PHH ordered to pay homeowner $16m in fraud case

POSTED ON July 21st  - POSTED IN news
 by Ryan Smith | Jul 21, 2014

A major mortgage servicing company has been ordered to pay a California man more than $16 million in a mortgage modification fraud case.

A Yuba County, Calif., jury awarded Phillip Linza $513,902 in compensatory damages and $15.7 million in punitive damages in the case, which dates to 2010, according to a News 10 ABC report.

Linza said that in 2010, he reached out to PHH for a loan modification, and the company agreed to reduce his payment from $2,100 per month to just over $1,500.

“I made the payments for months,” Linza told News 10. “Then I get a letter in the mail that says, ‘Oops, we made a mistake. Your payments aren’t $1,530, they’re $2,300.”

“They jacked it up, never explained why,” Linza’s attorney, Andre Chernay, told News 10. “They sent another letter demanding $7,000, never explained why.”

Linza testified in court that he made every effort to straighten things out, but only got a substantive response when he threatened to sue the company.

Linza said PHH told him, “’We’re a multibillion-dollar company. Stand in line because we’ve got a busload of attorneys that are on retainers.’”

Those attorneys didn’t end up doing the company much good. The judgment is one of the largest of its kind ever awarded in California, according to News 10.

Linza told News 10 that the verdict sends a message to the mortgage servicing industry.

“You people have been taking advantage of enough people and the country’s tired of it,” he said. “I mean, society’s tired of it.”

PHH is no stranger to legal woes. In January, the company was accused of orchestrating a massive kickback scheme. The company is also being investigated by the US Attorney’s Office for allegedly overcharging the government for foreclosure expenses on federally backed mortgages.


Current job creation may not drive a surge in home sales

POSTED ON July 11th  - POSTED IN news

The U.S. economy added 288,000 jobs in June, but this latest federal jobs report also contains a less widely reported fact: These job gains came from a surge in part-time jobs, which are unlikely to boost mortgage originations and drive home sales.

The added jobs — an average of 272,000 over the last three months according to the latest upwardly revised numbers from the U.S. Department of Labor — are not the type of high-paying, stable positions needed to support the housing recovery, according to analysts.

“The jobs report was really anything but rosy,” Anthony Sanders, a finance professor at George Mason University, told Scotsman Guide News on Monday. “We actually had shrinkage of full-time jobs. From a mortgage-origination standpoint that was very bad news. You really can’t have a ramp up in mortgage originations when it is all part-time jobs being created.”

The U.S. economy saw a net decline of 523,000 in full-time jobs in June while part-time jobs as defined by 34 hours or less surged by 799,000, according to Department of Labor statistics. Sanders said June’s employment numbers continued a trend of the economy adding mostly lower-wage jobs.

Sanders said that incomes have “flatlined.” Average hourly wages have increased at around 2 percent, roughly the rate of inflation, he said.

“It is better than no jobs being added but the fact of the matter is that it was a lot of low-wage, part-time jobs. We are still seeing this big surge in [such jobs as] bartenders, wait staff at restaurants and clerical jobs,” Sanders said. “We are not seeing the growth in the high-end numbers, which is what you need to see to have some sort of economic recovery.”.

SunTrust to pay $320 million over HAMP missteps

POSTED ON July 7th  - POSTED IN news
by Ryan Smith | Jul 07, 2014

SunTrust Mortgage has agreed to a $320 million settlement with the Justice Department that resolves a criminal investigation of the lender’s administration of the Home Affordable Modification Program.

The DOJ alleged that SunTrust misled mortgage servicing customers looking for mortgage modifications through HAMP. “Specifically, SunTrust made material misrepresentations and ommissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion,” the DOJ said in a release. “As a result of SunTrust’s mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms.”

“Instead of helping distressed homeowners, SunTrust’s mismanagement drove up foreclosures, decimated individual credit and increased costs for hardworking men and women across our nation,” said Attorney General Eric Holder.  “This resolution will provide much-needed restitution for victims. It will make available substantial funds to help other homeowners avoid foreclosure. And it will result in the kinds of systemic changes needed to ensure that this will not happen again.  This outcome demonstrates yet again that the Justice Department will never waver in its ongoing pursuit of those whose reckless and willful actions harm the American people and undermine our financial markets.”

As part of the settlement, SunTrust will pay $179 million in restitution to compensate borrowers. The money will be distributed to borrowers in eight pre-determined categories. If more is needed, the bank will also guarantee an additional $95 million. SunTrust will also pay $10 million directly to Fannie Mae and Freddie Mac.

Additionally, the lender will pay $16 million in forfeiture and $20 million to establish a fund for organizations that provide counseling to distressed homeowners..

The Obama administration’s Making Home Affordable initiative is being extended

POSTED ON June 30th  - POSTED IN news

The Obama administration’s Making Home Affordable initiative is being extended. In addition, the administration is taking steps to reignite non-agency securitizations.

The Homeowner Affordability and Stability Plan was unveiled in early 2009 by the U.S. Department of the Treasury.

Part of the plan was the Making Home Affordable initiative that includes government-subsidized loan modifications and refinances.

Through the Home Affordable Modification Program, servicers have permanently modified 1,364,674 mortgages as of April 30.

The Home Affordable Refinance Program has enabled 3,154,578 borrowers — including many who are in a negative equity position — to refinance as of the end of April.

Both HAMP and HARP were originally scheduled to end last year. But HARP was subsequently extended until the end of 2015, while HAMP was extended until the end of this year.

On Thursday, a joint announcement from the Department of Housing and Urban Development and the Treasury Department indicated that the Making Home Affordable initiative will be extended until at least Dec. 31, 2016.

The statement also indicated that HUD and the Treasury Department are partnering to support a multifamily mortgage risk-sharing program.

“With the new HUD-Treasury partnership, the Federal Financing Bank will use its authority to finance FHA-insured mortgages that support the construction and preservation of rental housing,” the statement said. “The first partnership — announced today — with the New York City Housing Development Corp. will help restore affordable rental housing damaged by Superstorm Sandy in Far Rockaway, Queens.”

The announcement additionally highlighted how many of the largest investors have not returned to the private-label mortgage-backed securities market. The lack of a vibrant PLS market has limited home buyers to agency loans..

Ocwen mishandled loans, illegally foreclosed on properties – state probe

POSTED ON June 17th  - POSTED IN news

Mortgage Professional America

 by Ryan Smith | Jun 17, 2014One of the nation’s largest mortgage servicers has been hit with the latest in a long line of penalties. Ocwen Financial Corporation will pay $3.7 million to the state of Massachusetts to settle claims that it failed to provide homeowners with required notices and that it illegally foreclosed on properties.

Massachusetts Attorney General Martha Coakley alleged that Ocwen failed to send state-mandated notices to homeowners in default and failed to execute proper mortgage assignments. An Ocwen-owned company, Litton Home Servicing Limited Partnership, is also alleged to have initiated foreclosures on homes to which it did not hold mortgages.

“Massachusetts homeowners faced unnecessary challenges due to these companies’ failure to provide proper notices and by initiating illegal foreclosures,” Coakley said. “This agreement provides for direct relief for affected borrowers and requires that Ocwen undertake efforts to repair problem titles in the Commonwealth.”

Under the settlement, the state of Massachusetts will be paid $700,000, while $3 million will be paid to homeowners.

The latest settlement is small potatoes compared to Ocwen’s other legal troubles. Plagued with allegations that it has mishandled its customers’ loans, the company is currently the subject of a class-action lawsuit and is being investigated by the state of New York for alleged servicing violations. In December, Ocwen reached a settlement with the Consumer Financial Protection Bureau in which it agreed to provide $2 billion in consumer relief after a CFPB probe found that the company “took advantage of borrowers at every stage of the process.”



Another Reason For Middle Class Decline: Late Inning Bubble Chasing

POSTED ON June 11th  - POSTED IN news

by Charles Hugh Smith • June 11, 2014

The middle class happily accepts high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses.

It’s well known that a major reason why the middle class is in decline is the stagnation of wages, a topic I have covered many times, most recently in What’s the Source of Soaring Corporate Profits? Stagnant Wages.

But another often overlooked source of middle class decline is the erosion of middle class wealth. The dynamic behind this long-term trend was indirectly described in The Stock Market Is Like a Fish Tank: the middle class is the majority of fish in the wealth tank that arrive after the gains have been reaped.

In effect, the few who skim most of the financial gain need the middle class to pony up the liquidity and wealth to be skimmed.

In terms of risk, the middle class is always late to the asset class feeding frenzy, meaning that the middle class invests its capital when the opportunities for outsized gains is long-gone and the risk of loss has risen to levels that guarantee declines.

Moving with the majority offers an illusion of low risk. Following the crowd into real estate, tech stocks, tulips, etc. seems like a safe bet because “everybody’s making money,” but like the fish in the pond, what the middle class is seeing is not “everybody making money” but the relative few who invested early making money and selling to the middle class to reap their outsized gains.

The illusory safety of following the crowd feeds the wealth-destroying dynamic of taking on high risk for either zero gains or huge losses once the asset bubble du jour pops.

The 10 million homeowners who are still underwater (their mortgage debt exceeds the value of their home once selling transaction commissions and fees are subtracted) provide an example of this dynamic. Despite the inflation of an echo-housing bubble (a second bubble in housing valuations, driven by cash buyers), around 25% of all homeowners have no home equity or too little home equity to buy another house should they sell their current home.

Another significant percentage of middle-class homeowners is trapped in their current house by the enormity of their debt and their stagnant income: they no longer qualify for a mortgage or refinance.

There are now three asset bubbles to choose from: housing, stocks and bonds. In each asset class, the majority is convinced that there can only be further gains from here. Risk is seen as low and complacency is high, the classic signs that the outsized gains have already been reaped and all that’s left in the tank to divvy up are the risks and losses.

No wonder the wealth of the middle class keeps declining: every temporary gain from joining the investing feeding frenzy sets up staggering losses when the bubble du jour pops and there’s nobody left to sell to.

Meanwhile, those who bought early have long since sold out and are now buying outlier assets that are viewed as “risky” by the majority who happily accept high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses and an erosion of real wealth.


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