another country where we might be able to live on our retirement and our Social Security.”
“Yeah. It’s just tragic, isn’t it? Just tragic, just tragic,” Romney said. “We’re just so overleveraged, so much debt in our society, and some of the institutions that hold it aren’t willing to write it off and say they made a mistake, they loaned too much, we’re overextended, write those down and start over. They keep on trying to harangue and pretend what they have on their books is still what it’s worth.”
“Also, Gov. Romney, we got hit with a double whammy,” Wood continued. “My wife, she’s a Realtor — she is in the process of filing for bankruptcy on some debts that she needed to take out in order to try and stay in business the past five years. I’m probably right behind her.”
“That’s tragic,” Romney said. “In some cases, if the debt is not in something you can service, it’s like you have to move on and start over away from those debts. It’s helpful if you get an institution that’s willing to work with you, but if you don’t you have no other option.”
The Sunshine State had the seventh-highest foreclosure rate of any state in 2011, according to RealtyTrac, an online foreclosure marketplace and data firm. All of the homeowners at the table Monday said they owed more than their homes were worth and that their banks wouldn’t negotiate on modifications or refinancing. More than 22 percent of all residential properties in the U.S. are “underwater,” according to housing research firm CoreLogic. In Florida, a full 44 percent of mortgage properties are underwater.
“The banks are scared to death, of course, because they think they’re going to go out of business,” Romney said. “They’re afraid that if they write all these loans off, they’re going to go broke. And so they’re feeling the same thing you’re feeling. They just want to pretend all of this is going to get paid someday so they don’t have to write it off and potentially go out of business themselves.”
“This is cascading throughout our system and in some respects government is trying to just hold things in place, hoping things get better,” Romney continued. “My own view is you recognize the distress, you take the loss and let people reset. Let people start over again, let the banks start over again. Those that are prudent will be able to restart, those that aren’t will go out of business. This effort to try and exact the burden of their mistakes on homeowners and commercial property owners, I think, is a mistake.”
MERS Settles, Avoiding Class Action Foreclosure Fee Lawsuit
The plaintiffs, Jose and Lorry Trevino, filed a motion seeking class action status and an amended complaint on Jan. 12. The defendants had until Jan. 17 to respond, but received a two-week extension, “so that the parties can memorialize their settlement,” according to court documents filed Jan. 13.
The parties have agreed to terms, but the settlement is pending final paperwork. The case hasn’t been dismissed and likely won’t until the settlement is finalized.
The suit, originally filed in 2007, names Merscorp and a number of its shareholders, including Citigroup, Countrywide, Fannie Mae, Freddie Mac, GMAC Residential Funding, HSBC, JPMorgan Chase, Washington Mutual and Wells Fargo.
The shareholder defendants were dismissed from the case in 2008, though they were renamed in the recent amended complaint. Representatives from the companies declined to comment about the case.
Janis Smith, Merscorp vice president of corporate communications, said the parties resolved the case, but declined to provide additional details, citing the settlement’s confidentiality agreement.
The lawsuit claims foreclosed borrowers were overcharged for attorneys’ fees and other expenses that were not actually incurred during the foreclosure process.
“MERS has extracted and continues to extract improper costs, fees and expenses from Plaintiffs and members of the Class in excess of sums they actually incurred and/or were obligated to pay,” the complaint reads.
By seeking class action status, the plaintiffs in the case would have been expanded to include all foreclosed borrowers since Sept. 20, 2001 whose mortgages or deeds of trust were assigned to MERS and who received a demand to pay expenses in excess of what MERS and its member servicers actually paid.
Mortgage documents authorize note holders to be reimbursed for their expenses when a loan goes into foreclosure. But since MERS and the servicers have prearranged set fees with foreclosure attorneys, those costs are limited, the plaintiffs argue. The suit claims MERS has a flat-fee arrangement of $400 to $500 per foreclosure, but that attorneys are sending demands for payment ranging from $1,200 to $2,000 “and upwards.”
“A demand for payment of fees and expenses that exceed actually incurred or obligated amounts, represents a clear breach of contract under the laws of the various states in which MERS operates,” the complaint reads.
The lawsuit claims breach of contract, unjust enrichment, and breach of duty of good faith and fair dealing.
“Defendants breached the agreement with Plaintiffs and the other members of the Class by causing, directing and/or allowing their loan servicers and retained attorneys to overcharge for costs, fees and expenses in connection with enforcement or foreclosure proceedings, in an amount in excess of the amounts actually incurred or obligated to be paid,” it reads.
According to court documents, the Trevinos borrowed a $194,000 Veterans Administration-backed mortgage in 2003 and subsequently defaulted, causing Wells Fargo to initiate a foreclosure on the property.
The complaint seeks to recover the alleged excessive expenses, but does not specify how much the Trevinos were allegedly overcharged, nor does it provide an estimate of the number of potential members in the class and how much they were allegedly overcharged.
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New REO Inventory in 2011 = 804,423 Homes, 1.9 million properties with a foreclosure filing
RealtyTrac’s year-end report released Thursday shows foreclosure filings – including default, auction, and bank repossession notices – were reported on 1,887,777 U.S. properties in 2011. Of that total, 804,423 homes were taken back by lenders as REO.
Last year’s tally of nearly 1.9 million properties with a foreclosure filing seems staggering, but it’s actually the lowest reported since 2007. It’s 34 percent below 2010, 33 percent below 2009, and 19 percent below the 2008 total.
RealtyTrac’s newly appointed CEO Brandon Moore describes foreclosure activity last year as being in “full delay mode.”
“The lack of clarity regarding many of the documentation and legal issues plaguing the foreclosure industry means that we are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages – particularly in states with a judicial foreclosure process,” Moore said.
These delays, however, may be coming to an end. Moore says there were strong signs in the second half of 2011 that indicate lenders are finally beginning to push stalled foreclosures through in select local markets.
“We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011, though still below the peak of 2010,” Moore said.
Despite signs that some markets are experiencing a pickup in foreclosures, RealtyTrac’s analysis shows that processing timelines continued to increase.
On the national stage, properties foreclosed in the fourth quarter took an average of 348 days to complete the process, up from 336 days in the third quarter and up from 305 days in the fourth quarter of 2010.
RealtyTrac says the length of the average foreclosure process has increased 24 percent from the third quarter of 2010, when lenders began to re-evaluate foreclosure procedures as a result of documentation and affidavit errors.
New York holds the title of ‘longest foreclosure process in the nation’ – an average of 1,019 days.
New Jersey documented the nation’s second longest end-to-end foreclosure process, at 964 days. Florida has the third longest at 806 days. Foreclosure activity in both these states dropped more than 60 percent from 2010 to 2011.
All three states with the longest foreclosure timelines employ the judicial foreclosure process.
Texas continues to register the shortest average foreclosure process of any state, at 90 days, but that still represents an increase from 86 days in the third quarter and 81 days in the fourth quarter of 2010.
At 106 days, Delaware has the second shortest foreclosure timeline in the nation, and Kentucky lays claim to the third shortest, at 108 days.
More than 6 percent of Nevada housing units (one in 16) had at least one foreclosure filing in 2011, giving it the nation’s highest state foreclosure rate for the fifth consecutive year. That’s despite a 31 percent decrease in foreclosure activity from 2010.
Arizona registered the nation’s second highest foreclosure rate for the third year in a row, with 4.14 percent of its homes (one in 24) receiving at least one filing in 2011.
California registered the nation’s third highest foreclosure rate for all of 2011, with 3.19 percent (one in every 31 homes).
Other states with 2011 foreclosure rates ranking among the nation’s 10 highest include: Georgia (2.71 percent), Utah (2.32 percent), Michigan (2.21 percent), Florida (2.06 percent), Illinois (1.95 percent), Colorado (1.78 percent), and Idaho (1.77 percent).
Related articles
- Foreclosure rates plummet to 2007 levels (agbeat.com)
- RealtyTrac: Boost In Foreclosure Activity Expected In 2012 (forexlive.com)
Fed Says Foreclosure Not Best Solution For Housing Crisis
The Huffington Post Jillian Berman First Posted: 1/4/12 05:16 PM ET Updated: 1/4/12 06:26 PM ET
More than four years into the housing crisis, and after millions of Americans have lost their homes, Federal Reserve Chairman Ben Bernanke is finally taking a stand.
Bernanke sent a Federal Reserve paper to the leaders of the House of Representatives’ Committee on Financial Services arguing that relying heavily on foreclosures to deal with mortgage borrowers that can’t meet their obligations is “costly and inefficient” for the housing market because they can lead to deteriorating homes and weigh on the property values in the surrounding community.
Instead, the paper encourages lenders to “aggressively” pursue loan modifications and for servicers to be given more incentives to seek alternatives to foreclosure.
Foreclosures “can result in ‘deadweight losses,’ or costs that do not benefit anyone, including the neglect and deterioration of properties that often sit vacant for months (or even years) and the associated negative effects on neighborhoods,” the paper said. “These deadweight losses compound the losses that households and creditors already bear and can result in further downward pressure on house prices.”
The Obama administration has already pursued policies aimed at encouraging lenders to modify loans, although to very limited success. The Home Affordable Modification Program, which Obama announced in February 2009, had helped fewer than 700,000 homeowners as of October, despite promises that the program would encourage banks to modify the loans of 3 to 4 million homeowners.
The paper mirrors findings from regional Fed banks indicating that foreclosures can be detrimental to more Americans than just those who are losing their homes. Properties that are occupied, but in foreclosure, drive down the surrounding property values twice as much as vacant properties, an October study from the Cleveland Federal Reserve found.
And with millions of foreclosed properties already in the pipeline, the foreclosure process is already taking longer than in recent memory — a situation that may only be exacerbated if lenders don’t take the Fed’s advice. The average foreclosure process now takes 674 days, almost triple the time necessary in 2007.
Another alternative to foreclosure proposed in the paper is to combine a deed-in-lieu of foreclosure — or a program where borrowers return the home to lenders without foreclosure proceedings — with a rent-back arrangement. Others have floated a similar plan, including left-leaning economist Dean Baker, that would allow defaulting borrowers to stay in their homes, but as tenants.
The Obama administration also considered a plan in August to boost falling home prices by turning thousands of government-owned foreclosure properties into rentals. If the program goes through, the spaces would likely have some takers; the U.S. apartment sector has expanded past recovery, indicating a boost in rental demand.
Related articles
- Fed urges foreclosure alternatives (lansner.ocregister.com)
- Why Renting Is Better Than Owning, Bernanke’s Take (huffingtonpost.com)
- Fed Disagrees With GOP Candidates on Foreclosure Crisis (abcnews.go.com)
- Fed’s Raskin: Mtg Forcls Hurt Recov Pace; Hi Unemp a Factor (forexlive.com)
Overall Mortgage Performance Stable, Delinquencies Remained Elevated in Third Quarter 2011
FOR IMMEDIATE RELEASE
December 21, 2011Contact: Bryan Hubbard
(202) 874-5770
Overall Mortgage Performance Stable, Delinquencies Remained Elevated in Third Quarter 2011
WASHINGTON—The performance of first-lien mortgages serviced by large national banks and federal savings association was stable, but delinquencies remained elevated during the third quarter of 2011, according to a report released today by the Office of the Comptroller of the Currency (OCC).
The quarterly OCC Mortgage Metrics Report showed delinquencies remained elevated but stable during the third quarter of 2011 but have declined from a year earlier. However, the number of new foreclosures increased by 21.1 percent during the quarter as servicers lifted voluntary moratoria implemented in late 2010 and exhausted alternatives to foreclosure for the large inventory of seriously delinquent mortgages working through the loss mitigation process. The increase in new foreclosures and the increase in average time required to complete foreclosures sales has resulted in the number of foreclosures in process increasing to 4.1 percent of the overall portfolio, or 1,327,077 loans, at the end of the third quarter of 2011.
At the end of the third quarter of 2011, 88 percent of the 32.4 million loans in the portfolio were current and performing at the end of the third quarter, almost unchanged from the previous quarter. The percentages of mortgages that were 30-to-59 days delinquent and mortgages that were seriously delinquent (loans 60 or more days delinquent or delinquent mortgages to bankrupt borrowers) did not change from the previous quarter. However, both categories of delinquencies have declined from a year earlier.
Other key findings of the report included:
On average, the modifications implemented in the third quarter of 2011 reduced borrowers’ monthly principal and interest payments by 24.4 percent, or $382. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 35.1 percent on average, or $567.
Modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less. At the end of the third quarter of 2011, 58.8 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 36.4 percent of modifications made during that time that reduced payments by less than 10 percent.
Since the beginning of 2008, servicers have modified 2,258,026 mortgages through the end of the second quarter of 2011. At the end of the third quarter of 2011, 50.8 percent of those modifications remained current or had been paid off. Another 8.8 percent were 30-to-59 days delinquent, and 17.8 percent were seriously delinquent. Eleven percent were in the process of foreclosure and 5.8 percent had completed the foreclosure process.
The report covers about 62 percent of all first-lien mortgages in the United States, worth $5.6 trillion in outstanding balances. The complete report can be downloaded from the OCC Web site, www.occ.gov.
Related Link:
Source: OCC Mortgage Metrics Report for the Third Quarter of 2011 (PDF)
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