Monday, April 25, 2011

Chase to Pay $27M in Military Lending Dispute

J.P. Morgan Chase & Co. has reached a $27 million settlement in a class action lawsuit, which accused the bank of overcharging thousands of active-duty military members as well as wrongly foreclosing on a handful of military members.

To date, the company has issued $6 million in payments to borrowers who were overcharged. Chase will also provide an estimated $6.4 million in additional benefits to borrowers who may have been wrongly foreclosed upon.

"We hold ourselves accountable and responsible for these mistakes, and fixing them is just the beginning of a new way forward with the military and veteran community," says Frank Bisignano, chief administrative officer of J.P. Morgan.

Shortly after admitting the company’s military lending mistakes, the bank announced several programs to help active members and veterans as well as making a statement that it would not foreclose on any currently deployed military personnel.

Source: “JP Morgan Agrees To $27 Million Settlement To Resolve Military Lending Issues,” Dow Jones Business News (April 21, 2011)

Thursday, April 21, 2011

FHA PowerSaver Program to Offer Low-Cost Financing to Credit-Worthy Borrowers

HUD SELECTS LENDERS TO PARTICIPATE IN NEW PILOT PROGRAM TO HELP HOMEOWNERS PAY FOR ENERGY IMPROVEMENTS TO THEIR HOMES

WASHINGTON – Eighteen national, regional and local lenders will participate in a new two-year pilot program that will offer qualified borrowers living in certain parts of the country low-cost loans to make energy-saving improvements to their homes. Backed by the Federal Housing Administration (FHA), these new PowerSaver loans will offer homeowners up to $25,000 to make energy-efficient improvements of their choice, including the installation of insulation, duct sealing, replacement doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems.

U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan and U.S. Department of Energy Secretary Steven Chu announced the participating lenders (see attached list) during a tour of a family-run company that offers home energy audits and upgrades in Long Island, New York.

“We believe the market is right for a low-cost financing option for families who want energy-saving technologies in their home,” said Secretary Donovan. “PowerSaver hits on all cylinders by helping credit-worthy homeowners finance these upgrades, cut their energy bills and boost the local job market in the process. While FHA and these lenders are jumpstarting this pilot, we hope its success will lead to a growing private sector interest in making these types of loans.”

Secretary Chu said, “Today, we are breaking down barriers and making energy efficiency more accessible and more affordable. It’s the right thing to do for our environment, for our economy and for the pocketbooks of American families.”

The remodeling industry cites surveys that point to a growing demand among homeowners interested in making their homes energy efficient. Yet options are still limited for financing home energy improvements, especially for the many homeowners who are unable to take out a home equity loan or access an affordable consumer loan. Initially, the PowerSaver pilot program is estimated to assist approximately 30,000 homeowners to finance energy-efficient upgrades though higher market demand may increase this impact. According to HUD projections, more than 3,000 jobs will be created through this pilot program and the impact may be larger if market demand for the loan program increases over time.

Participating lenders are largely selected based on their commitment to work in partnership with established home energy retrofit programs provided by states, cities, utilities and home performance contractors. These markets include, but are not limited to areas of the country participating in the Energy Department’s Better Building Program.

PowerSaver loans will be backed by the FHA but require these lenders to have significant “skin in the game.” FHA mortgage insurance will cover up to 90 percent of the loan amount in the event of default. Lenders will retain the remaining risk on each loan, incentivizing responsible underwriting and lending standards.

PowerSaverhas been carefully designed to meet a need in the marketplace for borrowers who have the ability and motivation to take on modest additional debt to realize the savings over time from home energy improvements. PowerSaver loans are only available to borrowers with good credit, manageable debt and at least some equity in their home (maximum 100% combined loan-to-value).

HUD developed PowerSaver as part of the Recovery Through Retrofit initiative launched in May 2009 by Vice President Biden’s Middle Class Task Force to develop federal actions that would expand green job opportunities in the United States and boost energy savings by improving home energy efficiency. The announcement is part of an interagency effort including 11 departments and agencies and six White House offices.

FHA PowerSaver Approved Lenders

1. Admirals Bank
2. AFC First Financial Corporation
3. Bank of Colorado
4. City of Boise, Idaho
5. Energy Finance Solutions
6. Enterprise Cascadia
7. HomeStreet Bank
8. Neighbor's Financial Corporation
9. Paramount Equity Mortgage, Inc.
10. Quicken Loans
11. SOFCU Community Credit Union
12. Stonegate Mortgage Corporation
13. Sun West Mortgage Company, Inc.
14. The Bank at Broadmoor
15. University of Virginia Community Credit Union, Inc.
16. Viewtech Financial Services, Inc.
17. WinTrust Mortgage
18. W. J. Bradley Mortgage Capital Corporation

Wednesday, April 20, 2011

Lender Found Guilty in Major Bank Fraud Scheme

Lee B. Farkas, the founder of one of the nation’s largest mortgage lending companies, was found guilty by a federal jury this week for masterminding a scheme that cheated investors and the government out of about $2.9 billion.

Farkas, 58, the former chairman of Taylor, Bean & Whitaker, was found guilty on 14 counts of securities, bank, and wire fraud and conspiracy to commit fraud.

Prosecutors called the case one of the “largest and longest bank fraud schemes in American history.” They say the scam led to the 2009 collapse of Colonial Bank.

During the trial, Farkas continued to deny any wrongdoing in the case.

Prosecutors say the scheme began in 2002 with Taylor, Bean & Whitaker executives hiding the firm's losses and overdrawing its Colonial Bank accounts by more than $100 million. Prosecutors say the company sold Colonial about $1.5 billion in “worthless” and “fake” mortgages, in which some had already been purchased by other investors.

Farkas and other executives also created a separate mortgage lending company--Ocala Funding--which sold commercial loans to big financial firms that were never paid back after Taylor, Bean & Whitaker collapsed, according to prosecutors.

Prosecutors also accused Farkas and other Taylor, Bean & Whitaker executives of persuading Colonial Bank to apply for $570 million in federal bailout funds through the Troubled Asset Relief Program (known as TARP).

“Today’s verdict ensures that Farkas will pay for his crime—an unprecedented scheme to defraud regulators during the height of the financial crisis and to steal over $550 million from the American taxpayers through TARP,” Christy Romero, the acting special inspector general for the TARP program, said in a statement.

Source: “Leader of Big Mortgage Lender Guilty of $2.9 Billion Fraud,” The New York Times (April 19, 2011)

Monday, April 18, 2011

New HUD Campaign Helps Homeowners Recognize, Avoid, and Report Scams

HUD No.11-059
FOR RELEASE
Monday
April 18, 2011

NEW HUD CAMPAIGN EMPOWERS HOMEOWNERS TO RECOGNIZE, AVOID, AND REPORT SCAMS

WASHINGTON – Today, the U.S. Department of Housing and Urban Development (HUD) is launching a new campaign in Miami, Chicago, and Los Angeles called Know It. Avoid It. Report It. This campaign has two objectives. First, it aims to direct homeowners facing foreclosure to trusted resources and housing counselors. Second, and more importantly, the campaign wants to solicit the support of homeowners in shutting down scammers who regularly target the elderly, Hispanics, and African Americans. Both objectives will be pursued through education and outreach, anti-scam reporting tools, and close cooperation with federal, state, local, and non-profit partners.

Newly deceptive scam artist tactics lure homeowners into misleading agreements. Their tactics include giving the false impression that they are affiliated with the government, charging illegal up-front fees, and executing fraudulent lease-back, financing, and repurchase schemes.

Highlights of the Know It. Avoid It. Report It. campaign include:

•Information on how to avoid becoming a victim
•Scam artist red flags and fraud warning signs
•Complaint form and hotline to report fraud or suspicious activity
•Resources for finding HUD-approved counselors and free housing workshops in every state
•Names of individuals and companies identified by law enforcement agencies who have allegedly committed loan modification fraud or foreclosure relief scams

Education, outreach, and grassroots efforts in hardest hit communities include:

•Multilingual brochures, posters, flyers, and other outreach materials
•Television, radio, print, mass transit, and out-of-home advertising
•Social media activity

With millions of homeowners in foreclosure or at risk of losing their homes as they fall behind on mortgage payments, and eight million Americans expected to face foreclosure now through 2012, the timing of this campaign could not be more prudent.

HUD’s goal is to motivate homeowners to call 1-888-995-HOPE (4763) or visit www.hud.gov/preventloanscams to get the facts about fraud and to report suspected scammers.

Friday, April 15, 2011

IRS Paid $513M in Undeserved Homebuyer Tax Credits

By BY STEPHEN OHLEMACHER
Associated Press
Published: Friday, Apr. 15, 2011 - 8:11 am
Last Modified: Friday, Apr. 15, 2011 - 10:03 am

WASHINGTON -- The Internal Revenue Service has paid out more than a half-billion dollars in homebuyer tax credits to people who probably didn't qualify, a government investigator said Friday.

Most of the money - about $326 million - went to more than 47,000 taxpayers who didn't qualify as first-time homebuyers because there was evidence they had already owned homes, said the report by J. Russell George, the Treasury inspector general for tax administration. Other credits went to prison inmates, taxpayers who bought homes before the credit was enacted and people who did not actually buy homes.

"The IRS has taken positive steps to strengthen controls and help prevent the issuance of inappropriate homebuyer credits," George said. "However, many of the actions occurred after hundreds of thousands of homebuyer credits had already been issued, including fraudulent and erroneous credits totaling millions of dollars."

The popular credit provided up to $8,000 to first-time homebuyers and up to $6,500 to qualified current owners who bought another home during parts of 2009 and 2010.

IRS spokeswoman Michelle Eldridge said the agency worked hard to enforce a complicated tax credit that provided nearly $29 billion to more than 4 million taxpayers. The agency audited nearly 448,000 returns and blocked or denied nearly 426,000 questionable claims, she said.

In all, the agency's enforcement efforts saved more than $1.3 billion and identified more than 200 criminal schemes, she said. "The IRS made the credit available within weeks of enactment, even allowing individuals to claim 2009 home purchases on their 2008 tax returns. Where there are questionable claims, the IRS has moved aggressively," Eldridge said.

"The IRS continues to audit claims as warranted, and recapture credits that were improperly paid."

The agency questioned some of the inspector general's findings, but said it would follow up on the report.

The tax credit for first-time homebuyers was part of President Barack Obama's economic recovery package enacted in 2009. In November 2009, Congress extended the credit and expanded it to longtime owners who bought new homes.

Homebuyers qualifying for the credit had until April 30, 2010, to sign purchase agreements. They had until Sept. 30 to complete their purchases, after Congress extended the deadline.

The popular tax credit helped to stabilize the nation's slumping housing market. But the extensions and expansion of the credit created a complicated system that made it hard for many taxpayers to determine which credit they qualified for, if any. There were also income requirements.

"The timing and differences in the various legislative provisions also created complexity and confusion for taxpayers and return preparers, as well as the real estate industry," the IRS said in a written response to the audit. "The IRS addressed this challenge by providing timely, understandable, and extensive outreach and education to the public, Nevertheless, this complexity undoubtedly contributed to numerous errors and erroneous claims."

Friday's report is the latest in a series of audits George has conducted on the homebuyer tax credit. It says the agency paid out $513 million in questionable claims for the homebuyer tax credit.

Among the findings:

- More than 47,500 taxpayers claimed the first-time homebuyer credit even though there was evidence on previous tax returns that they had already owned a home, including deductions for mortgage interest, real estate taxes and mortgage insurance. The report estimated these people claimed $326 million in credits.

- More than 13,400 taxpayers claimed the credit even though they had not yet purchased a home. These people listed future purchase dates on their tax forms. The report estimated these people claimed $97.8 million in credits. The IRS said it believes these estimates are overstated.

- More than 1,000 taxpayers said they purchased homes while they were incarcerated in prison, claiming $7.7 million.

- More than 2,500 taxpayers claimed credits for buying homes for which at least one other taxpayer also claimed the credit for buying. These taxpayers received $11.4 million.

- More than 2,700 taxpayers claimed credits for homes that were purchased before the tax credit went in effect. These taxpayers received $17.6 million.

- The IRS disallowed $531,134 in tax credits claimed by 96 taxpayers who were under age 18, making it unlikely they purchased a home

Wednesday, April 13, 2011

Federal Reserve Takes Action Against 10 Banks

Release Date: April 13, 2011

For immediate release

The Federal Reserve Board on Wednesday announced formal enforcement actions requiring 10 banking organizations to address a pattern of misconduct and negligence related to deficient practices in residential mortgage loan servicing and foreclosure processing. These deficiencies represent significant and pervasive compliance failures and unsafe and unsound practices at these institutions.

The Board is taking these actions to ensure that firms under its jurisdiction promptly initiate steps to establish mortgage loan servicing and foreclosure processes that treat customers fairly, are fully compliant with all applicable law, and are safe and sound.

The 10 banking organizations are: Bank of America Corporation; Citigroup Inc.; Ally Financial Inc.; HSBC North America Holdings, Inc.; JPMorgan Chase & Co.; MetLife, Inc.; The PNC Financial Services Group, Inc.; SunTrust Banks, Inc.; U.S. Bancorp; and Wells Fargo & Company. Collectively, these organizations represent 65 percent of the servicing industry, or nearly $6.8 trillion in mortgage balances. All 10 actions require the parent holding companies to improve holding company oversight of residential mortgage loan servicing and foreclosure processing conducted by bank and nonbank subsidiaries.

In addition, the enforcement actions order the banking organizations that have servicing entities regulated by the Federal Reserve (Ally Financial, SunTrust, and HSBC) to promptly correct the many deficiencies in residential mortgage loan servicing and foreclosure processing. Those deficiencies were identified by examiners during reviews conducted from November 2010 to January 2011.

The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties. These monetary penalties will be in addition to the corrective actions that the banking organizations are expected to take pursuant to the enforcement actions.

The enforcement actions complement the actions under consideration by the federal and state regulatory and law enforcement agencies, and do not preclude those agencies from taking additional enforcement action. The Federal Reserve continues to work with other federal and state authorities to resolve these matters.

The actions taken Wednesday require each servicer to take a number of actions, including to make significant revisions to certain residential mortgage loan servicing and foreclosure processing practices. Each servicer must, among other things, submit plans acceptable to the Federal Reserve that:

•strengthen coordination of communications with borrowers by providing borrowers the name of the person at the servicer who is their primary point of contact;
•ensure that foreclosures are not pursued once a mortgage has been approved for modification, unless repayments under the modified loan are not made;
•establish robust controls and oversight over the activities of third-party vendors that provide to the servicers various residential mortgage loan servicing, loss mitigation, or foreclosure-related support, including local counsel in foreclosure or bankruptcy proceedings;
•provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process; and
•strengthen programs to ensure compliance with state and federal laws regarding servicing, generally, and foreclosures, in particular.
The Federal Reserve will closely monitor progress at the firms in addressing these matters and will take additional enforcement actions as needed.

In addition to the actions against the banking organizations, the Federal Reserve on Wednesday announced formal enforcement actions against Lender Processing Services, Inc. (LPS), a domestic provider of default-management services and other services related to foreclosures, and against MERSCORP, Inc. (MERS), which provides services related to tracking and registering residential mortgage ownership and servicing, acts as mortgagee of record on behalf of lenders and servicers, and initiates foreclosure actions. These actions address significant compliance failures and unsafe and unsound practices at LPS and its subsidiaries, and at MERS and its subsidiary. The action requires LPS to address deficient practices related primarily to the document execution services that LPS, through its subsidiaries DocX, LLC, and LPS Default Solutions, Inc., provided to servicers in connection with foreclosures. MERS is required to address significant weaknesses in, among other things, oversight, management supervision, and corporate governance. The LPS action is being taken jointly with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, while the MERS action is being taken jointly with those agencies and the Federal Housing Finance Agency.

The Federal Reserve Board based its enforcement actions on the findings of the interagency reviews of the major mortgage servicers, LPS, and MERS. A summary of the findings from the reviews of the mortgage servicers is available in the Interagency Review of Foreclosure Policies and Practices, which is simultaneously being released by the Federal Reserve Board and the other agencies.

Fannie Mae Announces 3.5 Percent Buyer Assistance on HomePath® Properties

Incentive Part of Continuous Effort to Stabilize Neighborhoods

Washington, DC — Fannie Mae announced today that people purchasing a Fannie Mae-owned HomePath property will receive up to 3.5 percent in closing cost assistance. The initial offer must be submitted on or after April 11, 2011; and the sale must close on or before June 30, 2011 to be eligible for the incentive. Additionally, buyers must reside in the home as their primary residence (sales to investors are excluded).

"Attracting qualified buyers to the market and reducing the inventory of vacant homes remains essential to stabilizing neighborhoods and helping the market recover," said Terry Edwards, Executive Vice President of Credit Portfolio Management. "Since interest rates remain low, the incentive will go a long way toward helping even more families buy a new home so this is a great time for Fannie Mae to offer some assistance."

All Fannie Mae-owned HomePath properties are listed on HomePath.com and most listings include detailed property descriptions, photographs, community and school information, and more. In addition, many Fannie Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing, which offers homebuyers an opportunity to purchase with as little as 3 percent down.

HUD's Fair Housing Campaign to Focus on Ensuring Equal Access For Lesbian, Gay, Bisexual and Transgender Persons

WASHINGTON - The Department of Housing and Urban Development has launched a new media campaign, "Live Free," that will, among other things, strive to ensure that people have equal access to housing regardless of sexual orientation and gender identity.

The Fair Housing Act prohibits housing discriminate based on race, color, national origin, religion, sex, disability, or families with children. While sexual orientation and gender identity are not prohibited bases of discrimination under the federal Fair Housing Act, housing discrimination against someone who is LGBT may, in certain circumstances, violate the Act's existing provisions, including its prohibition against gender discrimination.

"While 20 states and over 200 local governments have led the way to make LGBT-related housing discrimination illegal, HUD is firmly committed to supporting the right of LGBT individuals and families to lead productive and dignified lives, free from housing discrimination and fear of retaliation, said John TrasviƱa, HUD Assistant Secretary for Fair Housing and Equal Opportunity. "HUD is finalizing a federal rule to ensure that HUD housing and programs are open to all, irrespective of marital status, gender identify, and sexual orientation."

The "Live Free" print advertisements are focused to particular targeted audiences. For example, one print ad reads "Should Gender Stereotypes Influence Where Your live? Learn More." "Live Free" campaign will run throughout the year and include Facebook ads, targeted print ads, digital videos, and podcasts.

In 2010, HUD provided Guidance to its staff on how to more effectively address inquiries from LGBT individuals regarding housing discrimination issues and also launched a webpage for the public on LGBT housing discrimination. Since then, HUD's housing discrimination complaint level from LGBT individuals has increased significantly. From July 1, 2010 to February 28, 2011, LGBT individuals filed 47 complaints of housing discrimination alleging gender discrimination with HUD. During the same period straddling 2009 and 2010 prior to issuance of the guidance, HUD only received 3 such complaints.

For more information about the Fair Housing Act and to file a complaint of housing discrimination, call 1-800-669-9777 or go to www.hud.gov/fairhousing.

Monday, April 4, 2011

5 States Get Foreclosure Aid for Unemployed

Unemployed home owners in five states will be able to get some help from the government with zero-interest, forgivable loans that set out to help them avoid foreclosure.

The $1 billion Emergency Homeowners’ Loan Program — an Obama administration program — was established nearly a year ago but has been delayed several months. The House recently voted to end the unemployment program, but the Democrat-led Senate isn’t expected to approve the measure.

The program will provide unemployed home owners zero-interest loans of up to $50,000 so that they’ll be able to continue making mortgage payments. The loans can be forgiven over five years.

The Department of Housing and Urban Development approved the following five states for funding:

▪ Pennsylvania: $106 million
▪ Maryland: $40 million
▪ Connecticut: $33 million
▪ Idaho: $13 million
▪ Delaware: $6 million

Each of those states already have similar programs geared to unemployed home owners.

In 27 other states that don't have a similar program, NeighborWorks America will soon provide federal funding for loans.

Neither program includes hard-hit real estate markets, such as Michigan, California, and Nevada. Those states will receive $7.6 billion in aid for a special fund designated for hard-hit states from the Treasury Department.

Source: “Five States Approved for $1 Billion Foreclosure Prevention Program,” Dow Jones Business News (April 1, 2011)