WASHINGTON (AP) — A federal regulator is standing by its decision to bar Fannie Mae and Freddie Mac from reducing principal for borrowers at risk of foreclosure, resisting pressure from the Obama administration.
The Federal Housing Finance Agency announced the decision Tuesday after months of considering the option.
The agency’s acting director, Edward DeMarco, has long opposed allowing Fannie and Freddie to offer principal reduction.
DeMarco said an extensive analysis by the FHFA found the potential benefit was too small compared with the costs and risks. The risks include as many as 19,000 borrowers strategically defaulting on their loans, according to the analysis.
About 1.4 million homeowners would be eligible for principal reductions from Fannie and Freddie.
The Obama administration immediately voiced its disappointment with the decision.
“I do not believe it is the best decision for the country,” Treasury Secretary Timothy Geithner said in a letter to DeMarco.
Geithner said allowing Fannie and Freddie to do “targeted” reductions of principal for troubled borrowers would provide much-needed help to a significant number of troubled homeowners. He said that would help repair the nation’s housing market and result in a net benefit to taxpayers.
The government rescued Fannie and Freddie in September 2008 to cover losses on soured mortgage loans. Since then the FHFA, which is independent of the administration, has controlled their financial decisions.
U.S. taxpayers have spent roughly $170 billion to rescue the companies. It could cost roughly $260 billion more to support them through 2014 after subtracting dividend payments, according to the government.
Tuesday, July 31, 2012
Thursday, July 12, 2012
Governor signs California Homeowner Bill of Rights into law
Excerpted from California Association of Realtors Newsletter
California Governor Jerry Brown signed into law the Homeowner Bill of Rights to help struggling Californians keep their homes. This law aims to avoid foreclosure where possible to help stabilize California's housing market and prevent the other negative effects of foreclosures on families, communities, and the economy. The new law will generally prohibit lenders from engaging in dual tracking, require a single point of contact for borrowers seeking foreclosure prevention alternatives, provide borrowers with certain safeguards during the foreclosure process, and provide borrowers with the right to sue lenders for material violations of this law.
The Homeowner Bill of Rights has four major components:
The law will go into effect January 1, 2013. For full text of the bills, visit: http://leginfo.ca.gov/bilinfo.
California Governor Jerry Brown signed into law the Homeowner Bill of Rights to help struggling Californians keep their homes. This law aims to avoid foreclosure where possible to help stabilize California's housing market and prevent the other negative effects of foreclosures on families, communities, and the economy. The new law will generally prohibit lenders from engaging in dual tracking, require a single point of contact for borrowers seeking foreclosure prevention alternatives, provide borrowers with certain safeguards during the foreclosure process, and provide borrowers with the right to sue lenders for material violations of this law.
The Homeowner Bill of Rights has four major components:
- Prohibiting “dual track” foreclosures that occur when a servicer continues foreclosure while also reviewing a homeowner’s application for a loan modification;
- Creating a single point of contact for homeowners who are negotiating a loan modification;
- Expanding notice requirements that must be provided to a borrower before taking action on a loan modification application or pursuing foreclosure; and
- Allowing injunctions against foreclosure until violations are corrected and permitting civil penalties against servicers that file multiple, inaccurate mortgage documents or commit reckless or willful violations of law.
The law will go into effect January 1, 2013. For full text of the bills, visit: http://leginfo.ca.gov/bilinfo.
Tuesday, July 10, 2012
A Simpler Mortgage Form For Home Buyers?
The Consumer Financial Protection
Bureau proposed a redesigned mortgage form Monday that sets out to help
home buyers better understand the cost and risks of getting a mortgage.
CFPB is seeking public comment on the forms until Nov. 6.
"When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," says Richard Cordray, CFPB’s director. "Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home."
CFPB says the current two sets of disclosure forms — required by the Real Estate Settlement Protection Act and the Truth in Lending Act — that lenders give to buyers are confusing and often overlap information. The two forms will be replaced by “Loan Estimate” and a “Closing Disclosure” forms, which CFPB says will each have more distinct purposes.
Within three days of submitting a loan application, home buyers will receive a form that would contain a “loan estimate,” which includes the costs and risks of the loan and details information about the mortgage.
Then, three days prior to closing on the loan, home buyers will receive a “closing disclosure” form, which would contain the costs of closing on the mortgage.
Lenders would be banned from charging borrowers more for closing than the amount listed in the “loan estimate” form, according to the CFPB rules.
To weigh in on the forms, you can submit a comment at the CFPB Web site. CFPB will be accepting public comment on the proposed forms until Nov. 6.
CFPB also is proposing a rule to expand protections for “high-cost mortgages,” which are mortgages that CFPB considers as having high interest rates and fees. CFPB says the new guidelines would prevent lenders from charging balloon payments with these loans, which often require a large amount of money to be paid at the end of the loan. It would also remove a penalty for repaying a loan early with these types of mortgages.
View more of its proposed guidelines on “high-cost mortgages” at the CFPB Web site.
Source: “Government Agency Proposes Simpler Mortgage Forms,” Associated Press (July 9, 2012) and Consumer Financial Protection Bureau.
"When making what is likely the biggest purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," says Richard Cordray, CFPB’s director. "Our proposed redesign of the federal mortgage forms provides much-needed transparency in the mortgage market and gives consumers greater power over the exciting and daunting process of buying a home."
CFPB says the current two sets of disclosure forms — required by the Real Estate Settlement Protection Act and the Truth in Lending Act — that lenders give to buyers are confusing and often overlap information. The two forms will be replaced by “Loan Estimate” and a “Closing Disclosure” forms, which CFPB says will each have more distinct purposes.
Within three days of submitting a loan application, home buyers will receive a form that would contain a “loan estimate,” which includes the costs and risks of the loan and details information about the mortgage.
Then, three days prior to closing on the loan, home buyers will receive a “closing disclosure” form, which would contain the costs of closing on the mortgage.
Lenders would be banned from charging borrowers more for closing than the amount listed in the “loan estimate” form, according to the CFPB rules.
To weigh in on the forms, you can submit a comment at the CFPB Web site. CFPB will be accepting public comment on the proposed forms until Nov. 6.
CFPB also is proposing a rule to expand protections for “high-cost mortgages,” which are mortgages that CFPB considers as having high interest rates and fees. CFPB says the new guidelines would prevent lenders from charging balloon payments with these loans, which often require a large amount of money to be paid at the end of the loan. It would also remove a penalty for repaying a loan early with these types of mortgages.
View more of its proposed guidelines on “high-cost mortgages” at the CFPB Web site.
Source: “Government Agency Proposes Simpler Mortgage Forms,” Associated Press (July 9, 2012) and Consumer Financial Protection Bureau.
Thursday, July 5, 2012
Countrywide issued hundreds of VIP loans to buy influence, report says
Here is a very interesting article posted today on CNN:
http://money.cnn.com/2012/07/05/real_estate/countrywide-mortgage/index.htm?hpt=hp_t2
http://money.cnn.com/2012/07/05/real_estate/countrywide-mortgage/index.htm?hpt=hp_t2
Monday, July 2, 2012
Foreclosure Whistleblowers Become Millionaires
Six Americans stand to collect up to
$46.5 million for their part in helping to expose foreclosure abuses by
the nation’s largest banks.
The whistleblowers helped the government expose how some banks used fraudulent documents to collect money from federal housing programs.
For their help in the lawsuits against the banks, these whistleblowers will be able to collect big paychecks due to the False Claims Act, “which allows private citizens to file lawsuits on behalf of the U.S. when they have knowledge that the government is being defrauded,” CNNMoney reports. Those who file the lawsuits stand to collect between 15 percent to 30 percent of the penalties assessed in the case.
For home owner Lynn Szymoniak, it was like winning the lottery. Szymoniak was served foreclosure papers in 2008. She helped prove banks had been using fraudulent documents to prove ownership of defaulted mortgages, for which the banks were then submitting insurance claims to the Federal Housing Administration. From the government’s $95 million award in a lawsuit, Szymoniak will get $18 million.
"I recognize that mine's a very, very happy ending," Szymoniak told CNNMoney. "I know there are plenty of people who have tried as hard as I have and won't see these kinds of results."
The other five whistleblowers came from within the industry, such as an appraiser who helped the government show that Countrywide Financial had been inflating home appraisals to collect higher claims from FHA. Other whistleblowers exposed banks overcharging veterans who had mortgages guaranteed by the Department of Veterans Affairs.
The whistleblower lawsuits helped lead to a foreclosure settlement, approved in May, between the nation’s five largest banks and state and federal officials. The settlement stems over banks’ errors uncovered in the processing of foreclosures. In the settlement, banks agreed to pay $5 billion in fines and about $20 billion in refinancing and mortgage modifications for home owners.
Source: “Whistleblowers Win $46.5 Million in Foreclosure Settlement,” CNNMoney (July 2, 2012
The whistleblowers helped the government expose how some banks used fraudulent documents to collect money from federal housing programs.
For their help in the lawsuits against the banks, these whistleblowers will be able to collect big paychecks due to the False Claims Act, “which allows private citizens to file lawsuits on behalf of the U.S. when they have knowledge that the government is being defrauded,” CNNMoney reports. Those who file the lawsuits stand to collect between 15 percent to 30 percent of the penalties assessed in the case.
For home owner Lynn Szymoniak, it was like winning the lottery. Szymoniak was served foreclosure papers in 2008. She helped prove banks had been using fraudulent documents to prove ownership of defaulted mortgages, for which the banks were then submitting insurance claims to the Federal Housing Administration. From the government’s $95 million award in a lawsuit, Szymoniak will get $18 million.
"I recognize that mine's a very, very happy ending," Szymoniak told CNNMoney. "I know there are plenty of people who have tried as hard as I have and won't see these kinds of results."
The other five whistleblowers came from within the industry, such as an appraiser who helped the government show that Countrywide Financial had been inflating home appraisals to collect higher claims from FHA. Other whistleblowers exposed banks overcharging veterans who had mortgages guaranteed by the Department of Veterans Affairs.
The whistleblower lawsuits helped lead to a foreclosure settlement, approved in May, between the nation’s five largest banks and state and federal officials. The settlement stems over banks’ errors uncovered in the processing of foreclosures. In the settlement, banks agreed to pay $5 billion in fines and about $20 billion in refinancing and mortgage modifications for home owners.
Source: “Whistleblowers Win $46.5 Million in Foreclosure Settlement,” CNNMoney (July 2, 2012
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