Your Tax Dollars Working to Help Your Credit Score

The Federal Reserve has just published a new website designed to help you understand, and improve, your credit rating.

The Consumer's Guide to Credit Report and Credit Scores is an ad-free site that explains how scores are compiled and used, tips on how to improve your credit score, how to identify and fix errors on your report, among other topics.

With hundreds of crooks offering to "fix your credit" for a fee, it's great to finally have a scam-free site with accurate information.

Short Sale - Week 7

This is Part 7 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

Short Sale - Week 3

Short Sale - Week 4

Short Sale - Week 5

Short Sale - Week 6


December 27, 2010

• I get an email from Equator telling me the property has been rejected from the HAFA program because it is not owner occupied. This is information I gave the HAFA representative when they first suggested it be placed in HAFA. The bottom line - we have lost 2 weeks while they figured this out.
• I email the new negotiator and ask what's next. He tells me the file is back in review. Once they decide the file is ready, it will be sent to the investor for final approval. This is exactly where we were on December 10!
• I email the negotiator and ask how long this analysis will take.
• The negotiator emails me with a counter offer from the investor! The changes are minor. the seller accepts the counter and I communicate the acceptance via Equator.

December 29

• No word from the investor, so I email the negotiator and ask for an update. He replies that the investor has not gotten back to him regarding the accepted counter.
  

Analysis - Days 43 - 49:

It was very frustrating for the seller, buyer and me to have lost two weeks while the file sat in the HAFA program. I would not have been so bothered if the file was rejected because of a problem discovered while the file was being analyzed. But the rejection was due to a technical issue that had been disclosed to B of A from day 1! Why it took 2 weeks to toss the file back out is beyond me.

On the other hand, I must commend the negotiator. The day he had the file returned to him was the day we got the investor's counter offer. We're still waiting for a final acceptance from the investor, but it was exciting to finally get a response after so many weeks.

Hint:

Even when the bank seems to be wasting time with formalities, remain calm and polite. Remember that you need the cooperation of people at the other end of the phone or email to get your final goal - a closed deal!

Short Sale - Week 6

This is Part 6 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

Short Sale - Week 3

Short Sale - Week 4

Short Sale - Week 5

December 17, 2010

• The seller and I spend the morning scrambling to collect all the new and updated documents required by HAFA. By early afternoon I submit all the required documents. I call HAFA to verify they have received everything. HAFA tells me that the file will be sent to the underwriting department where the documents will be reviewed to see if the file qualifies for HAFA. This will take a minimum of two weeks.


• Late afternoon I receive an email from Equator confirming that the file is at HAFA's underwriting department.

Analysis - Days 36 - 42:

It was very upsetting for the seller to be suddenly confronted with demands for more paperwork, especially when the documents required were already submitted. It does no good to point out to the lender that the reason the documents are out of date is because they required them a month earlier and just filed them without doing the required analysis at the time they were received. It is also disconcerting to be thrust into the HAFA program. When the seller first contacted B of A to set up the short-sale, B of A should have explain that, once the paperwork is complete, the file will automatically be submitted to HAFA. This way, both buyer and seller understand what will occur, and understand that it will delay the process a minimum of two weeks.

Hint:

Recognize when things are out of your control, and have patience as the file grinds its way through the system.

Lenders 'Foreclose' Homes They Don't Own

In dozens of incidents nationwide, confused banks have ransacked properties that were either not mortgaged at all or were mortgaged by a different lender or were a customer of the bank in question but were current on their payments.

For instance, Bank of America broke into Alan Schroit’s second home in Galveston, Texas, and turned off the power, allowing 75 pounds of salmon and halibut Schroit had caught on an Alaskan fishing vacation to spoil and create a reeking mess. Schroit had previously paid off the property. Schroit and the bank settled a lawsuit for an undisclosed sum.

Critics of the mortgage process say these kinds of incidents are evidence that the mortgage foreclosure business is flawed and needs to be reformed.

''Every day, smaller wrongs happen to people trying to save their homes: being charged the wrong amount of money, being wrongly denied a loan modification, being asked to hand over documents four or five times,'' says Ira Rheingold, executive director of the National Association of Consumer Advocates.

Source: The New York Times, Andrew Martin (12/22/2010)

Wells Fargo Agrees to Modify California Mortgages

San Francisco Business Times - by John Sailors

Wells Fargo & Co. said Monday it will make up to $2.4 billion in mortgage modifications for homeowners in California with "pick-a-payment" adjustable-rate loans, as pat of an agreement with Attorney General Jerry Brown.

San Francisco-based Wells Fargo (NYSE: WFC) also agreed to pay $32 million to borrowers who lost their homes through foreclosure.

The loans were issued by Wachovia Corp. and Golden West Financial Corp. Wells bought Wachovia after that bank bought Oakland-based Golden West Financial Corp. for $24 billion in October 2006.

The majority of the more than 50,000 at-risk Wachovia Pick-a-Payment customers are in California, Wells said.

Wells will offer loan modifications to nearly 15,000 California borrowers with the loans.

Many of the modifications will include “significant principal forgiveness.”

California joins nine other states in entering agreements with Wells Fargo. The others are Arizona, Colorado, Kansas, Florida, Illinois, Nevada, New Jersey, Texas and Washington.

Short Sale - Week 5

This is Part 5 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

Short Sale - Week 3

Short Sale - Week 4

December 10, 2010

• I send an email to Merna asking for an update on the file. I receive an email telling me the file has been referred to the HAFA program.
• HAFA, or Home Affordable Alternative Program, is part of the government's Making Home Affordable program. HAFA is designed to streamline the process of going through a short sales or foreclosures. It has some real benefits to the seller, but there are specific requirements the seller and the home must meet in order to qualify.
• I email Merna asking why the file has been referred to HAFA without notifying me or the seller.

December 15, 2010

• Merna responds to my email telling me that files are automatically sent to HAFA and I am to contact them for more information. I contact HAFA and am told that some of the documents submitted by the seller are now out of date. Of course, these documents were not out of date when submitted, but because the short sale process takes many weeks, they are now too old. Updated documents must be submitted in order for HAFA qualifications to continue.

December 16, 2010

• HAFA contacts the seller directly and explains the program. They tell her that she must fill out additional documentation and must do so today. The seller explains that she can not possibly get all the documents to HAFA that same day. HAFA tells her she has 24 hours to get the documents into the system.
• I contact HAFA and ask for a list of documents that must be resubmitted, as well as some new forms specific to HAFA. I contact the seller, provide the specific HAFA documents, and discuss the list of additional documents. She and I begin to assemble the documents.

Analysis - Days 29 - 35:


Prior to this week, I felt we were moving through the process at a reasonable pace. In a month we had submitted a deal, completed all of B of A's document requirements, and gotten an appraisal. Transferring the file to HAFA has stopped the negotiation process. There will now be a minimum of a 2 week delay before the file moves forward. However, if it is accepted into the HAFA program, and if HAFA approves the deal, the benefits to the seller are worth it. The question is, will the buyer hang around long enough to close.

Hint:

As the process drags on, communication is vital. Keep the seller and especially the buyer up to date on what's going on, even if there has been no progress.

Short Sale - Week 4

This is Part 4 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

Short Sale - Week 3

December 2, 2010

• I receive an email from Merna telling me that the appraisal has been submitted. B of A is gathering its internal documents to see how much is owed (loan amount, unpaid payments, fines, etc.) against the property. This information will be given to the short sale negotiator. They will analyze how much the holder of the loan (the investor) will lose on the offer. This analysis will be submitted to the investor who then can either accept, reject or counter the offer. Merna warns me that that my buyers should be prepared for a counter offer. If the buyer counters the investor's offer, this will result in substantial delays. And, if that isn't enough, Merna's email ends by telling me that, even once the investor agrees to price and terms, they can change their mind up until the day we close!
  

Analysis - Days 22 -28:

Activity on the file has really slowed down. It's hard on the seller, the buyer, and the agent, but there is nothing we can do except wait until we hear from the investor.

Hint:

Keep your buyer up to date on the market. If something new comes on that may be of interest, let them know. If the new property is not a short sale, they may decide to make an offer on the new listing rather than play the waiting game with the investor.

Feddie Mac Suspends Evictions For the Holidays

Freddie Mac today announced it has ordered all evictions involving foreclosed occupied single family and 2-4 unit properties that had Freddie Mac mortgages to be suspended from December 20, 2010 to January 3, 2011.

"If the property is occupied, our foreclosure attorneys will suspend the eviction to provide a greater measure of certainty to families during the holidays," said Anthony Renzi, Executive Vice President of Single Family Portfolio Management at Freddie Mac.

Short Sale - Week 3

Short Sale - Week 3

This is Part 3 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

Short Sale - Week 2

November 29, 2010

• Met with the appraiser. I provided him with a full set of comparables showing that the purchase price offered by the buyers is in line with prices paid for similar homes. I also gave him information on the Homeowners Association and complex, the amount of the monthly dues, and what this amount covers. He told me he would submit the appraisal no later than tomorrow. But he had no idea how long it will take to enter the system.

December 1, 2010

• Got a call from the appraiser asking a question about the property. Of course, this is a question that I covered in the documentation I provided at the time of the appraisal. And it also means that the appraisal has not yet been completed. So much for his promise to have it submitted the next day!

Analysis - Days 15-21:

It's been a week of nothing to do but wait for the appraisal to be submitted. I was pleased that, in the world of real estate lending, it only took about a week to schedule the appraisal. Even more impressive was that the appraiser actually knows the area where the property is located and has done other appraisals here. Past experiences with short sale appraisers is that they cover a very broad territory. Often this means that the appraiser knows nothing about the property's specific neighborhood, and this almost always results in a bad appraisal. Some have been so bad that I have had to petition to have a new appraisal done.

Hint:

Make sure your agent meets the appraiser at the property and provides accurate comparables. If the home is part of a Homeowner's Association, have the agent also provides the appropriate HOA information to the appraiser. Your agent's goal should be to make the appraiser's job as quick and easy as possible so that your appraisal gets done in a timely manner.

Short Sale - Week 2

This is Part 2 of an on-going series documenting my most recent experience attempting to use Bank of America's Equator system to complete a short sale. You can find earlier posts in this series at:

Short Sale - Week 1

November 19, 2010:

• Equator sends me a message acknowledging receipt of the offer. It also tells me the file has been sent to their Valuation Department. This department will be contacting me for access to the property. Until an appraisal has been completed, the file can not move forward.
• Equator sends me a message from Merna, the negotiator assigned to this file. In this email, Merna requests I send copies of the seller's hardship letter, last 2 pay stubs, and 2008 and 2009 tax returns. I assume Merna will use this information to decide if B of A should allow the seller to move forward with the short sale. I know the seller already submitted these documents to B of A and asked Merna to check the bank's file. She explains that she can only see documents submitted through Equator.
• I contact the seller to let her know I need to resubmit the documents.

November 20, 2010

• I meet with the seller, get the documents requested by Merna, and scan them into Equator.
• I email Merna to let her know the documents are now in her system.

November 22, 2010

• Merna calls to let me know she has received the documents but has not yet reviewed them. She repeats that nothing can be done until the property is appraised by the valuation team. I tell her that I have not been contacted by the valuation team for access to the property. She seems surprised, since her system says the valuation is in process. She assures me I will hear from them shortly.

November 24, 2010

• I receive a call from the Valuation Department to schedule an appraisal on November 29.
• I email Merna to let her know the appraisal has been scheduled.
• I prepare a list of comparable sales for the appraiser.

Analysis - Days 8-14:

The first glitch surfaces - because Equator does not cross reference files with B of A, it means extra work for the seller and agent, since documentation requested by B of A needs to be resubmitted to Equator. Equator should be able to automatically download these documents into their file.

On the plus side, communication with the negotiator is much easier than in the past. Prior to Equator, there was never a single contact person for the file. Every time you called the short sale department, you spoke with a different person who was looking at your file on their screen for the first time.

In contrast, I have Merna's direct phone number and email. She is extremely polite and friendly and she is completely familiar with the file.

I was impressed that, even though she can't do anything with the file until the appraisal is completed, Merna asked for documentation now so I can work on getting it to her while she works on getting the appraisal scheduled. I am impressed that she is "planning ahead".

In the past, negotiators were harried and rushed because they were overloaded with files. I have the feeling B of A has hired more negotiators.

Hint:

Ask your negotiator what documents you will be required to provide in the future so you can start getting the paperwork together now. That way, when they are requested, you can submit them immediately, thus speeding up the approval process.

Short Sale - Week 1

Trying to close a short sale can be an agonizingly long and frustrating process for the buyer, the seller, and the Realtor. Banks realize this and have been experimenting with systems to speed things up.

What follows is a record of my most recent short-sale experience. I will post updates as the deal progresses so together we can discover if these changes have, in fact, helped.

Fortunately, the owner has only one loan on the home (if there is more than one, the process is much more complicated). Her loan is with Bank of America. B of A has instituted a new system for short sales. Offers must be processed through an on-line site called Equator.

Here's how Equator works. Once the seller has accepted an offer on the home, the Realtor opens a file on Equator's website. From this moment forward, everything is submitted on line and through this site. The Realtor can not submit any offers, files, etc. until Equator specifically asks for them.

November 12, 2010:

• The homeowner accepts the offer;
• I open a file on Equator;
• I contact escrow and asked them to prepare a closing cost estimate sheet based on this offer. Though this is not requested by Equator, I know from experience that I will eventually need these numbers so I want to be ready;
• Equator acknowledges my file;
• Equator requires a Third Party Authorization Form. This form gives me permission to act as the seller's agent. I knew this would be required so I had the seller complete this form earlier in the week;
• I submit the Third Party Authorization form to Equator.

November 15, 2010

• Equator authorizes me to submit the offer on their form;
• I begin the offer submission form but can not complete it since I have not received the cost estimate from escrow;
• I contact escrow and ask when the cost estimate will be completed;
• I inform the buyer that the offer is being prepared for submission. Because we have no idea how long it will take to get an approval, the buyer and I discuss plans to have closing funds readily available.

November 16, 2010

• I am still waiting to receive the closing cost estimate from escrow. I can not move forward until I receive these numbers. I contact them again and ask for the numbers.

November 17, 2010

• Escrow contacts me to let me know they are really backed up but promise to have the numbers to me today;
• Escrow provides numbers. I complete the offer form and submit it;
• Equator requests a signed copy of the offer, which I submit;
• Equator requests supporting documents, such as photos, MLS information, etc., which I submit.

Analysis Days 1-7:

So far I am impressed. Working through Equator is so much better than the usual set-up, submitting via fax. Invariably, things are"lost" so agents have to resubmit, sometimes two and three times. This really slows things down.

With Equator, everything is visible on the website. You can not progress to the next step until B of A accepts what you've done. And if there is any question about submission, the proof is right in the file which can be seen on the computer screen.

I am also pleased with the speed (so far) that documents are acknowledged and processed. It's been 6 days since the offer was first signed by the seller, and we already have an offer in the lender's hands, along with all supporting documentation. Of course, many of these documents I already had. Since I knew, from past experience, that these would be required, I did not wait for Equator to ask for them. I got them ahead of time so that when they were requested, I could immediately upload them into Equator.

Hint:

Use a Realtor familiar with the short sale process. That way s/he will gather documentation before it is requested. This will substantially cut down on the submission time.

We Just Spent $2 Billion on Foreclosures

At the end of September, Freddie Mac and Fannie Mae owned 240,000 homes that were taken back in foreclosure. That's about 25% of all lender-owned homes in the US.

As the new owners, Freddie and Fannie are responsible to pay the taxes, insurance, cleaning, maintenance, even lawn care. The cost to maintain these homes so far this year? $2 billion.

And where does the money come from to pay these bills? From you - the US taxpayer.

Since taking them over 2 years ago, we've already invested $148 billion in preferred stock in Freddie and Fannie. We've received about $17 billion in dividends. But the longer the real estate crises continues, the more money we'll need to invest to keep them afloat. And with the recent questions about the legality of some of the foreclosures, this could drag on a long time.

Foreclosed Homeowners Fighting Back

The foreclosure process is in chaos. Bank records are a mess but they continue to lock people out of their homes.

This New York Times article has some very disturbing examples of what has been occurring across the nation.

Foreclosure Market Warning

Thinking of buying a foreclosed home? You better read this New York Times article first!

Avoid Foreclosure Market Until the Dust Settles

Mortgage Default-Prevention Program Offers Payment

Below is a link to a very interesting - and balanced - article from the San Francisco Chronicle. It is about a company that claims to offer financial incentives to keep homeowners from strategically defaulting on their home loans.

Great idea or a new scam? Read the article then let me know what you think!

Go to article

Countrywide CEO Mozilo settles with SEC for $67.5M

Associated Press

LOS ANGELES (AP) — Countrywide Financial Corp. co-founder Angelo Mozilo has agreed to a $67.5 million settlement to avoid trial on civil fraud and insider trading charges that alleged he profited from doling out risky mortgages while misleading investors about the risks.

Two other former Countrywide executives also settled before trial next week on charges filed by the Securities and Exchange Commission. But employment agreements that protect the men from lawsuits involving the failed lender mean Bank of America Corp., which bought Countrywide in July 2008, will pick up most of the tab.

The settlement announced Friday spares the executives the risk of a guilty verdict that could have been used against them in lawsuits by shareholders, or by prosecutors if a criminal probe into their activities leads to charges.

It also gives the SEC the right to brag about what it said is the biggest financial penalty ever against a public company's senior executive. The agency has been criticized for doing little to prevent much of the risky behavior that led to the financial meltdown and for failing to detect Bernard Madoff's massive investment fraud.

"This settlement is a desirable result for all the parties," said Jacob Frenkel, a former SEC enforcement attorney now in private practice. "The SEC claims victory. The defendants get closure while preserving their ability to fight" lawsuits by shareholders.

The agreement requires Mozilo to repay $45 million in ill-gotten profits and $22.5 million in civil penalties. Former Countrywide President David Sambol owes $5 million in profits and $520,000 in civil penalties, and former Chief Financial Officer Eric P. Sieracki will pay $130,000 in civil penalties.

It's "the fitting outcome for a corporate executive who deliberately disregarded his duty to investors by hiding what he saw in the executive suite," SEC Enforcement Director Robert Khuzami said in a conference call with reporters.

But $25 million of Mozilo's restitution will come from an escrow fund the company set up to cover shareholder litigation, Khuzami said. The Charlotte, N.C.-based bank, through its Countrywide subsidiary, also will pay the remaining $20 million, according to a person familiar with the matter who wasn't authorized to speak publicly and spoke on condition of anonymity.

Sambol's attorney Walter Brown said in a statement after the hearing that the company will also pay his client's $5 million forfeiture.

The payments come on top of an $8.4 billion settlement Bank of America made with 12 states in 2008 over Countrywide's lending practices. The company also agreed in August to pay $600 million to end a class-action case from former Countrywide shareholders.

The penalty represents a striking turn for Mozilo, the son of a Bronx butcher who 41 years ago co-founded what grew into the nation's largest home loan originator. In 2006, Countrywide was writing one in six of the nation's mortgages, totaling more than $490 billion, court records showed.

The Calabasas, Calif.-based company spiraled into disaster as investors suddenly realized many homeowners wouldn't be able to repay mortgages that required no proof of income or down payment, and offered adjustable rates that quickly made monthly payments unaffordable.

Regulators portrayed Countrywide's massive size in court documents as the result of the three executives' single-minded pursuit of market dominance, even if it meant taking disastrous risks.

"The credit losses experienced by Countrywide in 2007 not only were foreseeable by the proposed defendants, they were in fact foreseen at least as early as September 2004," the SEC said in its filing.

The SEC accused the men of misleading shareholders about the quality of the loans on Countrywide's books. The civil complaint also accused Mozilo of acting on his inside knowledge of the company's precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139 million.

Under the settlement, the three men did not admit wrongdoing.

"Mr. Sambol has agreed to settle the SEC lawsuit and put the matter behind him for the benefit of his family and loved ones," Brown said in the statement.

Sieracki's lawyer, Shirli Fabbri Weiss, said in a news release that all fraud-based claims against her client had been dropped and that his civil penalty was to settle negligence-based charges.

Mozilo, who was not in court when the settlement was announced, was the nation's highest-profile defendant yet to face trial for risky business practices leading to the housing collapse that sent the country into recession.

The SEC wanted to "put his head on a pike and parade it around," said Anthony Sabino, professor of law and business at St. John's University in New York.

Under the settlement, Mozilo agreed to never again serve as an officer or director of a publicly traded company.

Mozilo lawyer David Siegel did not return a message seeking comment.

The settlement talks involving Mozilo were first reported by the Wall Street Journal after U.S. District Judge John F. Walter filed a notice Thursday for trial lawyers to attend a status conference Friday.

Countrywide's lending practices are reportedly also the subject of a criminal probe in Los Angeles. Thom Mrozek, a spokesman for the U.S. attorney's office, declined to comment about the situation.

AP Business Writer Marcy Gordon in Washington contributed to this report.

Copyright © 2010 The Associated Press. All rights reserved.

Foreclosures in Crisis

In the past few weeks, information has come to light implying that lenders were improperly handling foreclosure activity. Because of this, Bank of America, JPMorgan Chase & Co., and Ally Financial Inc. froze foreclosure activity in 23 states. Now, Bank of America has announced it will stop foreclosures in all 50 states.

Because of this, the federal government is looking at imposing a nationwide moratorium. U.S. Rep. Edolphus Towns, a New York Democrat, who is chairman of the House Committee on Oversight and Government Reform, said the top 10 mortgage lenders should immediately suspend foreclosure proceedings in all states. "The implications of ignoring the foreclosure problems are far too great to be ignored," he said Friday.

Many real estate agents whose clients are in contract to buy foreclosed property are being notified that the purchase has been put on hold indefinitely. So if you are considering buying a foreclosure, be prepared for long delays.

Wells Fargo to Pay $24M to End 'Pick-a-Payment' Mortgage Probe

By Alan Zibel Associated Press
Posted: 10/06/2010 12:27:31 PM PDT

WASHINGTON -- Wells Fargo is paying $24 million to end an investigation by eight states probing whether lenders acquired by the company made risky mortgages to consumers without disclosing their perils.

The states said loans known as option adjustable rate loans, or "pick-a-payment" mortgages, were deceptive to borrowers. Those particularly toxic loans allowed borrowers to defer some of their interest payments and add them to the principal balance. Borrowers could make payments so low that loan debt actually increased every month.

San Francisco-based Wells Fargo announced the agreement Wednesday with attorneys general in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas and Washington state.

The loans were made by Wachovia and a California company it acquired, World Savings Bank. Wells purchased Wachovia at the end of 2008. Wachovia had already stopped making those loans before the acquisition was complete.

As part of the agreement, Wells has agreed to offer loan assistance worth more than $770 million to more than 8,700 borrowers through June 2013, though that amount will depend on how the economy fares during that time. The $24 million will be used to help states reach out to customers who took out such loans.

The agreement includes no admission of wrongdoing by Wells Fargo. The states' investigation centered on allegations that consumers were misled about the possibility that their mortgage amounts would increase.

Such "pick-a-payment" loans were made by many large lenders during the housing boom, but have defaulted in massive numbers after the market went bust.

Wells said the program will have no impact on its third-quarter financial results. It said "pick-a-payment" customers already have received about $3.4 billion in principal forgiveness.

Borrowers who already have received a loan modification from Wells will not be eligible for the new program. For information, call Wells at 1-888-565-1422.

HUD Has Loans for Out-of-Work Borrowers

The U.S. Department of Housing and Urban Development announced Tuesday that it will offer $50,000 loans to unemployed borrowers who are at least three months behind in their payments, but who have a reasonable likelihood of being able to resume regular payments within two years.

The property must be the borrower’s principal residence and they cannot own a second home. They must have suffered at least a 15 percent decline in income.

The loan is available in 32 states not receiving assistance through the Hardest Hit Fund, which gave 18 states more than $4 billion to devise programs to help the unemployed and underwater borrowers.

Source: CNNMoney.com, Tami Luhby (01/05/2010)

Fannie Mae Announces New Help for Military Homeowners

WASHINGTON, DC — At an event today at the Pentagon, Fannie Mae (FNMA/OTC) and the U.S. Army announced new initiatives to help service members who are struggling with their mortgage payments avoid foreclosure. The effort includes a mortgage payment forbearance of up to six months where the death or injury of a service member on active duty causes a hardship for impacted military families with a mortgage obligation.

The company also announced the creation of a special hotline, 877-MIL-4566, available to all service members to receive guidance about their mortgage options and enlist assistance.

"The men and women of our Armed Forces have shown extraordinary commitment to our country while facing unique challenges as a result of their service," said Jeff Hayward, Senior Vice President of Fannie Mae's National Servicing Organization. "No family impacted by a death or injury in the line of duty should have to face the additional burden of foreclosure as a result of the hardship. We want to do all that we can to provide support to these families at a time of need as we honor their sacrifices and service to our country."

The Honorable Katherine Hammack, Assistant Secretary of the Army (Installations and Environment), remarked, "We who serve alongside our military recognize the great sacrifice they and their families make each day. The initiative between Fannie Mae and the lending community recognizes their sacrifice and demonstrates our gratitude for those who face economic hardships as a result of their service. We are profoundly grateful for this heartwarming response from the lending community as they become partners in designing and implementing this initiative."

Service members or surviving spouses who may be eligible for the special forbearance are to contact their mortgage company. The mortgage company may grant forbearance of up to six months under Fannie Mae's "Unique Hardships" guidelines with Fannie Mae's approval. Under forbearance, the mortgage company may reduce or suspend the borrower's monthly payments for the specified period. Credit bureau reporting will be suspended during the forbearance to minimize any derogatory impact.

Fannie Mae has also created printed materials that will be available on military bases to help service members understand their options if they find themselves having trouble making their mortgage payments. Fannie Mae's new consumer education Web site, KnowYourOptions.com, is another resource for struggling homeowners. The site outlines the choices available to homeowners and provides guidance on how they can contact and work with their mortgage company to find solutions.

Service members are encouraged to visit www.KnowYourOptions.com/Military or call the Fannie Mae Military Support Hotline, 877-MIL-4566.

Banks Behaving Badly

Today there were two news stories about banks harassing their customers.

First up is GMAC Mortgage. In 2006 they were sanctioned for foreclosing on homes without the proper documentation. Seems the "sworn affidavits" signed by a mortgage executive which were used to justify the foreclosure were not actually read by said executive, nor were these documents signed in front of a notary.

Guess they didn't learn the error of their ways, since the GMAC Mortgage is facing new allegations that they evicted homeowners without checking to see if they were actually in default. Since this new allegation came out, GMAC Mortgage has suspended foreclosures in 23 states.

The second sunmission in today's Bad Bank contest is Bank of America. The bank has fired a debt collection service after an expose' by ABC News revealed the agency used racist slurs when contacting Bank of America customers.

What kind of slurs? Here are some excerpts from calls made to Allen Jones. Mr. Jones owed $81 on his Bank of America credit card:

"What's up, you f---ing n---r?"
"This is your f---ing wake up call, man."
"You little, lazy ass bitch, get your mother f---ing ass up and go pick some mother f---ing cotton fields, bitch."

You can see the full story on tonight's ABC World News with Diane Sawyer and Nightline.

Mortgage Lender Will Pay $1.5 Million to Settle FTC Charges That It Discriminated Against Hispanic Borrowers

FTC Press Release 9/20/2010

A California-based mortgage lender and its owner have agreed to settle FTC charges that they illegally charged Hispanic consumers higher prices for mortgage loans than non-Hispanic white consumers – price disparities that could not be explained by the applicants’ credit characteristics or underwriting risk.

“We will continue to be vigilant in enforcing fair lending laws and we’re not going to tolerate discriminatory practices by mortgage lenders,” FTC Chairman Jon Leibowitz said. “Lenders who allow discretion in pricing loans can’t escape liability simply by burying their heads in the sand. Those lenders must monitor discretionary pricing to ensure that American borrowers are treated equally based on their credit – not their race, national origin, or gender.”

The FTC filed a complaint in federal court on May 7, 2009, alleging that Golden Empire Mortgage, Inc. and Howard D. Kootstra violated the Equal Credit Opportunity Act in pricing mortgage loans. They allegedly gave loan officers and branch managers wide discretion to charge some borrowers, in addition to the risk-based price, “overages” through higher interest rates and higher up-front charges. They then paid loan officers a percentage of the overages as a commission, according to the complaint, and failed to monitor whether Hispanic consumers were paying higher overages than non-Hispanic white borrowers. (5/11/2009 release http://www.ftc.gov/opa/2009/05/gem.shtm).

The settlement order permanently prohibits Golden Empire and Mr. Kootstra from discriminating on the basis of national origin in credit transactions, or otherwise failing to comply with the Equal Credit Opportunity Act and its implementing Regulation B. The order imposes a $5.5 million judgment that will be suspended when $1.5 million has been paid for consumer redress. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The order also requires Golden Empire to have a policy that restricts loan originators’ pricing discretion, a fair lending monitoring program, a program to ensure the accuracy and completeness of their data, and employee training programs. The pricing policy and fair lending monitoring program set forth in the settlement order are intended to facilitate order enforcement in this case.

In fair lending cases, the Commission strives to have before it as wide a range of information as possible to determine whether a lender’s policies have run afoul of fair lending laws. As with other FTC orders, the order against GEM is designed to fit the facts of this case.

The extent to which other lenders should use the same methodology in monitoring ECOA compliance will depend on the facts and circumstances of each lender. An appropriate monitoring program requires an examination of a lender’s policies, business model and business necessities and should include statistical analyses that consider, as warranted by the lender’s particular circumstances, various information such as loan characteristics, geographic variations and other relevant factors.

The Equal Credit Opportunity Act and its implementing Regulation B bar creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age, or the fact that an applicant’s income is derived from public assistance. More information about consumers’ rights under the Act is available at http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea08.shtm.

The Commission vote to file the stipulated final order was 5-0. The order was filed in the U.S. District Court for the Central District of California.

NOTE: Stipulated court orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

As Housing Languishes, Mortgage Write-downs Gain Appeal for Banks

By David Bracken

RISMEDIA, September 10, 2010--(MCT)--Eager to avoid writing down the loans on their books, banks have been extending many of them with the hope that the market will improve.

Even banks that foreclosed on properties have kept them on their books, reluctant to auction them in a market where investors offer as low as 10 cents on the dollar.

Now that appears to be changing, and it could have implications for property owners caught up in the sell-off.

"The proverbial logjam is beginning to break up," said Jim Anthony, CEO of Anthony & Co., a Raleigh real estate services company.

As evidence, Anthony said BB&T plans to auction $1 billion of performing and nonperforming loans in the Southeast.

BB&T would neither confirm nor deny reports of the auction.

"BB&T continues to evaluate opportunities to best execute our problem loan disposition strategy, which may or may not include bulk sales," said spokeswoman Cynthia Williams.

BB&T has been more aggressive of late in writing down its troubled loans and moving to rid itself of some of them. The bank's CEO, Kelly King, has indicated the strategy will continue as long as investor appetite for the loans remains at current levels.

Other regional banks, including Pittsburgh-based PNC Financial Services Group and Birmingham, Ala.-based Regions Financial, are pursuing similar strategies.

The move to deal with troubled real estate loans is driven partly by federal regulators who have increased pressure on banks whose capital ratios fall below a certain level.

"I think the banks are coming to terms with the fact that, particularly, commercial real estate is declining in value and it's just not coming back in the next three months or six months," said Tony Plath, a banking professor at the University of North Carolina-Charlotte. "It's going to be a while before we're out of the hole as far as real estate values are concerned."

The auctions also are a sign that the gap between what the banks will take for the loans — and what investors will pay — is narrowing.

"I think all of the banks have reached the point where they realize they're not going to get 80 cents on the dollar for the value of the loans they package," Plath said. "They're going to be looking at something like 35 or 40 cents on the dollar, which seems to be where these loan packages are selling."

For property owners whose loans are included in these packages, the auctions could mean trouble.

If an investor buys a loan for 40 cents on the dollar, that means they can foreclose on the property, auction it off and still make a profit.

"The borrowers that are included in the package face much more rigorous collection efforts on behalf of the buyer," Plath said. "(If you're a borrower,) you really don't want that loan sold."

(c) 2010, The News & Observer (Raleigh, N.C.).
Distributed by McClatchy-Tribune Information Services.

HUD Announces National First Look Program

HUD Press Release

WASHINGTON - U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan today announced an unprecedented agreement with the nation's top mortgage lenders to offer selected state and local governments, and nonprofit organizations a "first look" or right of first refusal to purchase foreclosed homes before making these properties available to private investors.

The National First Look Program is a first-ever public-private partnership agreement between HUD and the National Community Stabilization Trust (Stabilization Trust). In collaboration with national servicers, Fannie Mae, and Freddie Mac, the First Look program is intended to give communities participating in HUD's Neighborhood Stabilization Program (NSP) a brief exclusive opportunity to purchase bank-owned properties in certain neighborhoods so these homes can either be rehabilitated, rented, resold or demolished.

"This groundbreaking agreement will help rebuild neighborhoods that have been struggling with blight and declining home values due to foreclosures," said HUD Secretary Shaun Donovan. "Local communities will now get an exclusive option to buy foreclosed properties in targeted neighborhoods so they can turn the homes into affordable housing or, in some cases, tear them down. This agreement helps us level the playing field to give communities a better chance to stabilize these neighborhoods."

"The Stabilization Trust is delighted to be working with HUD Secretary Donovan on the National First Look Program," said Craig Nickerson, President of the NCST. "By serving as the operations ‘engine' behind the First Look Program, the Stabilization Trust can facilitate the transfer of more foreclosed property for participating financial institutions to local community buyers, thereby accelerating the road to neighborhood recovery."

HUD's NSP grantees, which include state and local governments and non-profit organizations, often find themselves competing with private investors for real estate-owned (REO) properties, which can hinder their efforts to stabilize neighborhoods with high foreclosure activity. With today's announcement, HUD and the Stabilization Trust, working with national servicers, Fannie Mae, and Freddie Mac, will standardize the acquisition process for NSP grantees, giving them an exclusive option to purchase foreclosed upon homes in certain targeted neighborhoods.

The Stabilization Trust pioneered the 'First Look' model to create a transparent and streamlined process to facilitate the transfer of foreclosed and abandoned properties from key financial institutions to local government housing providers. First piloted in 2008, the model has gained recognition as a critical tool for positively tipping the scale in neighborhoods hard hit by foreclosures. NSP grantees will also be aided by REOMatch™, a web-based mapping and acquisition management tool developed by the Stabilization Trust. REOMatch will assist NSP grantees easily identify REO properties and make more strategic decisions about which properties to acquire, based on real-time data on an interactive mapping platform.

The nation's leading financial institutions are participating in the National First Look Program, representing approximately 75 percent of the REO marketplace. Participating institutions include: Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Ocwen Financial Corporation, Saxon Mortgage Services, U.S. Bank, Wells Fargo, Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA).

The National First Look Program will allow NSP grantees the exclusive opportunity to purchase available REO properties located within the defined boundaries of NSP target areas. NSP grantees will be immediately notified when a property becomes available and will have 24-48 hours to express interest in pursuing a specific property. Furthermore, these institutions will provide NSP purchasers with the opportunity to purchase REO properties at a discount their appraised value, reflecting the cost savings of a quick sale. NSP grantees may acquire these properties with the assistance of NSP funds for any eligible use.

After expressing interest in a property, the First Look Period will last approximately five to 12 business days during which the NSP Grantee will conduct inspections and establish costs to repair in anticipation of the financial institution's price offer. In the event that no NSP grantee exercises its preference to purchase an REO property during the First Look period, the financial institution will follow its normal process to sell the home on the open market.

Currently, the Federal Housing Administration (FHA) offers a complementary pilot program in which NSP grantees receive an exclusive option to purchase so-called ‘HUD Homes' at a discount prior to those homes being made available to the investor community. The FHA pilot, alongside today's agreement expands the opportunity for NSP grantees to gain access to REO properties through a national first-look standard option.

HUD's Neighborhood Stabilization Program was created to address the housing crisis, create jobs, and grow local economies by providing communities with the resources to purchase and rehabilitate vacant homes. NSP grants are helping state and local governments, as well as non-profit developers, acquire land and property; demolish or rehabilitate abandoned properties; and/or offer downpayment and closing cost assistance to low- to middle-income homebuyers. Grantees can also stabilize neighborhoods by creating "land banks" to assemble, temporarily manage, and dispose of foreclosed homes. To date, HUD has allocated nearly $6 billion in funding to state and local governments and non-profit housing developments. In the coming weeks, HUD will allocate an additional $1 billion in NSP funding, which was provided through the Dodd-Frank Wall Street Reform and Consumer Protection Act.

FTC Warns of Oil Spill Scams

Alert from the Federal Trade Commission

It’s no secret that scam artists follow the headlines, and the daily news of the oil spill in the Gulf of Mexico is no exception. The Federal Trade Commission (FTC), the nation’s consumer protection agency, cautions consumers and businesses to be on the alert for fraudulent activity related to the explosion aboard the Deepwater Horizon drilling rig and the resulting spill – and to report their experiences to federal and state authorities. BP leased the rig, which was owned and operated by Transocean.

The FTC says it’s likely that scammers will use e-mails, websites, door-to-door collections, flyers, mailings and telephone calls to make contact and solicit money. Some may claim they’re raising money for environmental causes or offer fraudulent services – like remediation services – related to the oil spill. Others may claim they can expedite loss claims for a fee. Still others may knock on your door and talk about placing booms or checking for oil on your property. Chances are they’re trying to gain your trust to get inside your home or get access to your personal information.

The FTC says that at the very least, you will want to do some homework before making a donation or entering into an agreement for services.

Regarding Claims

Expect some scam artists to pose as authorized adjusters and ask for fees to expedite services. ESIS, BP’s authorized claims administrator, is not charging individuals or companies any fee to process claims. If you make a claim, you are assigned a claims number through the BP hotline at 1-800-440-0858. An authorized ESIS adjuster will contact you to further verify and process the claim for payment. If you are not satisfied with the resolution, you should call the U.S. Coast Guard’s National Pollution Funds Center (NPFC) at 1-800-280-7118, or visit the NPFC for more information at: www.uscg.mil/npfc/Claims/default.asp

Expect other scam artists to pretend to be government officials – and then require a processing fee to provide government services. The government does not require processing fees.

Regarding Insurance

Verify that you are dealing with authorized representatives of BP, and don’t sign waivers of liability too quickly without getting adequate legal and financial counsel.

Report anyone who is making false or exaggerated insurance claims to your state insurance commissioner.

Report anyone who is making insurance claims but lives outside the disaster zone.

Regarding Contractors

Don’t do business with contractors who require up-front payment for services: You will be out the money if they fail to perform the work or finish the job to your specifications or satisfaction.

Require any contractors you use to detail the services they will perform on a written contract.

Use only licensed contractors.

Regarding Donations to Charities

Some people may misrepresent an affiliation with an environmental organization when they ask for donations via e-mail or social networking sites. If you’re tempted to contribute, check out the charity at www.bbb.org/us/charity, the website of the Better Business Bureau.

Some sham organizations may use copy-cat names to cash in on the reputations of older, more established charities.

Rather than clicking on a link to a purported website, verify the legitimacy of a nonprofit organization by using search engines and other online resources to confirm the group’s existence, history, mission and nonprofit status.

To ensure your contributions are received and used for the purposes you intend, contribute directly to organizations you know rather than relying on other people to make a donation on your behalf.

If you get pressure to make a contribution, look for another charity. Reputable charities don’t use those kinds of tactics.

Avoid donating cash if possible. Pay by debit or credit card, or write a check directly to the charity.

If an organization suggests you wire your donation to them, cross them off your list. Legitimate charities usually do not solicit donations via money transfer services.

Most legitimate charities websites end in .org rather than .com. For more information on the warning signs of a charity scam, visit www.ftc.gov/charityfraud.

Regarding Employment and Volunteer Opportunities

Avoid any job or volunteer opportunities that require you to pay a fee before the job begins.

FTC Warns Consumers to Exercise Caution When Selling a Timeshare Through a Reseller

FTC New Alert

The Federal Trade Commission, the nation’s consumer protection agency, offered these tips for people who seek to sell their timeshare through real estate brokers and agents that specialize in reselling timeshares:

Even if the salesperson claims the local market is “hot,” or his office is overwhelmed with buyer requests, don’t agree to anything on the phone or online before checking out the reseller. Contact the Better Business Bureau (www.bbb.org), state Attorney General (www.naag.org), and local consumer protection agencies (www.consumeraction.gov) in the state where the reseller is located. Ask if any complaints are on file.

Ask for all information in writing.

Ask if the reseller’s agents are licensed to sell real estate where the timeshare is located. If so, verify it with the state real estate commission. Deal only with licensed real estate brokers and agents, and ask for references from satisfied clients.

Ask how the reseller will advertise and promote the timeshare unit. Will progress reports be issued? How often?

Ask about fees and timing. It’s better if the reseller takes its fee after the timeshare is sold. If a fee must be paid in advance, ask about refunds. Get refund policies and promises in writing.

Don’t count on recouping the purchase price of a timeshare, especially if you’ve owned it for less than five years and the location is not well known.

To get an idea of the value of a timeshare, consider using a timeshare appraisal service. Check with the state where the service is located to make sure the appraiser’s license is current.

Before signing the contract, make sure it specifies the services the reseller will perform, the costs the seller is responsible for and when they must be paid, whether the seller can rent or sell the timeshare at the same time the reseller is trying to sell it, the length or term of the contract to sell the timeshare, and who is responsible for documenting and closing the sale.

Don't sign the contract if the deal isn't what you expected or wanted. Negotiate changes or find another reseller.

Check with the resort to determine restriction, limits, or fees that could affect resale or ownership transfer.

Have available the name, address, and phone number of the resort, the deed and the contract or membership agreement, the financing agreement if money is still owed, information to identify your interest or membership, the exchange company affiliation, the amount and due date of the maintenance fee, and the amount of any real estate taxes that are billed separately.

For more information contact:
American Resort Development Association
1201 15th Street N.W., Suite 400
Washington, D.C. 20005
(202) 371-6700; Fax: (202) 289-8544
www.arda.org

New Credit Card Rules Protect Borrowers

From the Federal Reserve

More new rules from the Federal Reserve mean more new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on August 22, 2010:

Reasonable penalty fees

Let's say you are late making your minimum payment.

Today: Your late payment fee may be as high as $39, and you likely pay the same fee whether you are late with a $20 minimum payment or a $100 minimum payment.

Under the new rules: Your credit card company cannot charge you a fee of more than $25 unless:

◦One of your last six payments was late, in which case your fee may be up to $35; or
◦Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.

In addition, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can't be more than $20. Similarly, if you exceed your credit limit by $5, you can't be charged an over-the-limit fee of more than $5.

Additional fee protections

No inactivity fees. Your credit card company can't charge you inactivity fees, such as fees for not using your card.

One-fee limit. Your credit card company can't charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.

Explanation of rate increase

If your credit card company increases your card's Annual Percentage Rate (APR), it must tell you why.

Re-evaluation of recent rate increases

Today: Your credit card company can increase your card's APR with no obligation to re-evaluate your rate increase.

Under the new rules: If your credit card company increases your APR, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

This set of rules is the latest in a series of regulations that implement the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit Card Act). For information on protections under the Federal Reserve's other credit card rules, read What You Need to Know: New Credit Card Rules Effective Feb. 22.

FTC Testifies About Ongoing Efforts to Protect Consumers from Deceptive Debt Relief Scams

FTC Office of Public Affairs

The Federal Trade Commission today told the U.S. Senate Committee on Commerce, Science, and Transportation that the FTC has made it a top priority to protect financially distressed American consumers from deceptive debt relief schemes.

With Americans continuing to feel the effects of the economic downturn, the FTC has stepped up efforts to stop fraudulent financial schemes that exploit consumers, according to the testimony, which was presented by Alice Saker Hrdy, Assistant Director in the FTC’s Division of Financial Practices. Hrdy described the FTC’s law enforcement actions in this area, a new FTC rule to combat deceptive and abusive telemarketing of debt relief services, and the FTC’s ongoing work to educate consumers about debt relief options and how to avoid scams.

In the past seven years, the FTC has brought 23 lawsuits against credit counseling firms that are sham nonprofits, debt settlement services, and debt negotiators. These cases have helped more than 500,000 consumers who have been harmed, and additional investigations are under way. The FTC works closely with state attorneys general and state banking departments to leverage its resources to protect consumers in this and other areas.

The testimony also described how the FTC recently amended its Telemarketing Sales Rule to further combat deceptive and abusive debt relief practices. The Rule now prohibits for-profit companies that sell debt relief services over the telephone from collecting fees before delivering the services they promise. In addition, the Rule requires telemarketers to make certain disclosures and prohibits them from making false claims.

In addition, the testimony described the FTC’s many educational campaigns to help consumers manage their finances, avoid deceptive and unfair practices, and be aware of emerging scams, including a major initiative regarding mortgage loan modification and foreclosure rescue scams. The FTC has focused outreach efforts on issues affecting people in financial distress, such as federal stimulus money scams.

The Commission vote authorizing the testimony was 5-0. The testimony was presented during a Senate Committee field hearing in Kansas City, Missouri.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Fannie Mae Launches “Know Your Options™”

Press Release from Fannie Mae

Fannie Mae Launches “Know Your Options™” Online Resource to Educate Struggling Homeowners

Initiative Builds on Company's Full Spectrum of Efforts to Help Borrowers

WASHINGTON, DC — Fannie Mae (FNMA/OTC) today announced the launch of KnowYourOptions.com, a new consumer education Web site that outlines the choices available to homeowners who are struggling with their mortgage payments, and provides guidance on how they can contact and work with their mortgage company to find solutions.

The online resource, which offers reliable and easy-to-understand information in both English and Spanish, expands on Fannie Mae's ongoing efforts to help struggling borrowers find alternatives to foreclosure.

“Through foreclosure prevention programs, borrower outreach, underwriting guidelines and servicer engagement, Fannie Mae is taking a comprehensive approach to helping struggling borrowers,” said Jeff Hayward, Senior Vice President, Fannie Mae's National Servicing Organization. “Identifying accurate resources and finding the right answers can be a difficult challenge for borrowers facing hardship and a flurry of disparate, incomplete and sometimes fraudulent information. Know Your Options™ is the company's newest effort to reach distressed homeowners and is designed to bring the best information and guidance together in one place so that struggling borrowers can focus on finding solutions that work for their particular circumstances.”

Key features of KnowYourOptions.com include:

Interactive Options Finder to help homeowners identify options that might be right for their situation;
Calculators to help borrowers understand how many of the options work, including refinance, repayment, forbearance, and modification;
Videos featuring real homeowners discussing how they received help and housing counselors providing advice;
A virtual assistant to walk homeowners through key areas of the site; and
Next steps and helpful forms, including a financial checklist and contact log to help borrowers be prepared when contacting their mortgage company or housing counselor.
For homeowners who are having trouble paying their mortgage, but want to stay in their homes, KnowYourOptions.com provides information on refinancing, repayment plans, forbearance, modifications and Deed-for-Lease™.

For homeowners who recognize that they can no longer afford their mortgages, but want to avoid having a foreclosure on their credit history, the site provides information on alternatives including short sales and deeds-in-lieu.

“There are different answers for different situations and this site can be an important tool in the toolbox for borrowers trying to do the right thing,” Hayward continued. “This initiative draws on the insights and feedback garnered through Fannie Mae's work with thousands of lender partners and housing counselors across the country, and will help connect borrowers with the servicing and counseling professionals they need to reach resolution. Our hope is that this site can be a trusted source of free information for borrowers and industry participants alike.”

The company plans to implement a comprehensive marketing outreach campaign to raise awareness about the site, and also intends to use the site as a vehicle to roll out new options for borrowers that are currently being developed.

To view a video demonstration of the site, please visit: http://www.knowyouroptions.com/presentation.

Deceptive Marketers Banned from Selling Mortgage Relief Services; One Defendant Ordered to Pay $11.5 Million

FTC Press Release

Eight marketers are banned from selling mortgage modification or foreclosure relief services under settlements with the Federal Trade Commission. The FTC alleged that the marketers charged homeowners up-front fees and falsely claimed they could get their mortgage loans modified or prevent foreclosure on their homes. The settlements in three separate actions are part of the FTC’s ongoing efforts against scams that target financially distressed consumers.

The FTC settled with the following defendants:

Federal Loan Modification Law Center. Steven Oscherowitz settled FTC charges that he and others advertised and sold a so-called “Federal Loan Modification program.” They charged up to $3,000, much of which they required up-front, but Federal Loan Modification often failed to live up to the promised results, according to the FTC’s complaint. (4/6/2009 release http://www.ftc.gov/opa/2009/04/hud.shtm). The settlement order against Oscherowitz permanently bans him from selling mortgage relief services and from telemarketing any good or service. Under the order, Oscherowitz also is prohibited from misrepresenting any good or service, selling or otherwise benefitting from customers’ personal information, and failing to dispose of customer information properly. The order imposes an $11.5 million judgment against Oscherowitz, which represents the amount consumers paid to the defendants while he was involved in the alleged scheme. Any money collected to satisfy the judgment will be paid to injured consumers if practicable, or to the U.S. Treasury as disgorgement of ill-gotten gains. Two individual and three corporate defendants already have settled charges against them in this case, and the FTC continues to pursue its case against five other defendants.

Loss Mitigation Services. Dean Shafer, Marion Anthony “Tony” Perry, and Bernadette Perry, also known as Bernadette Carr and Bernadette Carr-Perry, settled allegations that they falsely promised that a loan modification was assured or virtually assured if consumers paid an advance fee of up to $5,500. Shafer and the Perrys, who were principals of Loss Mitigation Services, Inc. (LMS) and Synergy Financial Management Corporation, doing business as Direct Lender or DirectLender.com (Direct Lender), also allegedly misrepresented that the companies were a department of, or affiliated with, the consumer’s lender or mortgage servicer. In addition, Shafer and the Perrys falsely claimed that consumers would receive refunds if LMS or Direct Lender failed to secure a loan modification. In many cases, the defendants failed to obtain loan modifications for consumers, and some consumers lost their homes while waiting for the promised results. (7/15/2009 release http://www.ftc.gov/opa/2009/07/loanlies.shtm.) Under the settlement orders, Shafer and the Perrys are banned from selling mortgage relief services. The orders also impose a $6.2 million judgment that is suspended due to their inability to pay. In addition to the orders against Shafer and the Perrys, the FTC obtained a default order against LMS and Direct Lender, banning them from selling mortgage relief services and ordering them to pay $6.2 million.

Hope Now Modifications. Brothers Salvatore and Nicholas Puglia, Hope Now Modifications LLC, and Hope Now Financial Services Corporation settled FTC charges that they falsely claimed that they could obtain mortgage loan modifications in all or virtually all cases and would refund consumers’ money if they failed, and that they were affiliated with, or part of, the HOPE NOW Alliance, a free federal homeowner assistance program. (3/24/2009 release http://www.ftc.gov/opa/2009/03/newhope.shtm). In addition to banning the defendants from selling mortgage relief services, the settlement order against them permanently bars them from misrepresenting any good or service, violating the Telemarketing Sales Rule, selling or otherwise benefitting from their customers’ personal information, and failing to dispose of their customer information properly. The order also imposes a judgment of almost $5.3 million, which will be suspended when the defendants surrender all of the funds in their bank accounts, which were frozen by the court.

The Commission votes to authorize staff to file the stipulated final orders in Federal Loan Modification Law Center and Loss Mitigation Services were 5-0. The orders were entered by the U.S. District Court for the Central District of California on July 12, 2010, and July 14, 2010, respectively. The Commission vote to authorize staff to file the stipulated final order in Hope Now Modifications was 5-0. The order was entered by the U.S. District Court for the District of New Jersey on July 12, 2010.

NOTE: Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

FTC Says Free Credit Reports Must Really Be FREE!

FTC Warns Websites That Offer 'Free' Credit Reports: Disclose Federally Mandated Free Reports or Face Prosecution

The Federal Trade Commission is warning 18 Internet websites offering free credit reports that they must clearly disclose that a free report is available under federal law. The FTC’s recently amended Free Credit Reports Rule, which took effect April 2, 2010, requires certain disclosures to help consumers distinguish between ads for free credit reports that often require them to buy credit monitoring or other services, and the federally mandated no-strings-attached credit reports available at AnnualCreditReport.com or 877-322-8228. For example, websites offering free credit reports must have a disclosure, with links to AnnualCreditReport.com and FTC.gov, that appears across the top of each page that mentions free credit reports. Violators are subject to legal action that can result in penalties of up to $3,500 per violation. The Commission vote to publicly disclose the warning letters was 5-0.

Warning letters are being sent to the following:

Company Name: Website

National Credit Report.Com LLC: NationalCreditReport.com

Quinstreet, Inc.: FreeCreditReport4U.com

MyCreditCenter.Com, Inc.: My CreditCenter.com, 3CreditReport.com,Online, FreeCreditReports.com

Vertrue, Inc.: My3BureauCreditReport.com, FreeScore.com, FreeTripleCreditScore.com, Free3BureauCreditReport.com, FreeOnlineReportNow.com

ConsumerTrack, Inc.: GoFreeCredit.com, FreeCredit-Reports.net,Free-Credit-Reports-Repair.com

ConsumerDirect, Inc.: FreeCredit-Report.net, SmartCredit.com

Mighty Net, Inc.: 3FreeCreditReportsUSA.com

Amie Nguyen: AllFreeCreditReports.com

Amanda Raab: FreeCreditReportsUSA.com

Information in credit reports may affect whether consumers can get a loan or a job, so it is important for consumers to check their reports and correct any inaccurate information. Consumers can learn more about their right to a free credit report under federal law at http://www.ftc.gov/freereports.

HUD To Investigate Mortgage Lenders Who Discriminate Against Expectant Mothers And New Parents

WASHINGTON - The U.S. Department of Housing and Urban Development announced today that it will launch multiple investigations into the lending practices of certain mortgage lenders to determine if they illegally denied families mortgages because the mother is pregnant or a family member is experiencing a short-term disability. The action follows a report published this week in the New York Times outlining the lending practices of some lenders which might possibly violate the Fair Housing Act.

"Denying a mortgage to people just because they're having a baby is flat wrong," said Vice President Biden, Chair of the White House Task Force on Middle Class Families. "Mothers on maternity leave have jobs, they have income, and they shouldn't have to lose their deal to close on a house because they had a baby. I applaud HUD for taking action on this practice that could potentially affect untold numbers of families."

HUD Secretary Shaun Donovan said, "Lenders have every right to ascertain the incomes of families to determine whether they are eligible for a mortgage loan but they have no right to use a pregnancy or a short-term disability as a cause to deny that family a mortgage they would otherwise qualify for. Having a child should be a time for a family to celebrate and must not be a cause for unfair lending practices."

HUD enforces the Fair Housing Act which prohibits discrimination in lending based on sex, familial status (pregnancy or children in the family), or disability. The Act protects consumers from being discriminated against based on a borrower's maternity leave if the borrower can demonstrate that she intends to return to work and can otherwise continue to meet the income requirements to qualify for the loan.

A published report in the New York Times indicated that some mortgage lenders may be denying credit to borrowers because of a pregnancy or maternity leave. As a result, HUD's Office of Fair Housing & Equal Opportunity is opening multiple investigations into the practices of lending institutions to determine if they are violating the Fair Housing Act.

"This report is profoundly disturbing and requires immediate action," said John Trasviña, HUD's Assistant Secretary for Fair Housing and Equal Opportunity, the office that will be directing these investigations. "Lenders must not carry out due diligence responsibilities in ways that have the practical effect of discriminating against recent or expectant mothers."

HUD's Federal Housing Administration (FHA) requires its approved lenders to review a borrower's income to determine whether they can reasonably be expected to continue paying their mortgage for the first three years of the loan. FHA-insured lenders cannot, however, inquire about future maternity leave. If a borrower is on maternity or short-term disability leave at the time of closing, lenders must document the borrower's intent to return to work, that the borrower has the right to return to work, and that the borrower qualifies for the loan taking into account any reduction of income due to their leave. Meanwhile, HUD is currently reviewing Fannie Mae and Freddie Mac's underwriting guidelines to determine if they satisfy the Fair Housing Act, including income verification of persons taking parental or disability leave.

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5 Real Estate Scams You Need to Know About

Don't be duped by mortgage fraud. Here are a few common scams and the red flags you should look for in a transaction.

By Melissa Dittmann Tracey | August 2010

Mortgage fraud is pervasive: An estimated $4 billion to $6 billion in annual losses result from mortgage fraud, according to FBI reports. “An entire community can be damaged by mortgage fraud,” says Rachel Dollar, a lawyer from Santa Rosa, Calif., and editor of the Mortgage Fraud Blog. Mortgage fraud can lead to a spike in foreclosures, home values plummeting, and lenders raising their rates and fees to recover losses.

The crimes are often complex, involving several parties and occurring over multiple transactions. To protect you and your clients, educate yourself about mortgage fraud and be on guard for any warning signs in a transaction. You can start by reviewing these five scams, and then test your knowledge by taking our Mortgage Fraud Quiz.

1. The Foreclosure Rescue Scheme

The Scam: “Rescuers” promise cash-strapped home owners that they can save their home from foreclosure. The rescue, which involves paying upfront fees, can take multiple forms, such as the perpetrator obtaining a new loan on behalf of the owner or by having the owner sign over the home’s deed and then rent the home until they can repurchase it. Eventually, the home owner loses the home, either to foreclosure or the fictitious rescue company.

Red Flags: With foreclosure rescue programs, borrowers are often advised to sign over the title of their house to a third party, become renters of their home, not contact their lender, or send mortgage payments to a third party, according to Fannie Mae, which provides fact sheets on mortgage fraud.

2. Loan Documentation Fraud

The Scam: This fraud involves numerous schemes in which a borrower provides inaccurate financial information — such as about their income, assets, and liabilities — or employment status in order to qualify for a loan with lower rates and more favorable terms. Occupancy fraud is one growing area: Borrowers say they plan to live in the property when they actually intend to rent it.

Red Flags: Documentation may raise suspicion if the employer’s address is shown as a post office box, accumulation of assets compared to the person’s income appears too high or low, the new house is too small to accommodate occupants, the person has no credit history, or the application is unsigned or undated, according to Fannie Mae.

3. Appraisal Fraud

The Scam: A faulty appraisal — saying a property is worth more than what it really is — is connected to many types of mortgage fraud. It entails manipulating or overstating comparables, market values, or property characteristics in order to obtain a higher appraisal. The higher property appraisal, which generates false equity, is done by falsifying an appraisal document or using an appraiser accomplice to obtain the higher value.

Red Flags: Be skeptical of appraisals that are dated prior to the sales contract, list comparable sales that do not contain similarities to the property or are outside the neighborhood, the owner is not the seller listed on the contract or the title, or a third party participating in the transaction orders the appraisal, Freddie Mac warns.

4. Illegal Property Flipping

The Scam: This entails purchasing properties and reselling them at inflated prices. These scams usually involve faulty appraisals and inaccurate loan documents. The property is then refinanced or resold immediately after purchase for an inflated value. The home is purchased at a higher price, often by straw buyers working with the “flipper,” and eventually falls into foreclosure.

Red Flags: Some key things to look for are rapid refinancing of a property; the seller recently having acquired the title or acquiring the title concurrent with the transaction; an appraisal that comes in too high; a property that was recently in foreclosure being purchased at a much lower price than its sales price; or the owner listed on the appraisal and title not matching the seller on the sales contract, according to Fannie Mae.

5. Short Sales Schemes

The Scam: Borrowers owe more than the current value of their home so they fake financial hardship and no longer make their mortgage payments. An accomplice of the borrower then submits a low offer to purchase the property in a short sale agreement. The lender agrees to the short sale, unaware that it was premeditated. The property, after being purchased at the reduced price, is then often resold at the home’s actual value for profit.

Red Flags: The borrower suddenly defaults on the mortgage with no workout discussions with the lender, an immediate offer is made to a lender at a short sale price, the short sale offer is less than current market value, or a cash back is offered at closing to the delinquent borrower (disguised as “repairs” or other payouts, for example) and is not disclosed to the lender, according to Fannie Mae.

You can report instances of suspected mortgage fraud to Stopfraud.gov.

Reprinted from REALTOR® Magazine Online August 2010 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2010. All rights reserved.

Help Me Help You

On Sunday I was holding an open house when a neighbor stopped by to say hello. I’ll call her “Mary”. We started talking and Mary mentioned that she had hired a “loan modification company” to modify her existing home loan.

Mary is an intelligent and savvy business woman. She owns her own company and bought her own home. She reads my blog and has seen the articles such as

New Organization Dedicated to Preventing Loan Modification Scams and

HUD Advances Fight Against Loan Modification Scams.

And yet, she still went ahead and took the bait. She is now out $1,500 and no closer to a loan modification.

I feel badly that, somehow, my warnings did not penetrate. So please, tell me what more I can do to get the message out.

Reform Bill Retools Lending

From the California Association of Realtors

The Senate passed the financial regulation bill yesterday, which will impact home buyers and lending guidelines. Chief among the changes impacting consumers is the creation a consumer bureau at the Federal Reserve and the requirement that lenders ensure a borrower is able to repay a home loan by verifying income, employment, and credit history.

KEEP THIS IN MIND

• Under the financial regulation bill, at least two categories of mortgages likely will see a dramatic decrease in their availability: interest-only loans and stated-income loans. Both loan types likely would fall short of the government’s definition of “qualified” mortgages and therefore be avoided by many in the lending community.

• Many real estate analysts credit interest-only loans and stated-income loans as contributing factors to the decline of the housing market. With interest-only loans, borrowers pay none of the loan principal for a fixed period, typically 10 years, after which time they must make higher payments for the remaining 20 years of the loan. Unlike other loan products, stated-income loans do not require borrowers to verify their actual income. Only a few lenders continue to offer these loans, and typically only to borrowers with deep cash reserves and large down payments.

• The bill also severely limits the industry practice known as “yield spread premiums,” which in many cases incentivized mortgage brokers and loan officers to sell higher-interest loans to borrowers. The reform bill will no longer allow commissions earned by mortgage brokers and loan officers to be linked to the interest rate, but rather the loan amount. Once the bill takes effect, the total commission and additional fees charged by lenders and others in the mortgage process will be limited to a maximum of 3 percent of the loan amount, not including the real estate commission.

To read the full story, please click here:
http://www.nytimes.com/2010/07/11/realestate/11mort.html?_r=1&ref=realestate

FHA Announces First Look Initiative To Help Communities Stabilize Neighborhoods Hard-Hit By Foreclosure

WASHINGTON - The U.S. Department of Housing and Urban Development (HUD) today announced a new initiative that gives state and local governments, and nonprofit organizations participating in HUD's Neighborhood Stabilization Program (NSP) preference to acquire homes from the Department's inventory of foreclosed properties, commonly known as "HUD homes." The initiative was announced by HUD Secretary Shaun Donovan at the National Council of La Raza annual conference in San Antonio, Texas.

A Notice outlining this temporary initiative will be published this week in the Federal Register. This Notice details how the sale of HUD Homes under the Federal Housing Administration's (FHA's) First Look Sales Method will align NSP and FHA requirements to provide NSP grantees an exclusive option to purchase HUD homes before they are marketed to other purchasers.

"This First Look initiative is a marriage of two programs to accelerate our effort to confront property abandonment in communities struggling to overcome the effects of the foreclosure crisis," said Secretary Donovan. "By essentially giving our NSP grantees a first bite at the apple, we hope to accelerate the sale of FHA's foreclosed properties while supporting the Obama Administration's neighborhood stabilization efforts."

Through the FHA First Look Sales Method, HUD will offer NSP grantees a preference ("First Look") to acquire available HUD homes within the defined boundaries of NSP-designated areas. Furthermore, First Look will provide NSP purchasers with the opportunity to purchase FHA properties at a discount of 10 percent below their appraised value, less the cost of any applicable listing and sales commissions.

The FHA-NSP First Look period will last approximately 14 days from the conveyance of a property to FHA. Properties that remain unpurchased at the expiration of the First Look period will be listed and sold according to standard FHA procedures. Eligible NSP grantees may acquire these properties with the assistance of NSP funds for any eligible use under NSP, including rental or homeownership. This sales method becomes effective today and continues through May 31, 2013.

HUD's Neighborhood Stabilization Program was created to address the housing crisis, create jobs, and grow local economies by providing communities with the resources to purchase and rehabilitate vacant homes. NSP grants are helping state and local governments, as well as non-profit developers, acquire land and property; demolish or rehabilitate abandoned properties; and/or offer downpayment and closing cost assistance to low- to middle-income homebuyers. Grantees can also stabilize neighborhoods by creating "land banks" to assemble, temporarily manage, and dispose of foreclosed homes.

FHA employs a variety of methods to sell its foreclosed properties in a manner that expands homeownership opportunities, strengthens neighborhoods and communities, and ensures a maximum return to the mortgage insurance fund. Additional information about the sale and purchase of FHA single family properties is available on HUD's website.

IRS Clamps Down on Fraudulent Home Buyer Tax Credits

Interim Report issued on June 17, 2010

Highlights of Reference Number: 2010-41-069 to the Internal Revenue Service Commissioner for the Wage and Investment Division.

IMPACT ON TAXPAYERS

Homebuyers who purchased a home in 2008, 2009, or 2010 may be able to take advantage of the First-Time Homebuyer Credit. The Credit may be an interest-free loan or a fully refundable Credit depending on when the taxpayer purchased his or her home.
Fraudulent and erroneous Credits totaling millions of dollars in refunds were issued, which increases an already burgeoning Federal deficit.

WHY TIGTA DID THE AUDIT

The First-Time Homebuyer Credit as expressed in the Housing and Economic Recovery Act of 2008 has been revised and extended by two subsequent bills. Taxpayers may be confused regarding which version of the Credit they qualify for, and unscrupulous individuals may make fraudulent claims for the refundable Credit.

The President of the United States has called on Federal agencies to ensure that recovery funds are used for authorized purposes and that every step is taken to prevent fraud, waste, error, and abuse. The Internal Revenue Service (IRS) faces significant challenges to ensure that the recovery funds it administers are used for authorized purposes. This report contains interim results of two audits. The overall objectives of these two audits are to determine whether the IRS has controls in place that effectively identify erroneous claims for the Credit and to determine whether the IRS has controls in place to ensure claims for the Credit claimed on amended income tax returns are appropriately processed.

WHAT TIGTA FOUND

The IRS has taken a number of positive steps to strengthen controls and help prevent inappropriate Credits from being issued. Primary among these controls was the implementation of filters to identify questionable claims for the Credit before they are processed.

However, additional controls are necessary to address erroneous claims for the Credit. Further, fraudulent and questionable claims processed prior to implementation of controls will need followup action by the IRS.

Control weaknesses allowed fraudulent claims filed by prison inmates totaling an estimated $9.1 million to be processed. Multiple claims for the same home were allowed. In addition, claims totaling an estimated $17.6 million were allowed for homes purchased prior to the dates allowed by the law.

Many questionable claims for the Credit made on amended tax returns were not appropriately sent to the IRS’ Examination function for scrutiny.
Further, TIGTA found additional IRS employees that had made questionable claims for the Credit.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the IRS ensure that steps are taken to reconcile Prisoner Files from year to year. The IRS should also ensure that erroneous Credits received by prisoners and by taxpayers claiming homes that do not qualify for the Credit (including those filed on amended returns) are identified and recovered through post-refund examination activities.

IRS management agreed with all of the recommendations. Management plans to continue to explore ways to enhance the accuracy and completeness of the Prisoner File and plans to take steps to ensure that the claims made by prisoners are given high priority and are subject to post-refund examinations. In addition, the IRS plans to provide additional compliance scrutiny to all other inappropriate claims.

Fannie Mae Increases Penalties for Borrowers Who Walk Away

WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframe.

"We're taking these steps to highlight the importance of working with your servicer," said Terence Edwards, executive vice president for credit portfolio management. "Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time."

Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.

Troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances

Temporary Mortgage Relief for Gulf Homeowners

CitiMortgage announced today that it would suspend, through September 17, all foreclosure sales and filings on any property within 25 miles of the Gulf Coast on which Citi holds a first mortgage.

Fannie Mae also announced today that servicers of Fannie-backed loans may immediately suspend or lower payments on mortgages for borrowers whose income or property were affected by the spill. If you think you qualify, don't wait for the servicer to call you.

According to Janis Smith of Fannie Mae, "borrowers who hope to obtain relief under this policy should call their servicers right away." If approved, your servicers can offer to postpone or lower payments for up to 90 days. But be prepared to prove income loss or damage from the oil spill.

Freddie Mac will allow up to 6 months of payment assistance for victims. Other lenders are also offering programs, so if your home or income has been impacted by the Gulf oil spill, contact your lender.

FTC Settles Countrywide Complaint

Press Release from the FTC

Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy

Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC Chairman Jon Leibowitz. “We’re very pleased that homeowners will be reimbursed as a result of our settlement.”

According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees – fees that could add up to hundreds or even thousands of dollars. Many of the homeowners had taken out loans originated or funded by Countrywide’s lending arm, including subprime or “nontraditional” mortgages such as payment option adjustable rate mortgages, interest-only mortgages, and loans made with little or no income or asset documentation, the complaint states.

Mortgage servicers are responsible for the day-to-day management of homeowners’ mortgage loans, including collecting and crediting monthly loan payments. Homeowners cannot choose their mortgage servicer. In March 2008, before being acquired by Bank of America, Countrywide was ranked as the top mortgage servicer in the United States, with a balance of more than $1.4 trillion in its servicing portfolio.

When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.

According to the FTC, under most mortgage contracts, homeowners must pay for necessary default-related services, but mortgage servicers may not mark up the cost to make a profit or charge homeowners for services that are not reasonable or appropriate to protect the mortgage holder’s interest in the property. Homeowners do not have any choice in who performs default-related services or the cost of those services, and they have no option to shop for those services.

In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.

Settlement Terms

The FTC’s complaint and settlement order name two mortgage servicers as defendants: Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP, formerly doing business as Countrywide Home Loans Servicing LP. The settlement requires Countrywide to pay $108 million, which will be refunded to homeowners who Countrywide overcharged before July 2008.

In addition, the settlement order prohibits Countrywide from taking advantage of borrowers who have fallen behind on their payments. The defendants continue to service millions of mortgage loans, including tens of thousands of loans involving borrowers in bankruptcy and foreclosure. In the servicing of loans, the defendants are permanently barred from:

Making false or unsubstantiated representations about loan accounts, such as amounts owed.
Charging any fee for a service unless it is authorized by the loan instruments, by law, or by the consumer for a specific service requested by the consumer.
Charging any fee for a default-related service unless it is a reasonable fee charged by a third party for work actually performed. If the service is provided by an affiliate of a defendant, the fee must be within limits set by state law, investor guidelines, and market rates. Defendants must obtain annual, independent market reviews of their affiliates’ fees to ensure that they are not excessive.
In addition, Countrywide must advise consumers if it intends to use affiliates for default-related services and, if so, provide a fee schedule of the amounts charged by the affiliates.

The settlement also requires Countrywide to make significant changes to its bankruptcy servicing practices. For example, Countrywide must send borrowers in Chapter 13 bankruptcy a monthly notice with information about what amounts the borrower owes – including any fees assessed during the prior month. The defendants also must implement a data integrity program to ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy.

This case was brought with the invaluable assistance of the United States Trustee Program, the component of the Department of Justice that oversees the administration of bankruptcy cases and private trustees. This action represents the FTC’s continuing work to help consumers who have been hurt by the economic downturn.

For more information about the case and the FTC’s refund program, see www.ftc.gov/countrywide.

The Commission vote to authorize staff to file the complaint and settlement was 5-0. The complaint and settlement were filed in the U.S. District Court for the Central District of California.

The Federal Trade Commission is a member of the interagency Financial Fraud Enforcement Task Force. For more information on the Task Force, visit www.stopfraud.gov.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.