Tuesday, July 28, 2009

From the Trenches - A Letter to the President & CEO of Bank of America

July 28, 2009

Kenneth Lewis
President and CEO
Bank of America
ken.d.lewis@bankofamerica.com

cc: Timothy F. Geithner
Secretary of the Treasury
United States
timothy.geithner@do.treas.gov

Mr. Lewis:

I am sure you are aware of the myriad of complaints lodged against banks regarding the short-sale process. As someone who has run residential lending divisions of banks and savings and loans, been involved in the closure of lending institutions in the 1980’s, and has held a California real estate broker’s license for 25 years, I am very familiar with and sympathetic towards the lending problems Bank of America inherited from Country Wide. But I wanted to relate to you my most recent experience in an attempt to help you understand why your institution’s short sale program is inefficient.

I listed a home as a short sale in March, 2009. Because this is a condominium, setting a fair market value was not too difficult. In this same complex, there is an identical unit that has gone into foreclosure. I listed our subject property $9,000 above this foreclosure.

Careful to submit all required documents, I had the bank’s approval to move forward with the sale within a month. In May, the seller declared bankruptcy, but in June I received permission, both from the Bank as well as the seller’s attorney, to move forward with the short-sale.

In the middle of June, I submitted an offer to your short-sale department. The offer was at full list price. On July 24 I called to get a status update. I was told the buyer’s offer was rejected. I requested an explanation as to what was wrong with the offer as presented; no explanation was given. I requested a counter-offer; I was told no counter-offer would be supplied. I was simply told to submit a new offer, and the review process would begin again.

Mr. Lewis, I cannot understand how your short-sale department can claim to want to sell this home, yet respond in this manner. This listing is now unsalable. If I raise the list price, I will be so far above market value that, even if another offer comes in, it will not appraise. I can only assume that the bank wishes to foreclose.

Please let me know if the Bank, in fact, prefers to allow the home to go into foreclosure. If that is the case, then I will return the listing to the seller.

Thank for your consideration,

Ida Abelson
Broker
Brickyard Realty

Friday, July 24, 2009

Countrywide Offers Assistance to Former Customers

Bank of America, which acquired Countrywide Financial Corp., one of the most active of the subprime lenders, has begun issuing checks to its borrowers who are eligible for foreclosure assistance under an agreement with attorneys general in 40 states.

Borrowers most likely to be eligible for assistance must have experienced a foreclosure, short sale, or deed-in-lieu of foreclosure after taking out a Countrywide mortgage. Rust Consulting, a third-party administrator, is managing the program, and notifying and paying eligible customers.

Source: Reuters News, Steve Eder (07/23/2009)

Friday, July 17, 2009

"Operation Loan Lies"

Federal and State Agencies Target Mortgage Foreclosure Rescue and Loan Modification Scams

FTC Leads “Operation Loan Lies” to Stop Fraud and Help Distressed Homeowners

Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, today announced Operation Loan Lies, a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.

“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”

The FTC announced four lawsuits, bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception. The FTC also announced a settlement in a lawsuit filed last November.

The FTC charged that the defendants falsely claimed that they would either obtain a mortgage loan modification or stop foreclosure, or both, and that some of the defendants falsely represented that they would give consumers refunds if they failed to do so. After charging consumers the equivalent of one month’s mortgage payment or more in advance, these companies often did little or nothing to help homeowners renegotiate their mortgages or stop foreclosure. After failing to provide the promised services, the defendants that promised refunds did not honor those promises. In each case the FTC is asking the court for consumer redress and a permanent bar on the deceptive practices. The FTC would like to thank the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury and the Special Inspector General of the Troubled Asset Relief Program (SIG-TARP) for their invaluable assistance in these cases.

Thursday, July 16, 2009

CA State Attorney General Requires Foreclosure Consultants to Register & Post $100,000 Bond

Continuing his fight against scam artists who "prey on" vulnerable Californians, Attorney General Edmund G. Brown Jr. issued a directive forcing foreclosure consultants to register with his office and post a $100,000 bond by July 1, 2009.

Those who fail to do so will be in violation of state law, subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

"California is awash with con artists who prey on vulnerable families facing foreclosure," Brown said. "By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world."

Up and down the state, scam artists pose as legitimate foreclosure consultants, promising homeowners they will prevent foreclosure. In reality, these scam artists charge huge up-front costs, but don't provide an ounce of help.

Earlier this month, Brown's office prosecuted a scam artist who provided hundreds of homeowners with forged bank documents and directed them to send their mortgage payments to accounts she had created, instead of the homeowners' lender.

Additionally, Brown's office has seen a significant increase in the number of complaints from homeowners regarding foreclosure consultants.

The registry unveiled today will provide Californians with information about potential consultants and recourse in the event that a consultant violates the law.

All foreclosure consultants operating in California must post a $100,000 bond and register with Brown's office by July 1, 2009 and submit the following information:
- Name, address, and telephone number;
- All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be used in connection with their business;
- Copies of all advertising;
- Copies of each different contract the consultant will use with consumers; and
- A copy of its $100,000 bond.

Foreclosure consultants who provide proper information will receive a Certificate of Registration. Brown's office, however, may refuse to issue, or revoke, a Certificate of Registration if the foreclosure consultant has made any misstatement in its registration form, has been convicted of fraud or misrepresentation, has been convicted of a violation of the state's foreclosure consultant laws, California's false advertising, unfair or deceptive practices laws or other laws dealing with mortgages.

If the company violates the law, a court may order restitution to victims out of proceeds from the $100,000 bond.

In order to obtain a Certificate of Registration by July 1, 2009, foreclosure consultants should send in their registration application and materials as soon as possible so they can be reviewed prior to July 1.

The registry was established through legislation sponsored by Speaker of the Assembly Karen Bass, AB 180, which was signed into law last year.

A copy of the registration forms may be found at http://ag.ca.gov/register.php under the "Foreclosure Consultant Registry."

After July 1, 2009, consumers can call the Attorney General's office to determine whether the company they are considering dealing with has been issued a Certificate of Registration.

Tips for Homeowners

DON'T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON'T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON'T transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called "rescuers" use to evict homeowners and steal all or most of the home's equity.

DON'T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON'T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer."

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or www.hud.gov.

Tuesday, July 7, 2009

Why Lenders Don't Want to Modify Loans

The Federal Reserve Bank of Boston just published an abstract ominously entitled Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization. As frightening as the title is, the results are worse.

The authors analyzed 665,410 loans originated between 2005 and 2007 that were over 60 days delinquent. Here are the results:

3% received modifications that resulted in lower monthly payments;
5.5% received modifications, but these did not result in lower monthly payments;
30% were able to fix their delinquency issues without any help from the lenders; and
45% of the approximately 150,000 borrowers who received some kind of aid ended up in arrears again.

The bottom line, according to Boston Fed senior economist Paul S. Willen, is that “loan modification is not profitable for lenders....A lot of people you give assistance to would default either way or won’t default either way. They (the banks) are trying to maximize profits, and at this point maximizing profits does not mean modifying loans.’’

So what's the solution? According to Willen, the feds should give the money directly to the borrower. “You have more money going to the banks and the servicers than you do to the homeowners,’’ he said. “It would make more sense to just give money to the borrowers.’’

Wednesday, July 1, 2009

Major Change in Government's Foreclosure Prevention Plan

In February, President Obama announced the Home Affordability Program. Under this program, borrowers with loans owned or guaranteed by Fannie Mae or Freddie Mac who had loan-to-value ratios of 80% to 105% and were not delinquent on their loan payments, could refinance at lower rates without buying mortgage insurance, or paying for more insurance than they already had.

Effective today, that top limit has been increased to 125%. This change is an acknowledgment that at least one in five homeowners now has negative equity in their homes. It also is intended to stimulate the home refinance market which has seen a slow-down in the past few weeks as interest rates creep over 5.5%