Author: Brian Honea December 15, 2014
The U.S. Senate and the House of Representatives have both unanimously voted to pass a bill that give military servicemembers who have recently returned from duty added protection from foreclosure, according to an announcement from Senator Sheldon Whitehouse (D-Rhode Island), who introduced the bill in May.
S.2404, also known as the Foreclosure Relief and Extension for Servicemembers Act of 2014, unanimously passed in the Senate on Thursday, December 11 and in the House on Friday, December 12, according to the announcement from Whitehouse.
The bill extends until January 2016 a provision that sets one year as the time a servicemember’s house is protected from foreclosure upon his or her return from active duty, if the mortgage was obtained before the servicemember was an active member of the military. The Commission on the National Guard and Reserves had submitted a report that prompted the foreclosure protection extension from 90 days to nine months in 2008. The period was extended to nine months as part of the Servicemembers’ Civil Relief Act (SCRA) in 2008 and lengthened further to one year in 2012 as part of a bill introduced by Whitehouse.
The one-year period was set to expire at the end of December and would have reverted back to its pre-2008 level of 90 days at the beginning of 2015. Whitehouse’s bill that he introduced back in May called for the permanent adoption of the one-year foreclosure protection period.
“After fighting for our country overseas, our troops shouldn’t have to fight to keep a roof over their heads when they return home,” Whitehouse said. “Servicemembers returning from active duty often need time to regain their financial footing, particularly those in the National Guard and Reserves who give up their full-time jobs to fight for our freedom. We should ultimately pass legislation to make this protection permanent, but I’m glad we were able to secure peace of mind for our veterans for one more year.”
The SCRA contains other protections for military members and their families from auto repossessions and other personal property while the servicemember is on active duty. Under the current law, servicemembers and their families cannot be evicted from housing due to nonpayment of rent that is less than $1,200 per month while the servicemember is on active duty..
Author: Brian Honea December 9, 2014
Fannie Mae and Freddie Mac announced on Tuesday a moratorium on evictions for single-family foreclosed homes for the holiday season.
The GSEs said evictions will not be enforced from December 17, 2014, until January 2, 2015, for single-family homes that have been foreclosed on, meaning that families living in those homes will be able to continue to live there during that two-week period. Both GSEs said that legal and administrative proceedings related to the eviction process may continue during that period even though the eviction itself will not be carried out.
“As in previous years, we believe it is important to extend the timeline of help for struggling borrowers during the holidays,” said Joy Cianci, SVP of Credit Portfolio Management for Fannie Mae. “If you are in trouble or facing foreclosure, reach out to Fannie Mae or your servicer today to get help. There are more options than ever before to avoid foreclosure. We want to help struggling borrowers whenever possible.”
Freddie Mac’s suspension of evictions will apply not just to foreclosed occupied single-family homes, but to 2-4 unit properties that have Freddie Mac owned or guaranteed mortgages, according to the announcement.
“Today’s announcement will bring some holiday relief to borrowers who went through foreclosure and were preparing to move,” said Chris Bowden, SVP of REO at Freddie Mac. “We strongly urge homeowners with financial challenges to start the new year by calling their mortgage servicer to explore one of the Freddie Mac workout options that have prevented over one million foreclosures since 2009.”
Fannie Mae has helped work out loan solutions for more than 1.6 million distressed homeowners to avoid foreclosure since 2009. For additional foreclosure prevention resources, homeowners can visit www.knowyouroptions.com. Freddie Mac has helped more than one million struggling homeowners avoid foreclosure during that same time period; more information can be found at Freddie Mac’s Mortgage.
We need to add a program for this program.
Government officials have announced extra incentives for borrowers under the Home Affordable Modification Program (HAMP).
Currently, homeowners who remain current following their modification are eligible to earn up to $5,000 over the first five years of their modified loan, which is applied in repayment of their outstanding principal balance. Under the revised guidelines announced Thursday, all homeowners in HAMP will now be eligible to earn $5,000 in the sixth year of their modification, reduceing their outstanding principal balance by as much as $10,000. Homeowners will also be offered an opportunity to re-amortize the reduced mortgage balance, which will have the effect of lowering their monthly payment.
“While the housing sector has strengthened in recent years, there are still many homeowners struggling to make their mortgage payments,” said Secretary of the Treasury Jacob Lew. “The changes we are announcing today offer meaningful incentives for borrowers to stay current in their modifications, increase their opportunity to build equity in their homes, and provide vital safety nets for those facing greater financial strains.”
Government officials estimate that approximately one million homeowners with HAMP loans are eligible for the additional $5,000 incentive. The changes appear aimed at motivating borrowers to stay current while also providing a cushion for borrowers due to see higher rates. The Treasury Department and Department of Housing and Urban Development (HUD ) established HAMP in 2009 in an effort to provide relief to homeowners facing financial hardship.
The administration also announced incentives for borrowers in the HAMP Tier 2 alternative program., which provides a low fixed interest rate for borrowers who did not qualify for a standard HAMP modification. Those borrowers can now pay a 50-basis point lower interest rate and are eligible for the $5,000 pay-for-performance incentive if they are in good standing at the end of their sixth year.
Additionally, the administration announced it has increased the amount of relocation assistance provided to homeowners to $10,000 to better reflect increased rents and the cost of moving in many parts of the country.
The payments would impact roughly 1 million borrowers who received reduced mortgage rates through the Home Affordable Modification Program during the Great Recession.
The discounted 2 percent mortgage rates are scheduled to rise by a percentage point for many of these borrowers entering the sixth year of the program. That would increase monthly payments for those who might still be struggling to find work or additional income.
“It’s about trying to prevent as many avoidable foreclosures as we can,” said Timothy Bowler, deputy assistant Treasury secretary for financial stability.
Read MoreSelf-employed? Good luck getting a mortgage
Mortgage rates on the modified loans will eventually rise to market levels.
This latest principal reduction would be in addition to the $5,000 in government payments made during the first five years of the loan modification. Because of the combined $10,000 in principal reduction, qualifying borrowers would have the option of adjusting their mortgage terms to pay on average $50 less a month. Otherwise, those borrowers could repay their mortgages ahead of schedule.
The HAMP program was launched in 2009 amid cratering home prices and fierce job cuts during the worst economic downturn since the 1930s. Obama administration officials initially pledged that HAMP could save as many as 4 million homeowners from foreclosure, but only 1.2 million were ultimately able to participate in the program established through the 2008 law creating the Troubled Asset Relief Program, or TARP.
More than 5.3 million homes were lost to foreclosure during the financial crisis, according to CoreLogic, a real estate data firm.
Watchdog outlines proposed foreclosure rules
The Consumer Financial Protection Bureau (CFPB) has proposed additional measures to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers. The proposal would require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan, to put in place additional servicing transfer protections and to take steps to protect borrowers from a wrongful foreclosure sale. The proposition would also help ensure that surviving family members and others who inherit or receive property have the same protections under the CFPB’s mortgage servicing rules as the original borrower. “The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” said CFPB Director Richard Cordray. “Today’s proposal would give greater protections to mortgage borrowers.”
The current rules, which went into effect on Jan. 10, require mortgage servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments and correct errors on request, according to the CFPB.
Highlights from the CFPB’s proposal:
- Require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan: Currently, a mortgage servicer must give the borrower certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. Under the proposed rule, servicers would have to give those protections again for borrowers who have brought their loans current at any time since the last loss mitigation application. CFPB said the change would help borrowers who obtain a permanent loan modification and later suffer an unrelated hardship— such as the loss of a job or the death of a family member— that could otherwise cause them to face foreclosure.
- Expand consumer protections to surviving family members and other homeowners: If a borrower dies, CFPB rules currently require that servicers promptly identify and communicate with family members, heirs, or other parties— known as “successors in interest”— who have a legal interest in the home. Today’s proposal would expand the circumstances in which consumers would be considered successors under the rules. The expanded circumstances include when a property is transferred after a divorce, legal separation, through a family trust, between spouses, from a parent to a child or when a joint tenant borrower dies.
- Require servicers to notify borrowers when loss mitigation applications are complete: When a borrower completes a loss mitigation application, key foreclosure protections take effect. If consumers do not know the status of their applications, they cannot know the status of their foreclosure protections, said the CFPB. The proposal would require servicers to notify borrowers promptly that the application is complete, so that borrowers know the status of the application and their protections.
- Protect struggling borrowers during servicing transfers: The proposition clarifies that generally a transferee servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer. If the borrower’s application was complete prior to the transfer, the new servicer generally must evaluate it within 30 days of when the prior servicer received it. For involuntary transfers, the proposal would give the new servicer at least 15 days after the transfer date to evaluate a complete application. If the new servicer needs more information in order to evaluate the application, the borrower would retain some foreclosure protections in the meantime.
- Clarify servicers’ obligations to avoid dual-tracking and wrongful foreclosures: The new rule would clarify what steps servicers and their foreclosure counsel must take to protect borrowers from a wrongful foreclosure sale. The regulator is suggesting that servicers who do not take reasonable steps to prevent the sale must dismiss a pending foreclosure action. The measures would aid servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.
- Clarify when a borrower becomes delinquent: The proposal would simplify that delinquency begins on the day a borrower fails to make a periodic payment. When a borrower misses a payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date of delinquency advances. The proposal also would allow servicers the discretion, under certain circumstances, to consider a borrower as having made a timely payment even if the borrower’s payment falls short of a full payment by a small amount.
- Provide more information to borrowers in bankruptcy: The additional measures would require servicers to provide periodic statements to borrowers facing bankruptcy. Under the current rules, servicers do not have to provide certain disclosures to borrowers who have told the servicer to stop contacting them under the Fair Debt Collection Practices Act. With these changes, servicers would be required to provide written early intervention notices to let those borrowers know about loss mitigation options.
The number of foreclosure filings, which include default notices, scheduled auctions, and bank repossessions (REOs), increased by 15 percent from September to October, the largest month-over-month jump since the peak of foreclosure activity in March 2010, according to RealtyTrac‘s October 2014 U.S. Foreclosure Market Report released Thursday.
Foreclosure filings were reported for 123,109 U.S. residential properties in October, which despite the month-over-month increase, still represented an 8 percent decline in the number of foreclosure filings from October 2013. One in every 1,069 residential housing units in the U.S. had a foreclosure filing in October, according to RealtyTrac.
The month-over-month increase in foreclosure filings was driven largely by a spike in scheduled foreclosure auctions. Foreclosure auctions nationwide totaled 58,869 for October, the highest total for a single month since May 2013. The October number of foreclosure auctions was a 24 percent increase from September and a 7 percent jump up from October 2013, according to RealtyTrac.
“The October foreclosure numbers are not a complete surprise given that over the past three years there has been an average 8 percent monthly uptick in scheduled foreclosure auctions in October as banks try to get ahead of the usual holiday foreclosure moratoriums,” said Daren Blomquist, VP at RealtyTrac. “But the sheer magnitude of the increase this year demonstrates there is more than just a seasonal pattern at work. Distressed properties that have been in a holding pattern for years are finally being cleared for landing at the foreclosure auction.”
In judicial foreclosure states, where the foreclosure process has to pass through the courts, scheduled foreclosure auctions rose in October by 21 percent month-over-month and 3 percent year-over-year. In non-judicial foreclosure states, where foreclosures are not required to be processed through the courts, scheduled auctions surged upward in October by 27 percent month-over-month and 14 percent year-over-year, according to RealtyTrac.
The states that experienced the largest year-over-year increases in scheduled foreclosure auctions in October, according to RealtyTrac, were Oregon (399 percent), North Carolina (288 percent), New Jersey (118 percent), New York (89 percent), and Connecticut (60 percent).
In October, REO activity (lenders repossessing properties via foreclosure) increased by 22 percent from September, according to RealtyTrac. It was the largest month-over-month increase in REOs since June 2009. REOs were down 26 percent from October 2013, however. In all, lenders repossessed 27,914 U.S. residential properties in October, RealtyTrac reported.
REOs increased year-over-year in 16 states, led by Maryland (190 percent), Pennsylvania (25 percent), New Jersey (22 percent), Oregon (20 percent), and New York (18 percent).
“There is still strong demand from the large institutional investors at the foreclosure auction in some markets, but even in markets with decreasing demand at the foreclosure auction, banks can be confident in selling REO properties quickly and at a good price,” Blomquist said. “That’s because there is still strong demand from buyers, particularly in the lower price ranges, combined with a dearth of distressed homes listed for sale.”
Foreclosure starts totaled 56,452 in the U.S. in October, a month-over-month increase of 12 percent but a year-over-year decline of 4 percent, according to RealtyTrac. The month-over-month increase was the largest since August 2011..
Foreclosures rates are dropping across the country and apparently billionaire Bill Erbey didn’t get the memo. According to a quarterly presentation, Erbey foreclosed on 1,022 houses last quarter through a company he is chairman of, Altisource Residential.
Erbey, chairman of mortgage servicer Ocwen, one of Altisource’s biggest clients, stands to win big from the foreclosures, according to the New York Post. The news appears to contradict a statement he said last week of Ocwen’s goals, “We work very hard to keep borrowers in their homes.” Ocwen is currently being accused of denying struggling borrowers the chance to fix loan problems and avoid foreclosures. A recent investigation by the New York’s Department of Financial Services found that Atlanta-based Ocwen Financial inappropriately backdated thousands of time-sensitive letters to mortgage borrowers and did not take action to fix the issue despite repeated notices of concern..
The Consumer Financial Protection Bureau (CFPB) issued a report Tuesday that alleges mortgage and student loan servicers are engaged in a bevy of illegal practices.
Bureau examiners found that some servicers charged unfair late fees and harassed consumers with debt collection calls. The CFPB also found that some mortgage servicers failed to provide critical consumer protections required by the new CFPB servicing rules that took effect earlier this year.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the CFPB has authority to supervise banks with over $10 billion in assets and certain nonbanks. Those nonbanks include mortgage companies, private student loan lenders and payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants.”
According to CFPB, the report aims to share information that industry participants can use to ensure their operations remain in compliance with federal consumer financial law. “All borrowers should be treated fairly by loan servicers, and through our supervision program, we intend to hold them accountable for how they treat borrowers,” said CFPB Director Richard Cordray.
Below are some of CFPB’s mortgage servicing findings from the report:
- Failed to oversee service providers: Institutions in contract with service providers failed to provide policies and procedures that oversee the providers. “When institutions do not oversee their activities, service providers that are unfamiliar with consumer financial protection laws can harm consumers,” the CFPB said.
- Unfairly delayed permanent loan modifications: Servicers delayed the loan modification process, causing “harm because they [borrowers] did not promptly receive the benefits of the terms of the permanent modification.”
- Deceived consumers about status of permanent loan modifications: Examiners found that “one or more servicers” did not execute certain permanent modification agreements after borrowers had signed them. Instead, the servicers sent borrowers updated agreements with different terms.
The CFPB said they alerted the accused companies to their concerns and outlined necessary remedial measures. The regulator did not name the firms allegedly involved in the illegal activity..
Using a legal tool known as a “deficiency judgment,” lenders can ensure that borrowers sold their home on a “short Sell” or lost their home to foreclosure are haunted by these zombie-like debts for years, and sometimes decades, to come.
But the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses. Now, lenders want their money back, and they figure it’s the perfect time to pursue borrowers: many of those who went through foreclosure have gotten new jobs, paid off old debts and even, in some cases, bought new homes.
“Just because they don’t have the money to pay the entire mortgage, doesn’t mean they don’t have enough for a deficiency judgment,” said Florida lender foreclosure attorney Michael Wayslik.
‘Slapped to the floor’
In 2008, bank teller Danell Huthsing broke up with her boyfriend and moved out of the concrete bungalow they shared in Jacksonville, Florida. Her name was on the mortgage even after she moved out, and when her boyfriend defaulted on the loan, her name was on the foreclosure papers, too.
She moved to St. Louis, Missouri, where she managed to amass $20,000 of savings and restore her previously stellar credit score in her job as a service worker.
But on July 5, a process server showed up on her doorstep with a lawsuit demanding $91,000 for the portion of her mortgage that was still unpaid after the home was foreclosed and sold. If she loses, the debt collector that filed the suit can freeze her bank account, garnish up to 25 percent of her wages, and seize her paid-off 2005 Honda Accord.
“For seven years you think you’re good to go, that you’ve put this behind you,” said Huthsing, who cleared her savings out of the bank and stowed the money in a safe to protect it from getting
It appears as if Fannie Mae is doing just that. In Florida alone in the past year, for example, at least 10,000 lawsuits have been filed—representing hundreds of millions of dollars of payments, according to Jacksonville, Florida-based attorney Chip Parker.
In Lee County, Florida, for example, Dyck O’Neal only filed four foreclosure-related deficiency judgment cases last year. So far this year, it has filed 360 in the county, which has more than 650,000 residents and includes Ft. Myers. The insurer the Mortgage Guaranty Insurance Company has also filed about 1,000 cases this past year in Florida alone.
The FHFA declined to comment..
Bank of America routinely denied qualified borrowers a chance to modify their loans to more affordable terms and paid cash bonuses to bank staffers for pushing homeowners into foreclosure, according to affidavits filed last week in a Massachusetts lawsuit.
“We were told to lie to customers,” said Simone Gordon, who worked in the bank’s loss mitigation department until February 2012. “Site leaders regularly told us that the more we delayed the HAMP [loan] modification process, the more fees Bank of America would collect.”
In sworn testimony, six former employees describe what they saw behind the scenes of an often opaque process that has frustrated homeowners, their attorneys and housing counselors.
They describe systematic efforts to undermine the program by routinely denying loan modifications to qualified applicants, withholding reviews of completed applications, steering applicants to costlier “in-house” loans and paying bonuses to employees based on the number of new foreclosures they initiated.
The employees’ sworn testimony goes a long way to explain why the government’s Home Affordable Modification Program, launched in 2008 during the depths of the housing collapse, has fallen so far short of the original targets to save millions of Americans from being tossed
In their sworn testimony, the former Bank of America employees detail a series of specific company policies designed to provide as little foreclosure relief as possible.
“Based on what I observed, Bank of America was trying to prevent as many homeowners as possible from obtaining permanent HAMP loan modifications while leading the public and the government to believe that it was making efforts to comply with HAMP,” said Theresa Terrelonge, a Bank of America collector until June 2010. “It was well known among managers and many employees that the overriding goal was to extend as few HAMP loan modifications to homeowners as possible.”
The reason was fairly simple, according to William Wilson Jr., who worked as a manager in the company’s Charlotte, N.C., headquarters, where he supervised 13 mortgage representatives working on with customers seeking HAMP loan modifications.
After stonewalling qualified borrowers seeking an affordable HAMP loan, Bank of America representatives could upsell them to a more costly “in-house” loan modification, with rates 3 points higher than the 2 percent rate available under HAMP guidelines, Wilson testified.
“The unfortunate truth is that many and possibly most of these people were entitled to a HAMP loan modification, but had little choice but to accept a more expensive and less favorable in-house modification,” he said.
Courtney Scott was among the Bank of America customers who experienced repeated delays and denials for a government-sponsored modification of the mortgage on her suburban Atlanta home. The retired nurse and grandmother grew increasingly frustrated after bank representatives repeatedly requested she fill out paperwork covering the same information.
So she was surprised when the bank approved her six months later for an “in-house” modification.
“I got the [HAMP] denial in January, 2010 and then in June they came back with an in-house offer saying ‘Congratulations, you’ve been approved for a modification,'” said Scott. “But it only lowered my payments by about $7 and some cents.”
Scott’s frustration in complying with the banks request was designed to motivate her to agree to the in-house modification according to the former Bank of America workers.
Some completed applications were denied one at a time, while other borrowers were rejected en masse in a process known as “the blitz,” Wilson said.
“Approximately twice a month, Bank of America would order that case managers and underwriters ‘clean out’ the backlog of HAMP applications by denying any file in which the financial documents were more than 60 days old,” he said. “These included files in which the homeowner had provided all required financial documents.”
Beyond the policy of denying affordable loan applications, Bank of America also encouraged its employees to move loans to foreclosure—even when the process could have been prevented, according to said Erika Brown, a former bank customer service representative.
“These homeowners were eligible for loan modifications under HAMP, sent back all the required documents and made all their required payments under a trial plan,” she said. “Bank of America nevertheless damaged their credit ratings by reporting them delinquent, tacked on additional charges to their loans, increased the amounts it considered as being owed and often referred these homeowners to foreclosure.”
When a borrower defaults on a loan and the bank forecloses, investors who own the loan typically bear the loss on the unpaid principal balance. But the foreclosure process generates a lucrative stream of fees for mortgage servicers—for everything from property inspections to legal work required to seize a home.
Those added fees provide mortgage servicers like Bank of America with a financial incentive to foreclose—and a disincentive to provide a more affordable loan, according to consumer advocates. The company shared those incentives—and disincentives—with its workers, based on foreclosure quotas spelled out in monthly meetings with managers, according to Gordon.
“A collector who placed 10 or more accounts into foreclosure in a given month received a $500 bonus,” she said. “Bank of America also gave employees gift cards to retail stores like Target or Bed Bath & Beyond as rewards for placing accounts into foreclosure. Bank of America collectors and other employees who did not meet their quotas by not placing a sufficient number of accounts into foreclosure each month were subject to termination. Several of my colleagues were terminated on that basis.”
“Often this involved double counting loans that were in different stages of the modification process,” according to Steven Cupples, who supervised a team of Bank of America underwriters until June 2012. “It was well known among Bank of America employees that the numbers Bank.