Regulators Detail Steps Lenders Must Take to Revamp Processes; Fines Are Still to Come
In a Wall Street Journal Article posted today U.S. regulators hit the nation's largest banks with a first round of sweeping penalties for improper home-foreclosure practices, issuing detailed orders to revamp the way they deal with troubled borrowers.
The orders issued on Wednesday to 14 financial institutions didn't include fines. Officials said they are coming.
"There will be civil money penalties; the question is timing and amount. But we're not letting that clock run forever," Acting Comptroller of the Currency John Walsh told reporters. The orders were issued by his office, the Federal Reserve and the Office of Thrift Supervision.
The bank regulators' action came as Obama administration officials and representatives of state attorneys general met with the bank representatives in an ongoing effort to reach a broader deal over alleged mortgage-servicing abuses, which brought foreclosures to a near halt last fall. All sides want a settlement that can resolve the issue so foreclosures can proceed again, which could help the sickly housing market.
Some attorneys general and administration officials have pushed for banks to pay more than $20 billion in civil fines or to devote a comparable amount to modifying mortgages held by distressed borrowers.
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Several officials said the regulators' action wouldn't undermine the broader settlement talks. "This doesn't change what we are doing," said Iowa Attorney General Tom Miller in an interview. Mr. Miller, who is spearheading the 50-state investigation, said, "We are moving ahead full speed."
Outside observers said the orders could make it harder for state attorneys general to extract greater concessions from the banks.
"The biggest stick in this fight just settled, so there's going to be a lot less pressure on the banks to agree to a radical resolution to resolve the state complaints," said Jaret Seiberg, an analyst in Washington with MF Global.
Mark Zandi, chief economist at Moody's Analytics, said the agreement appears to require only "modest changes" to banks' foreclosure process and is unlikely to have a big impact on the housing market or broader economy. Still, Mr. Zandi added, "the foreclosure process will remain bogged down and a true bottom in the housing market elusive" until the banks reach a complete settlement with the state attorneys general.
Bank executives said the changes ordered would be anything but modest. "It's very demanding and there is a lot that we have to do," said one bank official. "It will be fairly expensive and a big resource drain."
The regulators issued the orders to the nation's four largest banks—Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc. Also receiving orders were Ally Financial Inc., HSBC Holdings PLC, MetLife Inc., PNC Financial Services Group Inc., SunTrust Banks Inc., U.S. Bancorp, Aurora Bank, EverBank, OneWest Bank and Sovereign Bank.
Bank of America, Wells Fargo, J.P. Morgan and Citigroup were ordered to revamp mortgage-lending practices.
Under the orders, banks have 60 days to establish plans to clean up their mortgage-servicing processes to prevent documentation errors.
The orders also direct banks to take steps to ensure they have enough staff to handle the flood of foreclosures, that foreclosures don't happen when a borrower is receiving a loan modification and that borrowers have a single point of contact throughout the loan-modification and foreclosure process.
Banks must hire an independent consultant to conduct a "look back" of all foreclosure proceedings from 2009 and 2010 to evaluate whether they improperly foreclosed on any homeowners and require each company to establish its own process to consider whether to compensate borrowers who have been harmed.
Critics, including other regulators, believe this process and other aspects of the orders leave too much discretion to banks.
J.P. Morgan, in a statement, acknowledged that the consent orders "are targeted directly at weaknesses in our processes and controls." The New York bank took a charge of $1.1 billion in the first quarter to reflect higher mortgage-servicing costs that resulted from a string of new regulations enacted after the financial crisis.
Other banks said many of the required changes already are under way. "This is an unprecedented measure and a tough message to take, but it will make mortgage servicing practices better across the board," Wells Fargo said. The San Francisco bank said it already has taken numerous actions to address the issues, including hiring 10,000 employees since 2009 to deal with foreclosure issues.
PNC Financial Services sought to distance itself from the industry's mess, saying that it represents just 1.5% of the mortgage-servicing business. A spokesman for the Pittsburgh bank said that its internal review had determined that the bank didn't foreclose on customers without a "valid reason or appropriate documents."
Even before the orders became public, critics charged that the bank regulators were letting servicers off too easy and were undercutting the broader talks.
The OCC, which has been the target of most criticism, defended the enforcement orders. "They require substantial corrective actions," Mr. Walsh said. "The banks are going to have to do substantial work, bear substantial expense to fix the problems that we identified" as well as to identify and compensate homeowners that suffered financial harm.
The Federal Deposit Insurance Corp. in a statement called the orders "only a first step" and declared its full support for the broader talks. "The enforcement orders announced [Wednesday] complement, rather than pre-empt or impede, this ongoing collaboration," it said.
By VICTORIA MCGRANE, ALAN ZIBEL and ROBIN SIDEL —Ruth Simon contributed to this article.
http://online.wsj.com/article/SB10001424052748703551304576260952761726790.html?mod=WSJ_RealEstate_LeftTopNews
American Eagle Realty, we are a realty company not a legal firm, we can help with all of your real estate needs including foreclosure. American Eagle Realty can help you with solid answers about your rights and options before your house is foreclosed on! We are experts in the Short Sale Process and have the experience needed to work with your bank! Loan Mods, too. Contact us we can help, We have helped others we can help you...
Whether you want buy, rent, or sell a home we can assist you.
American Eagle Realty
www.american-eagle-realty.com
502-969-1801
Thursday, April 14, 2011
Tuesday, April 12, 2011
Foreclosure fraud: The homeowner nightmares continue
FORTUNE — Over the past several months regulators have finally noticed what consumer attorneys have been saying for years: the big banks have routinely committed fraud in their foreclosure filings and their records of how much people owe are too often wrong. And the mortgage modification process, which was meant to help homeowners, has been exposed as an abject failure.
Salvageable mortgages are being foreclosed because the banks, wearing their “mortgage servicer” hats, find it more profitable to foreclose than modify loans. And even when the banks sincerely try to modify loans, they often seem incompetent.
In early March, a settlement proposal surfaced claiming to represent what the 50 states’ attorneys general think the big banks should do to fix the problems. Although not all of the AGs are in agreement yet – some think it’s too harsh and others too weak – it was the first peek inside the settlement negotiations. The proposal mostly amounted to saying “thou shalt obey the law and not abuse borrowers.” One term was “sworn statements shall not contain information that is false or unsubstantiated.” That is, “Thou shalt not commit perjury.”
Given how basic the term sheet was, it was hard to imagine how the big banks could make a good faith counter-proposal that was significantly weaker. And yet a recently leaked document shows they did.
The banks’ counter-proposal, dated March 28th, rewrites the “banks can’t commit perjury” term as the banks “shall implement processes reasonably designed to ensure the factual assertions made in…sworn statements…are accurate and complete…” and “sworn statements shall not contain information that is false or unsubstantiated in any material respect.”
Translation: It’s not perjury if we make a reasonable effort not to lie under oath and we don’t consider the lie to be important.
What kind of lie in a sworn statement isn’t “material?” What about a small detail, like the date? Well, consider documents Bank of America and Wells Fargo filed in a case brought by homeowners in Hawaii — the securitized trusts trying to foreclose on the loans were supposedly given the mortgages before the trusts existed. Are those dates material?
Wells Fargo, responding to a request for comment, did not address the impossible date issue: “The borrowers lost their home following a protracted judicial foreclosure, the issues raised in their petition [i.e. the claim that documents were fraudulent] were argued and ruled upon by the courts twice already and the most recent petition was actually denied by the Hawaii Supreme Court on March 17.” Bank of America (BAC) did not respond to a request for comment. The attorney for the homeowners, Gary Victor Dubin, disputes Wells Fargo’s (WFC) characterization.
Bottom line: Wells filed a document to give a trust a mortgage before the trust existed. Would the banks’ proposed settlement language make that okay?
Or perhaps the banks are suggesting that they could be wrong about precisely how much a borrower owes. If the borrower is in default, they might say, we’re right to foreclose. Does it really matter if our math is precisely correct? Well, yes. For starters, the bad math might mean the borrower shouldn’t be facing foreclosure.
For example, the Matthews family of Missouri would not be facing foreclosure if JPMorgan Chase (JPM) hadn’t collected some $3,000 for an insurance policy the Matthews didn’t need — the Matthews already had insurance — and if Chase’s computer system would acknowledge the Matthews’ payment should be $1,216, not the $1,611 Chase started charging to pay for the insurance.
When asked about the Matthews’ account, a Chase spokesman responded: “The customer’s account has been corrected, reducing the payment back to the proper amount, and we are reaching out to the customer to resolve the past issues. In the meantime we will amend her credit and remove foreclosure actions from her record.” However, the Matthews countered that it remained unresolved.
Again, the bottom line: Chase’s computer system had the wrong payment in place and that caused the Matthews to face foreclosure wrongly.
A mess of records
Like the language regarding perjury, the attorneys general and the banks have a different view of the banks’ need to keep accurate records of what people owe. The attorneys’ general term sheet says the banks “…shall maintain procedures to ensure the accuracy and timely updating of borrowers’ account information…” The banks’ counter offer again inserts the weasel words “reasonably designed,” as in “procedures reasonably designed to ensure accuracy…”
One theme running through the banks’ counter proposal is their unwillingness to be responsible for their employees’ actions.
For example, the AG term sheet flatly says “Servicer’s employees shall not instruct, advise or recommend that borrowers go into default in order to qualify for [a mortgage modification].” The banks’ counter offer says “Servicer shall instruct its employees not to advise …”
Inserting that “shall instruct” is all about plausible deniability: Look, we told our employees not to tell borrowers to default, who cares if we were winking and nodding when we told them that?
Telling people to default before a modification can be considered is insidious, because it triggers many preventable foreclosures. As it is, during trial modifications when the borrowers promptly make the full, modified payment — the only payment they’re supposed to make — the banks consider the payment late because it’s less than the original amount, and charge a late fee. If the borrower is already three months delinquent when he starts the mortgage modification, the fees have grown so much that the borrower ends up in a big hole.
The bank then starts on the foreclosure path while considering the modification — the so-called “Dual Track” — and the borrower ends up foreclosed on.
I’ve spoken to many borrowers who were told to default. Most recently, I’ve been chatting with Joe, a homeowner in Georgia who works in the financial industry. Joe and his family have been struggling with SunTrust Bank (STI) since 2009. At that time, they wanted to refinance their house. The couple’s credit was stellar, rates were low, they had a long and deep relationship with the bank, and they were willing to pay closing costs. Seemed like a no-brainer.
Unfortunately they owed more than the house was worth, so the bank wouldn’t do the deal. Instead, in January 2010 the bank told him to seek a mortgage modification. When an appropriate program became available in July, Joe submitted his application package. But SunTrust didn’t reply at all until December, and in January 2011, it told him he didn’t qualify for a modification because he was still current on his mortgage.
Meanwhile, the family blew through their life savings. Joe’s income was reduced, his wife fell ill and could no longer work, and her medications were expensive. But they stayed current on their mortgage through December 2010.
Despite that heroic effort to stay current, Joe is now facing foreclosure. The bank told him to default in January, and it’s now made a modification offer that reduces his payment by a mere $250 a month — not enough for him to be able to save his house, and half of what he could have saved by doing the 2009 refi. And if the refi had gone through, they would still have their life savings, and their credit would still be great.
Joe has asked SunTrust to explain its math in calculating what kind of modification he qualifies for, but it refused. The AG proposal would solve this problem, but the banks’ counteroffer wouldn’t. In fact, most recently, SunTrust demanded that Joe give it some $7,000 — three months of trial payments. But SunTrust wouldn’t tell him how the money would be applied, whether for fees, principal, or interest, until it decided — if it decided — at the end of that time to give him a permanent modification. Nor would it tell him what the terms of a permanent offer would be if it were made. SunTrust refused to put anything in writing. Joe wouldn’t pay on that basis, of course.
Joe recorded his conversations with SunTrust, which he shared with Fortune. SunTrust said: “While we are not at liberty to discuss a specific client relationship or our internal policies and procedures, generally speaking we work with clients on a case-by-case basis regarding potential loan modifications taking into account investor guidelines and the fact that every situation is different.”
The AGs must not lose sight of people like Joe, a former marine who served during the first Gulf War, and condemn troubled borrowers as unsympathetic “deadbeats.” The banks are relying on that stereotype to carry the day for them.
If the banks won’t deal, throw the book at them. Just like it’s been thrown at baseball great Barry Bonds for his comparatively trivial alleged perjury. If we can prosecute Bonds but not the banks, what kind of country are we?
http://finance.fortune.cnn.com/2011/04/07/foreclosure-fraud-the-homeowner-nightmares-continue/
American Eagle Realty, we are a realty company not a legal firm, we can help with all of your real estate needs including foreclosure. American Eagle Realty can help you with solid answers about your rights and options before your house is foreclosed on! We are experts in the Short Sale Process and have the experience needed to work with your bank! Loan Mods, too. Contact us we can help, We have helped others we can help you...
Whether you want buy, rent, or sell a home we can assist you.
American Eagle Realty
www.american-eagle-realty.com
502-969-1801
Salvageable mortgages are being foreclosed because the banks, wearing their “mortgage servicer” hats, find it more profitable to foreclose than modify loans. And even when the banks sincerely try to modify loans, they often seem incompetent.
In early March, a settlement proposal surfaced claiming to represent what the 50 states’ attorneys general think the big banks should do to fix the problems. Although not all of the AGs are in agreement yet – some think it’s too harsh and others too weak – it was the first peek inside the settlement negotiations. The proposal mostly amounted to saying “thou shalt obey the law and not abuse borrowers.” One term was “sworn statements shall not contain information that is false or unsubstantiated.” That is, “Thou shalt not commit perjury.”
Given how basic the term sheet was, it was hard to imagine how the big banks could make a good faith counter-proposal that was significantly weaker. And yet a recently leaked document shows they did.
The banks’ counter-proposal, dated March 28th, rewrites the “banks can’t commit perjury” term as the banks “shall implement processes reasonably designed to ensure the factual assertions made in…sworn statements…are accurate and complete…” and “sworn statements shall not contain information that is false or unsubstantiated in any material respect.”
Translation: It’s not perjury if we make a reasonable effort not to lie under oath and we don’t consider the lie to be important.
What kind of lie in a sworn statement isn’t “material?” What about a small detail, like the date? Well, consider documents Bank of America and Wells Fargo filed in a case brought by homeowners in Hawaii — the securitized trusts trying to foreclose on the loans were supposedly given the mortgages before the trusts existed. Are those dates material?
Wells Fargo, responding to a request for comment, did not address the impossible date issue: “The borrowers lost their home following a protracted judicial foreclosure, the issues raised in their petition [i.e. the claim that documents were fraudulent] were argued and ruled upon by the courts twice already and the most recent petition was actually denied by the Hawaii Supreme Court on March 17.” Bank of America (BAC) did not respond to a request for comment. The attorney for the homeowners, Gary Victor Dubin, disputes Wells Fargo’s (WFC) characterization.
Bottom line: Wells filed a document to give a trust a mortgage before the trust existed. Would the banks’ proposed settlement language make that okay?
Or perhaps the banks are suggesting that they could be wrong about precisely how much a borrower owes. If the borrower is in default, they might say, we’re right to foreclose. Does it really matter if our math is precisely correct? Well, yes. For starters, the bad math might mean the borrower shouldn’t be facing foreclosure.
For example, the Matthews family of Missouri would not be facing foreclosure if JPMorgan Chase (JPM) hadn’t collected some $3,000 for an insurance policy the Matthews didn’t need — the Matthews already had insurance — and if Chase’s computer system would acknowledge the Matthews’ payment should be $1,216, not the $1,611 Chase started charging to pay for the insurance.
When asked about the Matthews’ account, a Chase spokesman responded: “The customer’s account has been corrected, reducing the payment back to the proper amount, and we are reaching out to the customer to resolve the past issues. In the meantime we will amend her credit and remove foreclosure actions from her record.” However, the Matthews countered that it remained unresolved.
Again, the bottom line: Chase’s computer system had the wrong payment in place and that caused the Matthews to face foreclosure wrongly.
A mess of records
Like the language regarding perjury, the attorneys general and the banks have a different view of the banks’ need to keep accurate records of what people owe. The attorneys’ general term sheet says the banks “…shall maintain procedures to ensure the accuracy and timely updating of borrowers’ account information…” The banks’ counter offer again inserts the weasel words “reasonably designed,” as in “procedures reasonably designed to ensure accuracy…”
One theme running through the banks’ counter proposal is their unwillingness to be responsible for their employees’ actions.
For example, the AG term sheet flatly says “Servicer’s employees shall not instruct, advise or recommend that borrowers go into default in order to qualify for [a mortgage modification].” The banks’ counter offer says “Servicer shall instruct its employees not to advise …”
Inserting that “shall instruct” is all about plausible deniability: Look, we told our employees not to tell borrowers to default, who cares if we were winking and nodding when we told them that?
Telling people to default before a modification can be considered is insidious, because it triggers many preventable foreclosures. As it is, during trial modifications when the borrowers promptly make the full, modified payment — the only payment they’re supposed to make — the banks consider the payment late because it’s less than the original amount, and charge a late fee. If the borrower is already three months delinquent when he starts the mortgage modification, the fees have grown so much that the borrower ends up in a big hole.
The bank then starts on the foreclosure path while considering the modification — the so-called “Dual Track” — and the borrower ends up foreclosed on.
I’ve spoken to many borrowers who were told to default. Most recently, I’ve been chatting with Joe, a homeowner in Georgia who works in the financial industry. Joe and his family have been struggling with SunTrust Bank (STI) since 2009. At that time, they wanted to refinance their house. The couple’s credit was stellar, rates were low, they had a long and deep relationship with the bank, and they were willing to pay closing costs. Seemed like a no-brainer.
Unfortunately they owed more than the house was worth, so the bank wouldn’t do the deal. Instead, in January 2010 the bank told him to seek a mortgage modification. When an appropriate program became available in July, Joe submitted his application package. But SunTrust didn’t reply at all until December, and in January 2011, it told him he didn’t qualify for a modification because he was still current on his mortgage.
Meanwhile, the family blew through their life savings. Joe’s income was reduced, his wife fell ill and could no longer work, and her medications were expensive. But they stayed current on their mortgage through December 2010.
Despite that heroic effort to stay current, Joe is now facing foreclosure. The bank told him to default in January, and it’s now made a modification offer that reduces his payment by a mere $250 a month — not enough for him to be able to save his house, and half of what he could have saved by doing the 2009 refi. And if the refi had gone through, they would still have their life savings, and their credit would still be great.
Joe has asked SunTrust to explain its math in calculating what kind of modification he qualifies for, but it refused. The AG proposal would solve this problem, but the banks’ counteroffer wouldn’t. In fact, most recently, SunTrust demanded that Joe give it some $7,000 — three months of trial payments. But SunTrust wouldn’t tell him how the money would be applied, whether for fees, principal, or interest, until it decided — if it decided — at the end of that time to give him a permanent modification. Nor would it tell him what the terms of a permanent offer would be if it were made. SunTrust refused to put anything in writing. Joe wouldn’t pay on that basis, of course.
Joe recorded his conversations with SunTrust, which he shared with Fortune. SunTrust said: “While we are not at liberty to discuss a specific client relationship or our internal policies and procedures, generally speaking we work with clients on a case-by-case basis regarding potential loan modifications taking into account investor guidelines and the fact that every situation is different.”
The AGs must not lose sight of people like Joe, a former marine who served during the first Gulf War, and condemn troubled borrowers as unsympathetic “deadbeats.” The banks are relying on that stereotype to carry the day for them.
If the banks won’t deal, throw the book at them. Just like it’s been thrown at baseball great Barry Bonds for his comparatively trivial alleged perjury. If we can prosecute Bonds but not the banks, what kind of country are we?
http://finance.fortune.cnn.com/2011/04/07/foreclosure-fraud-the-homeowner-nightmares-continue/
American Eagle Realty, we are a realty company not a legal firm, we can help with all of your real estate needs including foreclosure. American Eagle Realty can help you with solid answers about your rights and options before your house is foreclosed on! We are experts in the Short Sale Process and have the experience needed to work with your bank! Loan Mods, too. Contact us we can help, We have helped others we can help you...
Whether you want buy, rent, or sell a home we can assist you.
American Eagle Realty
www.american-eagle-realty.com
502-969-1801
Wednesday, April 6, 2011
Mortgages are cheap - if you can get one?
According to the Federal Reserve, nearly a quarter of people who apply for loans are turned down. The denial rates tell only half the story. Many potential buyers aren't even applying for loans because they assume they can't get one. That shows up in credit scores for loans financed with backing from Fannie Mae and Freddie Mac. The average credit score has risen to 760 from 720 a few years ago. For FHA loans, the average score has gone to 700 from 660. Loans made to borrowers with sub-620 scores are almost nonexistent. Another factor keeping people out of the mortgage market is that lenders now require much more up-front cash. The median down payment for purchase is about 15%. During the housing boom, it approached zero. On most loans, banks want 20% down. On $200,000 purchases, that's $40,000, an insurmountable obstacle for many young house hunters.
Or, in New York City, where the median home price is $800,000, buyers need $160,000 up front. Industry insiders say all these factors have reduced the pool of buyers, lowering demand for homes and hurting prices. "We feel it really reduces the demand for houses," said Mike D'Alonzo, president of the National Association of Mortgage Brokers. "It's an unbelievable buyer's market, but there hasn't been as much activity as you would expect because not as many people qualify for loans." And it's about to get harder for buyers. Federal regulators proposed rules last week that are designed to discourage risky lending but that will also likely further restrict lending.
Banks would be required to keep 5% of some loans, specifically those with less than 20% down payments, on their books rather than selling them all off as securities. As a result, banks make be unlikely to issue loans where less than 20% is put down. So much for first-time buyers. "We think the new rules are appalling," said the NAHB's Howard. "Only the wealthy will be able to buy homes at low interest cost." It could also further erode consumer demand for homes. The immediate impact, should the new regulations get adopted, should be minor, according to Steve O'Connor, spokesman for the Mortgage Bankers Association. That's because Fannie, Freddie and FHA loans are all exempt from the requirements and they represent more than 90% of the market right now. The government, however, wants to reduce the presence of all three agencies in favor of private lenders, and banking experts fears the long-term impact of abandoning the field to mostly private companies.
American Eagle Realty, we are a realty company not a legal firm, we can help with all of your real estate needs including foreclosure. American Eagle Realty can help you with solid answers about your rights and options before your house is foreclosed on! We are experts in the Short Sale Process and have the experience needed to work with your bank! Loan Mods, too. Contact us we can help, We have helped others we can help you...
Whether you want buy, rent, or sell a home we can assist you.
American Eagle Realty
www.american-eagle-realty.com
502-969-1801
Or, in New York City, where the median home price is $800,000, buyers need $160,000 up front. Industry insiders say all these factors have reduced the pool of buyers, lowering demand for homes and hurting prices. "We feel it really reduces the demand for houses," said Mike D'Alonzo, president of the National Association of Mortgage Brokers. "It's an unbelievable buyer's market, but there hasn't been as much activity as you would expect because not as many people qualify for loans." And it's about to get harder for buyers. Federal regulators proposed rules last week that are designed to discourage risky lending but that will also likely further restrict lending.
Banks would be required to keep 5% of some loans, specifically those with less than 20% down payments, on their books rather than selling them all off as securities. As a result, banks make be unlikely to issue loans where less than 20% is put down. So much for first-time buyers. "We think the new rules are appalling," said the NAHB's Howard. "Only the wealthy will be able to buy homes at low interest cost." It could also further erode consumer demand for homes. The immediate impact, should the new regulations get adopted, should be minor, according to Steve O'Connor, spokesman for the Mortgage Bankers Association. That's because Fannie, Freddie and FHA loans are all exempt from the requirements and they represent more than 90% of the market right now. The government, however, wants to reduce the presence of all three agencies in favor of private lenders, and banking experts fears the long-term impact of abandoning the field to mostly private companies.
American Eagle Realty, we are a realty company not a legal firm, we can help with all of your real estate needs including foreclosure. American Eagle Realty can help you with solid answers about your rights and options before your house is foreclosed on! We are experts in the Short Sale Process and have the experience needed to work with your bank! Loan Mods, too. Contact us we can help, We have helped others we can help you...
Whether you want buy, rent, or sell a home we can assist you.
American Eagle Realty
www.american-eagle-realty.com
502-969-1801
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