From the Trenches

Want to know what it's like to be a Realtor these days? Take a look at this New York Times article:

http://www.nytimes.com/2009/06/29/business/29loanmod.html?em

Fraud Alert - Loan Scams

California Department of Real Estate ** CONSUMER ALERT ** (Issued 3/2009) 1 FRAUD WARNINGS FOR CALIFORNIA HOMEOWNERS IN FINANCIAL DISTRESS

I. HOME LOAN MODIFICATIONS.
Because of the current economic situation, you may not be able to afford your mortgage payment. If you are also not able to refinance your home loan, an option that may be available to you is a Loan Modification.

What is a Loan Modification? That is where you and your lender agree to modify one or more of the terms of your home loan. The terms could be a lower interest rate, an extension of the length of the loan (like making a 30 year loan into a 40 year loan), a conversion of an adjustable rate loan (called an ARM) to a fixed rate, the deferring of some of your payments, or any other modification of loan terms.

The goal of a Loan Modification is to help you keep your home and to give you a real, meaningful, sustainable, and long-term adjustment to your current home loan that works for your financial situation.

II. BEWARE OF LOAN MODIFICATION SCAMS AND CON ARTISTS, WHO USUALLY DEMAND THE PAYMENT OF UPFRONT FEES.
Just like after a hurricane hits, where unscrupulous contractors and repair people may collect money for repairs and then not do anything, there are numerous rogue and dishonest operators and companies (many of whom are unlicensed) that have appeared in the wake of the current economic downturn -- and more are popping up every day. They make false promises about their abilities to help get you a loan modification, collect money up front, and then do nothing or next to nothing. They are predators who take advantage of those who are or may be vulnerable.

III. THINGS TO DO TO PROTECT YOURSELF FROM BECOMING A LOAN MODIFICATION OR FORECLOSURE RESCUE SCAM VICTIM.

A. Do It Yourself (and Do It As Soon As Possible) -- You can contact your mortgage servicer and/or lender directly and request a Loan Modification that works for you and your lender. Don’t wait to call if you cannot make or believe you will not be able to make your mortgage payments. Be persistent! - call back many times. Make detailed notes about your attempts to call, when you have left messages, who you speak with, what was said, and what offers are discussed and/or made.

B. Other Free and Safe Options -- If you don’t believe you can negotiate a Loan Modification yourself, or if you do not want to, there are free and safe options available to you.

1. The U.S. Department of Housing and Urban Development ("HUD") offers Foreclosure Avoidance Counseling through non-profit agencies in California. Go to HUD’s web site at www.hud.gov, or call 800-569-4287, to find counselors. HUD also offers information to homeowners facing the loss of their home.

2. HOPE NOW Alliance - this is a cooperative effort of home loan counselors and lenders, and it consists of HUD intermediaries. Go to the HOPE NOW web site at www.hopenow.com or call 888-995-HOPE.

C. Locate and Work with a Legitimate, Licensed, and Qualified person or company ("Log on, Look em up, and Check em out")

1. California licensed real estate brokers can perform loan modification work, and licensed real estate salespersons can do such work under the supervision of their employing broker.

While it is legal for a real estate broker to charge you in advance of performing the loan modification services before a Notice of Default is recorded, you do not have to pay anything in advance of a successful loan modification, and all broker fees are negotiable. If a real estate broker wishes to charge an advance fee, he or she must submit an Advance Fee Agreement and all supporting materials to the Department of Real Estate ("DRE"). If the agreement and materials meet the requirements under the law, DRE issues a no-objection letter. All fees collected in advance must be properly handled as trust funds, which require special handling and must be deposited into the broker’s trust account. A licensee must refund to you any unearned portion of the advance fee(s) collected if any of the promised services are not completed.

But please understand that a no-objection letter does not mean that DRE recommends, approves or endorses the agreement or the services of the real estate licensee. You should go to DRE’s web site at www.dre.ca.gov, review and check the information on advance fees and loan modification services, carefully review the public license information on the real estate broker (that information will include any disciplinary history), and look for any Desist and Refrain Orders (D&Rs) that have been issued against companies and individuals. If a D&R has been issued, that means that DRE has determined the individual and/or company is unlicensed and/or has operated unlawfully.

2. California licensed lawyers can also perform loan modification work, but only when such lawyers render those loan modification services in the course and scope of their practice as an attorney at law.

Lawyers can also charge fees in advance (typically called a retainer), and even after a Notice of Default has been recorded. But lawyers must have a written fee agreement with you. And as is the case with real estate licensees, you do not have to pay anything in advance of a successful loan modification, and all legal fees are negotiable. Any fees that you pay to the lawyer(s) in advance do not have to be placed in their trust accounts.

Just as you should do with real estate licensees, check out lawyers by going to the website of the California State Bar, www.calbar.ca.gov. Check the lawyer‘s bar membership records and look for any discipline.

Unfortunately, some loan modification business models have claimed lawyer involvement but they are just unlawful schemes to avoid the prohibition against the collection of advance fees by a real estate licensee after a Notice of Default is recorded. In others, lawyers are just a "front" or non-participating "magnet" for business from desperate homeowners.

****Be on Guard and Check Them Out -- Do Your Own Homework**** In addition to looking at the license records, contact the Better Business Bureau to see if they have received any complaints about the person or company. But please understand that this is just another resource for you to check, and the loan modification provider might be so new that the Better Business Bureau may have little or nothing on them (or something positive because of insufficient public input).

Also, and very importantly, ask the loan modification "specialists" (whether they are real estate licensees or lawyers) about their financial, mortgage and real estate experience, the options and methods they use to renegotiate home loans, when they were first licensed, whether their license is still active, whether they have ever been disciplined, where they got their experience, and also ask them to define a loan modification and the process that they will undertake and the time that they will spend to negotiate a long-term, affordable and sustainable modification for you.

D. Signals of Fraud/Red Flags to Watch Out For

1. Demand for payment up front (advance fee payment). While not unlawful if paid to licensed persons in the certain limited situations discussed above, the demand or request for advance payment should alert you to the possibility of fraud.

2. Promises or guarantees of success, such as "We Can Save Your Home. We Have Saved Thousands. Free Consultation. Money Back Guarantee". No such guarantees are possible, and there are no assurances of a successful loan modification.

3. Too good to be true testimonials, such as "We Modified Terri G’s Adjustable Rate Loan, Which Had Spiked to 8 Percent, to a 3.5 Percent Fixed Rate Loan".

4. Claims that a loan modification company is attorney-backed, attorney-affiliated, or attorney-based -- especially where no lawyer or law firm is identified or mentioned. Many of these entities are simply using the name of an attorney (the name might be for show only, and/or there might not even be a lawyer involved) and scams skirting the law.

5. Claims that a loan modifier is operating under a California Finance Lender‘s (CFL) license issued by the California Department of Corporations. This is not lawful according to the Commissioner of the Department of Corporations.

6. A request that you grant a "power of attorney" to the loan modifier. The scammer may use the power of attorney to sell the home right out from under you.

7. A request that you transfer title to your home to the loan modifier or some third party. This is likely evidence of a scam where these scam artists will strip all of the remaining equity in your home.

8. Promises that you can repair your credit history by the payment of rent to the loan modifier or some third party.

9. Lease/rent-back scams, where you are told to transfer title to a third party, rent the home from that party, and then buy it back later. Transferring your deed gives the con artists the ability to evict you and sell the home.

10. Instructions to pay someone or some company other than your home loan lender or servicer.
11. Claims that a loan modification company will file a bankruptcy or other frivolous case for you to "force" a lender to negotiate a loan modification. So-called "forensic loan reviews" may fall into this category.

12. Assertions by the so-called loan modifier that you should just sign documents that they have filled out, without reviewing them first. You must carefully read and understand all of the documents you sign. Be especially wary of promises by salespeople that they will "take care of everything" and you just need to sign "a bunch of forms with boring legalese".

13. Lawyers or real estate licensees who tell you that they have no time to meet with you face-to-face.

14. Unlicensed people or companies.

15. Instructions from a loan modification provider that you should not contact your home loan lender or servicer, a lawyer, an accountant, or a non-profit housing counselor.

16. Being advised to miss payments in order to improve your chances of getting a loan modification.

17. High-pressure sales tactics or warnings that "you must act today" or "tomorrow may be too late".

It is impossible to list all of the Red Flags that might suggest fraud, since the scammers and con artists continue to modify and refine their stories, pitches and cons. They are ruthless and clever. Please be alert, be skeptical, and do your own homework.

And remember, Don’t Rush! You are always able to "slow down" or "pause", and you should tell the provider of loan modification services that you want to check out their license status with the DRE or the California State Bar. Any service provider who objects to that request may have something to hide, like no credentials or license (or bogus credentials) – so be wary!!! Log on, Look em up, and Check em out!!! www.dre.ca.gov

IV. WHAT YOU CAN DO IF YOU HAVE BEEN SCAMMED (OR BECOME AWARE OF A LOAN MODIFICATION SCAM)? REPORT FRAUD AND FILE COMPLAINTS WITH

1. The DRE if a real estate licensee is involved, or if the person or company is unlicensed. If the person or company is unlicensed, the DRE will file a Desist and Refrain Order. If the person or company is licensed, the DRE will commence disciplinary action, http://www.dre.ca.gov/cons_complaint.html .

2. The District Attorney, Sheriff, local police and local prosecutor in your community.

3. The California Attorney General, at www.ag.ca.gov/consumers/general.php .
4. The California State Bar if a lawyer is involved, or if an unlicensed person claims to be a lawyer at www.calbar.ca.gov .

5. The California Department of Corporations, at www.corp.ca.gov , if a loan modification claims to be operating under a California Finance Lender License.

6. The Federal Trade Commission, at www.ftc.gov . They have an excellent fact sheet on Foreclosure Rescue Scams.

7. Federal Bureau of Investigation (FBI), at www.fbi.gov .

8. HUD, at www.hud.gov .

9. The Federal Deposit Insurance Corporation (FDIC), at www.fdic.gov .

10. The Better Business Bureau in your community.

11. The Chamber of Commerce in your community.

12. File a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. Since 2008, you can recover up to $7,500 in Small Claims Court. You represent yourself, and can request a judgment for money damages. If your judgment is based on fraud, misrepresentation, or deceit, or conversion of trust funds, and the judgment is against a real estate licensee, DRE has a Recovery Fund that may be able to pay your claim. Go to the DRE web site at www.dre.ca.gov , and look under the tab for "Consumers". Also, the California Secretary of State has a "Victims of Corporate Fraud Compensation Fund" that provides restitution to victims of corporate fraud. Go to the Secretary of State’s web site at www.sos.ca.gov/vcfcf for more information.

FHA Announces Loan Modifications Increase

FEDERAL HOUSING FINANCE AGENCY NEWS RELEASE

FANNIE MAE AND FREDDIE MAC LOAN MODIFICATIONS UP BY MORE THAN 50 PERCENT IN FIRST QUARTER
MONTHLY PAYMENTS REDUCED FOR HOMEOWNERS

Washington, DC – Fannie Mae and Freddie Mac modified nearly 37,000 loans during the first quarter of 2009. It is an increase of 57 percent over the fourth quarter of 2008 and more than double the number of modifications in the first quarter of last year. The data were released by James B. Lockhart, Director of the Federal Housing Finance Agency, as part of the Foreclosure Prevention Report for the first quarter of 2009.

The FHFA report details the actions Fannie Mae and Freddie Mac have taken to prevent foreclosures and keep people in their homes. The report reflects loan modification volumes under the Streamlined Modification Program initiated in November 2008 but does not include volumes from the Home Affordable Modification program (HAMP) announced in March 2009 which was still in development in March.

"The use of serious loan modifications by Fannie Mae and Freddie Mac has risen dramatically," said Director Lockhart. "As a result, more homeowners are seeing payments significantly reduced and fewer people will lose their homes."

The report shows that as of March 31, 2009, of the Enterprises’ 30 million residential mortgages:

• Modifications represented 43 percent of all completed foreclosure prevention actions in the first quarter of 2009, up from 33 percent in the prior quarter.

• Modifications with more than 20 percent reduction in monthly payments rose from 2 percent in the first quarter of last year to 52 percent in the first quarter of this year

• Completed actions to prevent foreclosure- including modifications, forebearance, repayment plans and other measures-- rose substantially in the first quarter. Approximately 87,000 of these actions were completed in the quarter, an increase of 20 percent over the prior quarter and more than double the volume of the first quarter 2008.

• Home retention actions – actions that result in a borrower keeping his or her home – accounted for 90 percent of these actions completed during the first quarter consistent with the proportions of foreclosure prevention actions completed over the past year.

• Fannie Mae and Freddie Mac own or guarantee 56 percent of all mortgages outstanding but only 22 percent of all seriously delinquent loans.

• Although the Enterprises’ mortgage delinquencies continued to increase during the first quarter of 2009, the rate of delinquency is consistently lower than the industry average. As of March 31, 2009, the percentage of Enterprises’ mortgage loans that were at least two payments past due (60 plus days delinquent) was 3.6 percent, compared with 6.1 percent for VA loans, 10.2 percent for FHA loans and 9.2 percent for the industry average.

"We encourage servicers to work aggressively to continue to identify borrowers who are willing and able to make affordable mortgage payments," said Lockhart. "These efforts at modifying mortgages and refinancing homeowners into safer mortgages are important elements of the stabilization of the housing market and the U.S. economy. "

Is Your Home's Assessed Value Too High?

Please Note: This article is specific to California property valuation. Please check with your local property tax assessor if you live in another state.

Since the passage of Proposition 13, Californians pay property tax based on the price of the home when they bought it. Every year there after, the assessor may increase that value by the rate of inflation, but never more than 2% per year. The assessor may also increase the value if the homeowner does a major renovation or addition, but otherwise, the property tax increase is predictable from year to year.


Until recently, this has been a great deal for California homeowners. As they watched home values in their neighborhoods climb, their tax rate remained stable. But now that values have dropped throughout the state, many homeowners are complaining that their homes are worth less than what they paid.


Thanks to the passage of Proposition 8, homeowners can ask for a temporary reduction in their valuation. If you have owned your home for many years, even in this real estate downturn, your assessment may still be below current market value. But for people who bought in the past few years, the assessed value as reflected on their 2009-2010 tax bill may be too high.


Starting July 2, if you think the market value of your home as of January 1, 2009, is less than its assessed value for 2009-10, you may ask the assessor to revise it downward. Depending on the county in which your property is located, you have until September 15 or November 30 to file a formal appeal.


If you want to have your assessment revised, go to your county property assessor's website. There you should find information on filing an appeal. Sometimes the assessor will ask for data to back up your claim of decreased valuation. Ask your local Realtor for assistance in providing this information. Beware of companies who offer to file the appeal for a fee. The process is simple and there is no need to pay a third party.


If you do get a reduction, remember that it is temporary. Every January 1, the assessor will review your home value to see if it has increased. If the housing market bounces back, your assessed value could go up by more than 2% a year, but it can never go higher than it would have been if you had never received the temporary reduction.

White House Plan for Regulatory Reform

THE WHITE HOUSE

Office of the Press Secretary
__________________________________________________________________
For Immediate Release June 17, 2009


President Obama to Announce Comprehensive Plan for Regulatory Reform

WASHINGTON – President Obama will lay out a comprehensive regulatory reform plan this afternoon to modernize and protect the integrity of our financial system. While this crisis has had many causes, it is clear now that the government could have done more to prevent these problems from growing out of control and threatening our overall economy.

The President will be joined by Treasury Secretary Tim Geithner, representatives from the regulatory community, consumer groups, the financial industry and members of Congress for an event in the East Room later this afternoon.

The President’s plan will:

•Require that all financial firms that pose a significant risk to the financial system at large are subjected to strong consolidated supervision and regulation
•Increase market discipline and transparency to make our markets strong enough to withstand system-wide stress and the potential failure of one or more large financial institutions
•Rebuild trust in our markets by creating the Consumer Financial Protection Agency to focus exclusively on protecting consumers in credit, savings, and payment markets.
•Provide the government with the tools needed to manage financial crises so it is not forced to choose between bailouts and financial collapse
•Raise international regulatory standards and improve international coordination
Below are links to the White Paper and Fact Sheets:

White Paper: Financial Regulatory Reform:

http://www.financialstability.gov/docs/regs/FinalReport_web.pdf

Fact Sheets:

http://www.financialstability.gov/docs/regulatoryreform/requiring_strong_supervision_reg_finfirms.pdf Requiring Strong Supervision And Appropriate Regulation Of All Financial Firms

http://www.financialstability.gov/docs/regulatoryreform/strengthening_reg_core-markets_infrastructure.pdf Strengthening Regulation Of Core Markets And Market Infrastructure

http://www.financialstability.gov/docs/regulatoryreform/strengthening_consumer_protection.pdf Strengthening Consumer Protection

http://www.financialstability.gov/docs/regulatoryreform/providing_govt_tools_manage_fincrisis.pdf Providing The Government With Tools To Effectively Manage Failing Institutions

http://www.financialstability.gov/docs/regulatoryreform/improving_internatl_reg_standards_co-op.pdf Improving International Regulatory Standards And Cooperation

More Government Money for Loan Modifications

In March, the federal government put aside $50 billion. This money was to entice lenders into allow borrowers to modify their loans so as to be more affordable. But the program has been less than successful.

During first quarter, 2009, 4 millions borrowers were delinquent on their loan payments, but only 50,000 were enrolled in the modification program.

Much of the blame lies with the lenders, who were not prepared for the onslaught of modification applications.

In response, the government has increased their incentive by another $3.1 billion to get banks to streamline their approval process.

Former Countrywide CEO Charged With Fraud

Countrywide Financial CEO and co-founder Angelo Mozilo has been charged with securities fraud and insider trading. The Securities and Exchange Commission (SEC) also hit former Chief Operating Officer David Sambol and ex-Chief Financial Officer Eric Sieracki with similar charges.

The SEC said the men deliberately misled investors, leading them to believe that riskier subprime and option adjustable-rate mortgages were safe. It said the executives ignored the warnings of the company’s risk officer about the firm’s precarious underwriting practices.

The SEC claims Mozilo acknowledged privately that the company was unsure about the performance of option mortgages, but publicly spoke about their soundness. Mozilo is also accused of selling $140 million of his Countrywide shares even though he knew the firm was near collapse.

Lawyers for the men say they are innocent and are being charged because the SEC is looking for scapegoats.

Source: The Wall Street Journal, Liz Moyer (06/04/09)