Federal Agency Releases New Rules for Foreclosures

Daily Real Estate News | Friday, January 18, 2013

  

The Consumer Financial Protection Bureau released new guidelines for mortgage servicers on Thursday that set out to help protect home owners who may be facing foreclosure.

CFPB Director Richard Cordraysays the new rules are aimed at trying to prevent “unnecessary foreclosures” as well as “ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.”

Among the CFPB’s new guidelines:

• Mortgage servicers are prohibited from foreclosing on a home owner who is seeking loan modifications. Servicers will be unable to file a foreclosure notice until a home owner is at least 120 days behind on a mortgage payment.
• A foreclosure sale on the home will be prohibited until alternatives are considered. Servicers will be required to give home owners adequate time to accept an alternative to foreclosure before going ahead with a foreclosure sale. Servicers must respond to loan modification requests from home owners who apply for a loan modification at least 37 days prior to a foreclosure auction.
• When a home owner has missed two consecutive payments, servicers are required to send a written notice of foreclosure alternative examples to the home owner, such as deferred payments and loan modifications.
• Servicers must be easily accessible to the home owners for assistance.
• Servicers will be required to publish more clear mortgage statements, which includes mortgage payments broken down by principal, interest, fees, and escrow as well as includes the amount and due date of the next payment.
• Servicers must notify home owners early about any interest rate changes to their mortgage payments.
• Servicers will be required to credit a home owner’s account on the date a payment arrives.

The new rules take effect January 2014.

Source: “New Rules Aim to Protect Home Owners From Foreclosure,” CNNMoney (Jan. 17, 2013)

Treasury Announces Full Repayment with Interest for Investment Through TALF Financial Crisis Response Program Designed to Unlock Credit for Consumers, Businesses

US Department of the Treasury Press Release 1/15/2013

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Term Asset-backed-securities Lending Facility (TALF) Helped Support Auto, Small Business, and Student Loans to Consumers and Businesses after Credit Markets Seized Up During the Financial Crisis

 

 

WASHINGTON -- Today, the U.S. Department of the Treasury announced the full repayment with interest of its investment through the Term Asset-backed-securities Lending Facility (TALF). After giving effect to today’s announcement, interest and other gains above principal repayments to date for Treasury from the program would total $173 million – with additional payments expected moving forward.

 

The TALF program, which the Federal Reserve Board and Treasury announced in November 2008, was one part of the federal government’s broad efforts to help unlock credit for consumers and businesses during the financial crisis. TALF supported the issuance of nearly 3 million auto loans, more than 1 million student loans, nearly 900,000 loans to small businesses, 150,000 other business loans, and millions of credit card loans.

 

“TALF helped finance millions of new loans to consumers and businesses after the credit markets froze during the financial crisis,” said Assistant Secretary for Financial Stability Timothy G. Massad. “Now, this program is being wound down at a profit for taxpayers.”

 

Under TALF, the Federal Reserve Bank of New York (FRBNY) lent funds to investors in highly rated asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS). By encouraging issuance of ABS and CMBS, which are securities backed by consumer and business loans, the TALF helped support the economy by increasing credit availability to American households and businesses.

 

As part of the program, Treasury originally pledged $20 billion in credit protection through the Troubled Asset Relief Program (TARP) against potential losses on TALF loans. In light of repayments over time and the number of TALF loans outstanding, Treasury’s credit protection commitment was subsequently reduced to $4.3 billion in June 2010 and to $1.4 billion in June 2012.

 

Today, due to the fact that the accumulated fees collected through TALF ($856 million) exceed the total principal amount of TALF loans outstanding ($556 million), Treasury’s commitment of TARP funds to provide credit protection is no longer necessary. Moreover, the early repayment of TALF loans has allowed the $100 million in temporary loans that Treasury made over the course of the program under its credit protection commitment to help finance TALF to be repaid in full with $13 million in interest.

 

The TALF remains a joint Treasury-Federal Reserve program supported by earnings due to the Treasury from the program and by collateral securing each TALF loan. The Treasury and Federal Reserve will continue to consult on the administration of the program. Any excess interest, fees, and gains collected above the remaining principal on outstanding TALF loans will be divided between Treasury (90 percent) and the Federal Reserve (10 percent). There will be an initial payment of approximately $177 million divided between Treasury and the Federal Reserve reflecting the excess of fees collected to date and the current remaining principal on outstanding TALF loans. There will then be additional payments as the remaining TALF loans are repaid.

 

Given that Treasury’s investment is being repaid in full with interest, each additional dollar Treasury collects through TALF moving forward represents an additional dollar of profit for taxpayers. The Federal Reserve is also fully protected against any losses on the remaining outstanding TALF loans, and its profits on repayment of TALF credits ultimately accrue to the taxpayer.

 

The final TALF loan is scheduled to mature on March 30, 2015. All loans remain well collateralized and current in payments of principal and interest.

 

Overall, nearly 93 percent ($387 billion) of the $418 billion in funds disbursed for TARP have already been recovered to date through repayments and other income. For more details on Treasury’s lifetime cost estimates for TARP programs, please visit Treasury’s Monthly 105(a) Report to Congress on TARP at this link.

4 Ways Buyers Can Mess Up a Loan Approval

Daily Real Estate News | Tuesday, January 15, 2013

  

Your home buyers have gotten approved for a mortgage and now they’re just waiting to make it to the closing table. Make sure they don’t throw their loan approval into jeopardy by making one of these common mistakes:

1. Making a big purchase: Tell your buyers to avoid making major purchases, like buying a new car or furniture, until after they close on the home. Big purchases could change the buyer’s debt-to-income ratio that the lender used to approve the buyer’s home loan and could throw the approval into jeopardy.
2. Opening new credit: Inform your buyers that now isn’t the time to open up any new credit cards.
3. Missing any payments: Home buyers need to be extra vigilant about paying all their bills on time, even if they’re disputing one.
4. Cashing out: Avoid any transfers of large sums of money between your bank accounts or making any undocumented deposits — both of which could send up “red flags” to your buyer's lender.

Source: “How to Keep Your Mortgage Approval Approved,” Realty Times (Jan. 14, 2013)

Banks Near $10B Settlement Over Foreclosure Abuses

Daily Real Estate News | Wednesday, January 02, 2013

  

Fourteen banks are reportedly nearing a $10 billion settlement with banking regulators over the banks’ past involvement in foreclosure mishandlings that included faulty paperwork and excessive fees, The New York Times reports.

About $3.75 billion of the reported settlement would go to aid home owners who lost their homes to foreclosure — more than double what was set aside from a $26 billion settlement reached in 2012 among the state attorneys general and five of the nation’s largest banks.

The majority of the money from the latest settlement would go to help home owners struggling to make their payments and remain in their homes, such as with aid like loan modifications or lowering the amount of principal on their mortgages.

Banks have faced several settlements with government officials and home owners in recent months that have aimed to hold them accountable for the 2008 financial crisis and subsequent housing slump. From 2007 to early 2012, four million Americans faced foreclosure.

“It’s certainly a victory for consumers and could help entire neighborhoods,” Lynn Drysdale, a former co-chairwoman of the National Association of Consumer Advocates, told The New York Times about the latest proposed settlement. “But the devil, as they say, is in the details, and for those people who have had to totally uproot their lives because of eviction it may still not be enough.”

The same banks involved in the $26 billion mortgage settlement--JPMorgan Chase, Bank of America, Wells Fargo, Citigroup and Ally Financial — also are included in this recent settlement, The New York Times reports.

Source: “Settlement Expected on Past Abuses in Home Loans,” The New York Times (Dec. 30, 2012)