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
Friday, June 25, 2010
Wednesday, June 16, 2010
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.
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.
Tuesday, June 8, 2010
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.
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.
Thursday, June 3, 2010
B of A Rolls Out Plan to Forgive Principal
Bank of America announced Wednesday that it was rolling out a relief program for roughly 45,000 of its most troubled borrowers that would reduce mortgage principal by as much as 30 percent.
To be eligible, homeowners must have missed at least two monthly payments and owe 20 percent or more than their home is worth. Homes must have been originally financed by Countrywide Financial Corp. under specific lending programs.
The offer is a result of an agreement with state attorneys general that settles charges over high-risk loans made by Countrywide. The federal government will pay 18 percent of the forgiven principal.
Source: The Associated Press (06/02/2010)
To be eligible, homeowners must have missed at least two monthly payments and owe 20 percent or more than their home is worth. Homes must have been originally financed by Countrywide Financial Corp. under specific lending programs.
The offer is a result of an agreement with state attorneys general that settles charges over high-risk loans made by Countrywide. The federal government will pay 18 percent of the forgiven principal.
Source: The Associated Press (06/02/2010)
After Foreclosure: How long until you can buy again?
Financing a home after foreclosure is possible for most homeowners. Those who default on their mortgages due to economic hardships, such as job loss, may receive approval for another mortgage in as little as two years, while it may take more than seven years for strategic defaulters to be approved.
KEEP THIS IN MIND
• Lenders utilize several methods in determining whether to grant mortgages, including the amount of money borrowers have saved; employment histories; and payment history.
• According to the chief economist with the Mortgage Bankers Association, lenders may be more willing to finance a mortgage for a borrower who defaulted on their mortgage as a result of factors beyond their control.
• Some homeowners who strategically default—intentionally not meet their mortgage obligations although they have the financial means to do so—assume they can raise their FICO scores by paying their others bills on time. However, most future loan underwriters will scrutinize their records very closely, and if they determine the borrower strategically defaulted on their previous mortgage, the repaired credit score will not overshadow the walkaway.
• Although not impossible for strategic defaulters to finance another home purchase, it likely will be more difficult. Lenders may ask for down payments of 30 percent or more to provide sufficient collateral to enable the bank to recoup most of its money in a foreclosure. These borrowers also may be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.
To read the full story, please click here.
KEEP THIS IN MIND
• Lenders utilize several methods in determining whether to grant mortgages, including the amount of money borrowers have saved; employment histories; and payment history.
• According to the chief economist with the Mortgage Bankers Association, lenders may be more willing to finance a mortgage for a borrower who defaulted on their mortgage as a result of factors beyond their control.
• Some homeowners who strategically default—intentionally not meet their mortgage obligations although they have the financial means to do so—assume they can raise their FICO scores by paying their others bills on time. However, most future loan underwriters will scrutinize their records very closely, and if they determine the borrower strategically defaulted on their previous mortgage, the repaired credit score will not overshadow the walkaway.
• Although not impossible for strategic defaulters to finance another home purchase, it likely will be more difficult. Lenders may ask for down payments of 30 percent or more to provide sufficient collateral to enable the bank to recoup most of its money in a foreclosure. These borrowers also may be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.
To read the full story, please click here.
Thursday, May 27, 2010
New Organization Dedicated to Preventing Loan Modification Scams
The Loan Modification Scam Prevention Network was created to strengthen the fight against these scammers and support existing efforts at the national, state and local levels. The lead organizations of the effort include Fannie Mae, Freddie Mac, the Lawyers' Committee for Civil Rights Under Law and NeighborWorks America, among others, with representatives from key governmental agencies, such as the Federal Trade Commission, the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Justice, the U.S. Treasury Department, the Federal Bureau of Investigation, and state Attorneys General offices, as well as leading non-profit organizations from across the country.
This new, broad coalition includes a two-part response. First, NeighborWorks is leading a national media and outreach campaign to educate homeowners and the public on potential scams. (Please visit the NeighborWorks' website on this effort www.loanscamalert.org.) Second, the Lawyers' Committee is leading an effort to increase reporting and prosecution of alleged scammers to support ongoing enforcement efforts at the federal, state and local levels.
The Loan Modification Scam Prevention Network
The Lawyers' Committee, along with our partners, is leading a large-scale mobilization of resources in a comprehensive campaign to enhance and support existing state and local efforts, increase scam reporting, educate homeowners, and work with law enforcement. This comprehensive campaign includes:
•Increased Reporting of Loan Modification Scams and Creation of National Database - Increasing the number of complaints submitted by homeowners is a top priority of the Network. Complaints against alleged scammers can now be submitted via a simple online form (available in hard copy) by homeowners anytime, housing counselors and advocates working with homeowners, at foreclosure prevention events, and through the Homeowners' HOPE Hotline (1-888-995-HOPE). A national database (National Loan Modification Scam Database) has been created to house these complaints, which supports federal, state and local law enforcement efforts and provides a comprehensive picture of the loan modification scam crisis nationwide.
•Support of State and Local Efforts - The Network supports ongoing state and local law enforcement efforts by sharing complaint information, providing access to national data to determine whether alleged scammers are operating across jurisdictions and state lines, working with active coalitions, educating the public and homeowners, and supporting commonsense legal and policy reforms.
•Increased Enforcement Actions - It is anticipated that as a result of the national Loan Modification Scam Database, enforcement activities will increase at the state and local level not only by prosecutors, but also state regulatory agencies. In addition, the Network will coordinate closely with governmental law enforcement and local legal organizations representing victims of scams to file high impact litigation where appropriate.
•Direct Homeowner Contact - Trained volunteers will contact homeowners who have reported scams to conduct a more substantive intake to collect detailed information about scammers and how they operate and transmit this information to appropriate law enforcement agencies.
•Public Education - A strategic public education effort is underway, utilizing both online and offline tools, to use the information in the Database and the experience of leaders on the ground to help homeowners identify and avoid scams and paint the clearest picture of the havoc wrought by loan modification scammers.
For more information go to www.preventloanscams.org
This new, broad coalition includes a two-part response. First, NeighborWorks is leading a national media and outreach campaign to educate homeowners and the public on potential scams. (Please visit the NeighborWorks' website on this effort www.loanscamalert.org.) Second, the Lawyers' Committee is leading an effort to increase reporting and prosecution of alleged scammers to support ongoing enforcement efforts at the federal, state and local levels.
The Loan Modification Scam Prevention Network
The Lawyers' Committee, along with our partners, is leading a large-scale mobilization of resources in a comprehensive campaign to enhance and support existing state and local efforts, increase scam reporting, educate homeowners, and work with law enforcement. This comprehensive campaign includes:
•Increased Reporting of Loan Modification Scams and Creation of National Database - Increasing the number of complaints submitted by homeowners is a top priority of the Network. Complaints against alleged scammers can now be submitted via a simple online form (available in hard copy) by homeowners anytime, housing counselors and advocates working with homeowners, at foreclosure prevention events, and through the Homeowners' HOPE Hotline (1-888-995-HOPE). A national database (National Loan Modification Scam Database) has been created to house these complaints, which supports federal, state and local law enforcement efforts and provides a comprehensive picture of the loan modification scam crisis nationwide.
•Support of State and Local Efforts - The Network supports ongoing state and local law enforcement efforts by sharing complaint information, providing access to national data to determine whether alleged scammers are operating across jurisdictions and state lines, working with active coalitions, educating the public and homeowners, and supporting commonsense legal and policy reforms.
•Increased Enforcement Actions - It is anticipated that as a result of the national Loan Modification Scam Database, enforcement activities will increase at the state and local level not only by prosecutors, but also state regulatory agencies. In addition, the Network will coordinate closely with governmental law enforcement and local legal organizations representing victims of scams to file high impact litigation where appropriate.
•Direct Homeowner Contact - Trained volunteers will contact homeowners who have reported scams to conduct a more substantive intake to collect detailed information about scammers and how they operate and transmit this information to appropriate law enforcement agencies.
•Public Education - A strategic public education effort is underway, utilizing both online and offline tools, to use the information in the Database and the experience of leaders on the ground to help homeowners identify and avoid scams and paint the clearest picture of the havoc wrought by loan modification scammers.
For more information go to www.preventloanscams.org
Wednesday, May 19, 2010
CAR Backs Bill to Protect Borrowers
From California Association of Realtors
C.A.R. is sponsoring SB 1178 (Corbett) to extend anti-deficiency protections to homeowners who have refinanced “purchase money” loans and are now facing foreclosure. Most homeowners didn't know that when they refinanced they lost their legal protections, and now may be personally liable for the difference between the value of the foreclosed property and the amount owed to the lender.
SB 1178 will be voted on soon by the entire Senate. One can’t help but think, “When is enough, enough?” Banks have already foreclosed upon a family’s home and now lenders can continue to hound them for additional payment. How much more money can today’s families afford to pay when they’ve already lost their homes and most likely their jobs? Are they never to have the opportunity to begin again?
Background
California has protected borrowers from so-called "deficiency" liability on their home mortgages since the 1930s, but the evolution of mortgage finance requires that the statute be updated.
Current law says that if a homeowner defaults on a mortgage used to purchase his or her home, the homeowner's liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting and allow borrowers who are brought down by financial crisis to get back on their feet.
Unfortunately, the 1930s law does not extend the protection for purchase money mortgages to loans that re-finance the original purchase debt -- even if the re-finance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to refinance their mortgages, yet almost no one realized that by re-financing their mortgage to obtain a lower rate, they were forfeiting their protections. These borrowers became personally liable for the balance of the loan.
C.A.R. is Sponsoring SB 1178 because:
· SB 1178 is fair. Home buyers, and lenders, entered into the purchase with the idea that the mortgage would be non-recourse debt, and that the lender would look to the security (the house) itself to make good on the debt if the borrower cannot. It meets the legitimate expectation of the borrowers, who have no idea that they are losing this protection by a refinance. Home owners didn't know that their refinance exposed them to personal liability, and new tax liability, on the note. It would be unfair to allow a lender, or someone that has purchased a note from a lender, to pursue the borrower beyond the value of the agreed upon security.
· SB 1178 is consistent with the intent of the original law and simply updates it for modern times. Current law was intended to ensure that if someone lost their home to foreclosure, they wouldn’t be liable for additional payment. Since the law was passed over 70 years ago, homeowners refinancing from the original loan to lower their interest rate has become a commonplace. The 1930s legislature didn’t anticipate how mortgages would change over time.
· Lenders could pursue families to collect this “deficiency debt” years down the road. Under current law, lenders have up to ten years to collect on the additional debt after a judgment has been entered on the foreclosure. Years after a family has lost their home, they could find themselves in even more financial trouble. Lenders could even sell these accounts to aggressive collection agencies or even bundle them into securities. The end result would be banks who didn’t lend responsibly in the first place coming after families for even more money that they don’t have.
· SB 1178 does NOT apply to “cash-out” refinances, unless the money was used to improve the home and it doesn’t apply to HELOCs.
C.A.R. is sponsoring SB 1178 (Corbett) to extend anti-deficiency protections to homeowners who have refinanced “purchase money” loans and are now facing foreclosure. Most homeowners didn't know that when they refinanced they lost their legal protections, and now may be personally liable for the difference between the value of the foreclosed property and the amount owed to the lender.
SB 1178 will be voted on soon by the entire Senate. One can’t help but think, “When is enough, enough?” Banks have already foreclosed upon a family’s home and now lenders can continue to hound them for additional payment. How much more money can today’s families afford to pay when they’ve already lost their homes and most likely their jobs? Are they never to have the opportunity to begin again?
Background
California has protected borrowers from so-called "deficiency" liability on their home mortgages since the 1930s, but the evolution of mortgage finance requires that the statute be updated.
Current law says that if a homeowner defaults on a mortgage used to purchase his or her home, the homeowner's liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting and allow borrowers who are brought down by financial crisis to get back on their feet.
Unfortunately, the 1930s law does not extend the protection for purchase money mortgages to loans that re-finance the original purchase debt -- even if the re-finance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to refinance their mortgages, yet almost no one realized that by re-financing their mortgage to obtain a lower rate, they were forfeiting their protections. These borrowers became personally liable for the balance of the loan.
C.A.R. is Sponsoring SB 1178 because:
· SB 1178 is fair. Home buyers, and lenders, entered into the purchase with the idea that the mortgage would be non-recourse debt, and that the lender would look to the security (the house) itself to make good on the debt if the borrower cannot. It meets the legitimate expectation of the borrowers, who have no idea that they are losing this protection by a refinance. Home owners didn't know that their refinance exposed them to personal liability, and new tax liability, on the note. It would be unfair to allow a lender, or someone that has purchased a note from a lender, to pursue the borrower beyond the value of the agreed upon security.
· SB 1178 is consistent with the intent of the original law and simply updates it for modern times. Current law was intended to ensure that if someone lost their home to foreclosure, they wouldn’t be liable for additional payment. Since the law was passed over 70 years ago, homeowners refinancing from the original loan to lower their interest rate has become a commonplace. The 1930s legislature didn’t anticipate how mortgages would change over time.
· Lenders could pursue families to collect this “deficiency debt” years down the road. Under current law, lenders have up to ten years to collect on the additional debt after a judgment has been entered on the foreclosure. Years after a family has lost their home, they could find themselves in even more financial trouble. Lenders could even sell these accounts to aggressive collection agencies or even bundle them into securities. The end result would be banks who didn’t lend responsibly in the first place coming after families for even more money that they don’t have.
· SB 1178 does NOT apply to “cash-out” refinances, unless the money was used to improve the home and it doesn’t apply to HELOCs.
Tuesday, May 18, 2010
Mortgage Help for the Unemployed
By July 1, all mortgage servicers participating in the Making Home Affordable Program will offer extra help for homeowners struggling to make their monthly mortgage payments because of unemployment. The Unemployment Program will offer homeowners a forbearance period to temporarily reduce or suspend their monthly mortgage payments while they seek re-employment.
The minimum forbearance period is three months, although a mortgage servicer may extend it depending on the investor and regulator guidelines. If a homeowner becomes re-employed in that time, the forbearance period will end and the homeowner will be evaluated for a mortgage modification under the Making Home Affordable Program. Unemployment benefits will no longer qualify as income for the mortgage modification program.
During the forbearance period, a homeowner’s monthly mortgage payment must be reduced to no more than 31 percent (or less) of their gross monthly income. The servicer can decide to temporarily suspend payments in full. The payment amount and due dates will be decided by the servicer depending on investor and regulator guidelines.
To qualify, a homeowner must meet the following eligibility criteria:
•The mortgage must be a first lien mortgage, originated on or before January 1, 2009, and the unpaid principal balance must be equal to or less than $729,750 for a one-unit property.
•The property must be the homeowner’s principal residence.
•The mortgage has not been previously modified through a Home Affordable Modification.
•The homeowner was ineligible for a Home Affordable Modification.
•The homeowner is either behind on payments (but not by more than three consecutive months) or it is reasonably forseeable that the homeowner will fall behind.
•The total monthly mortgage payment is greater than 31 percent of the homeowner’s gross monthly income. If the payment is less, it is up to the servicer’s discretion if they will offer the program to the homeowner.
•The homeowner will be unemployed at the start of the forbearance period, and is able to document this because they will be receiving unemployment benefits in the month the forbearance period begins (even if the benefits expire before the forbearance period ends).
A mortgage servicer may require that, based on investor and regulator guidelines, homeowners have received at least three months of unemployment benefits before they begin a forbearance period.
There is no cost to apply to the Unemployment Program, although late charges may accrue while the homeowner is being evaluated for the program or in the program. A mortgage servicer may not collect late charges from the homeowner while they are still in the forbearance period.
Servicers may not initiate foreclosure proceedings or conduct a foreclosure sale while a homeowner is being evaluated for the Unemployment Program or in the forbearance period.
To determine if you qualify for the Unemployment Program, contact your mortgage servicer. You should learn your eligibility within ten days of submitting complete documentation to your servicer.
If you have any questions after speaking with your servicer, or need assistance applying to the program, call 1-888-995-HOPE (4673) to speak with a HUD-approved housing counselor for free.
To read the guidelines for the Unemployment Program for all mortgages not held by Fannie Mae or Freddie Mac, click here.
From makinghomeaffordable.gov
The minimum forbearance period is three months, although a mortgage servicer may extend it depending on the investor and regulator guidelines. If a homeowner becomes re-employed in that time, the forbearance period will end and the homeowner will be evaluated for a mortgage modification under the Making Home Affordable Program. Unemployment benefits will no longer qualify as income for the mortgage modification program.
During the forbearance period, a homeowner’s monthly mortgage payment must be reduced to no more than 31 percent (or less) of their gross monthly income. The servicer can decide to temporarily suspend payments in full. The payment amount and due dates will be decided by the servicer depending on investor and regulator guidelines.
To qualify, a homeowner must meet the following eligibility criteria:
•The mortgage must be a first lien mortgage, originated on or before January 1, 2009, and the unpaid principal balance must be equal to or less than $729,750 for a one-unit property.
•The property must be the homeowner’s principal residence.
•The mortgage has not been previously modified through a Home Affordable Modification.
•The homeowner was ineligible for a Home Affordable Modification.
•The homeowner is either behind on payments (but not by more than three consecutive months) or it is reasonably forseeable that the homeowner will fall behind.
•The total monthly mortgage payment is greater than 31 percent of the homeowner’s gross monthly income. If the payment is less, it is up to the servicer’s discretion if they will offer the program to the homeowner.
•The homeowner will be unemployed at the start of the forbearance period, and is able to document this because they will be receiving unemployment benefits in the month the forbearance period begins (even if the benefits expire before the forbearance period ends).
A mortgage servicer may require that, based on investor and regulator guidelines, homeowners have received at least three months of unemployment benefits before they begin a forbearance period.
There is no cost to apply to the Unemployment Program, although late charges may accrue while the homeowner is being evaluated for the program or in the program. A mortgage servicer may not collect late charges from the homeowner while they are still in the forbearance period.
Servicers may not initiate foreclosure proceedings or conduct a foreclosure sale while a homeowner is being evaluated for the Unemployment Program or in the forbearance period.
To determine if you qualify for the Unemployment Program, contact your mortgage servicer. You should learn your eligibility within ten days of submitting complete documentation to your servicer.
If you have any questions after speaking with your servicer, or need assistance applying to the program, call 1-888-995-HOPE (4673) to speak with a HUD-approved housing counselor for free.
To read the guidelines for the Unemployment Program for all mortgages not held by Fannie Mae or Freddie Mac, click here.
From makinghomeaffordable.gov
Thursday, May 6, 2010
Chase Announces Foreclosure-Prevention Events
Press Release
May 5, 2010
Chase plans multi-day, foreclosure-prevention events in eight markets to help struggling homeowners
•Chase builds on success of one-on-one help for 3,200 customers in Florida
•Events complement 51 Chase Homeownership Centers
NEW YORK, May 5, 2010 - Building on its success in helping Florida homeowners, Chase today announced that it will host multi-day Homeowner Assistance Events exclusively for struggling Chase homeowners in eight major U.S. markets this year.
"We have increased borrower participation dramatically by concentrating our reach-out efforts and bringing together dozens of Chase loan counselors for several days," said Dave Lowman, head of home lending at Chase. "Most importantly, we have been able to help many, many families stay in their homes."
Over the next five months, up to 40 Chase counselors will work with homeowners as long as 12 hours a day for four or five days in a central location, like a civic center or community college.
Many of the counselors are based in the 51 Chase Homeownership Centers across the country. Chase began opening the centers in early 2009 to provide face-to-face counseling to homeowners who have fallen behind on their mortgages. The centers are open six days a week, including evening hours.
Chase began the multi-day events in Florida, where counselors met with 3,200 customers. Half the homeowners spoke a counselors in less than 10 minutes, and a total of 85% waited no more than 30 minutes before speaking one-on-one with a counselor. Nearly three-quarters of the customers said their experience was excellent while another 12% said it was very good.
"We are building on the terrific customer experiences at our Chase Homeownership Centers across the country," Lowman said. "The centers have provided personalized help to more than 91,000 borrowers, and we expect these events will helps thousands more in just a few days."
Chase plans to host multi-day events in the following markets:
•Chicago - May 13 - 17
•Atlanta - June
•Washington, D.C. - June
•New York
•Northern California
•Orlando
•Phoenix
•Southern California
Homeowners with Chase mortgages can receive the following services at the events:
•Initial counseling for homeowners applying for a mortgage modification
•Counseling for customers who are current on their mortgage but are struggling
•Short-sale assistance for customers who cannot afford their home or don't want to stay in it
They also can:
•Drop off documents that they need to submit as part of their trial plan
•Sign final modification documents if they are ready to complete mod agreements
Since 2009, Chase has hired 3,600 additional counselors, hosted and participated in nearly 475 outreach events, and mailed more than 1 million letters to invite customers to events and centers.
"Chase is a national leader in preventing foreclosure, and we continue to expand on and improve our programs to keep families in their homes," Lowman said. "Since 2007, we have helped prevent more than 965,000 foreclosures."
Since Jan.1, 2009, Chase has offered over 750,000 modifications to struggling homeowners under the Home Affordable Modification Program, its own modification programs, and modification programs offered by Fannie Mae, Freddie Mac, the Veterans Administration and the Federal Housing Authority.
About Chase
Chase is the U.S. consumer and commercial banking business of JPMorgan Chase & Co. (NYSE: JPM), which operates more than 5,100 branches and 15,000 ATMs nationally under the Chase brand. Chase has 146 million credit cards issued and serves consumers and small businesses through bank branches, ATMs and mortgage offices as well as through relationships with auto dealerships, schools and universities. More information about Chase is available at www.chase.com.
May 5, 2010
Chase plans multi-day, foreclosure-prevention events in eight markets to help struggling homeowners
•Chase builds on success of one-on-one help for 3,200 customers in Florida
•Events complement 51 Chase Homeownership Centers
NEW YORK, May 5, 2010 - Building on its success in helping Florida homeowners, Chase today announced that it will host multi-day Homeowner Assistance Events exclusively for struggling Chase homeowners in eight major U.S. markets this year.
"We have increased borrower participation dramatically by concentrating our reach-out efforts and bringing together dozens of Chase loan counselors for several days," said Dave Lowman, head of home lending at Chase. "Most importantly, we have been able to help many, many families stay in their homes."
Over the next five months, up to 40 Chase counselors will work with homeowners as long as 12 hours a day for four or five days in a central location, like a civic center or community college.
Many of the counselors are based in the 51 Chase Homeownership Centers across the country. Chase began opening the centers in early 2009 to provide face-to-face counseling to homeowners who have fallen behind on their mortgages. The centers are open six days a week, including evening hours.
Chase began the multi-day events in Florida, where counselors met with 3,200 customers. Half the homeowners spoke a counselors in less than 10 minutes, and a total of 85% waited no more than 30 minutes before speaking one-on-one with a counselor. Nearly three-quarters of the customers said their experience was excellent while another 12% said it was very good.
"We are building on the terrific customer experiences at our Chase Homeownership Centers across the country," Lowman said. "The centers have provided personalized help to more than 91,000 borrowers, and we expect these events will helps thousands more in just a few days."
Chase plans to host multi-day events in the following markets:
•Chicago - May 13 - 17
•Atlanta - June
•Washington, D.C. - June
•New York
•Northern California
•Orlando
•Phoenix
•Southern California
Homeowners with Chase mortgages can receive the following services at the events:
•Initial counseling for homeowners applying for a mortgage modification
•Counseling for customers who are current on their mortgage but are struggling
•Short-sale assistance for customers who cannot afford their home or don't want to stay in it
They also can:
•Drop off documents that they need to submit as part of their trial plan
•Sign final modification documents if they are ready to complete mod agreements
Since 2009, Chase has hired 3,600 additional counselors, hosted and participated in nearly 475 outreach events, and mailed more than 1 million letters to invite customers to events and centers.
"Chase is a national leader in preventing foreclosure, and we continue to expand on and improve our programs to keep families in their homes," Lowman said. "Since 2007, we have helped prevent more than 965,000 foreclosures."
Since Jan.1, 2009, Chase has offered over 750,000 modifications to struggling homeowners under the Home Affordable Modification Program, its own modification programs, and modification programs offered by Fannie Mae, Freddie Mac, the Veterans Administration and the Federal Housing Authority.
About Chase
Chase is the U.S. consumer and commercial banking business of JPMorgan Chase & Co. (NYSE: JPM), which operates more than 5,100 branches and 15,000 ATMs nationally under the Chase brand. Chase has 146 million credit cards issued and serves consumers and small businesses through bank branches, ATMs and mortgage offices as well as through relationships with auto dealerships, schools and universities. More information about Chase is available at www.chase.com.
Monday, May 3, 2010
Fannie Mae Changes ARM Requirements
Washington, D.C. — Fannie Mae (FNM/NYSE) today announced new standards for the purchase and securitization of adjustable-rate mortgage (ARM) products. The company is changing eligibility criteria to protect consumers from potentially dramatic payment increases and to help ensure that borrowers who hold these types of mortgages can sustain them beyond the initial interest rate period.
"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term, while helping our lender partners offer a range of mortgage products for qualified borrowers," said Marianne Sullivan, Senior Vice President of Single Family Credit Policy and Risk Management at Fannie Mae. "These policy changes reflect our intention to continue providing liquidity to different market segments by ensuring that support for ARM products remains in appropriate circumstances."
For ARMs with initial periods of 5 years or less, Fannie Mae will require that borrowers be qualified at the greater of the note rate plus 2 percent or the fully indexed rate (index plus margin).
The company also said it will continue to make available an interest-only loan product, but will change its qualification criteria. The maximum loan-to-value ratio cannot exceed 70 percent, the borrower's credit score must be 720 or higher and the borrower must have a minimum of 24 months of liquid asset reserves remaining after loan closing. Balloon mortgages, which typically offer lower initial interest rates but leave a significant balance due at maturity, will no longer be eligible, except with special approval.
All loans not meeting the new guidelines must be purchased as whole loans on or before August 31, 2010, or delivered into MBS pools with issue dates on or before August 1, 2010.
"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term, while helping our lender partners offer a range of mortgage products for qualified borrowers," said Marianne Sullivan, Senior Vice President of Single Family Credit Policy and Risk Management at Fannie Mae. "These policy changes reflect our intention to continue providing liquidity to different market segments by ensuring that support for ARM products remains in appropriate circumstances."
For ARMs with initial periods of 5 years or less, Fannie Mae will require that borrowers be qualified at the greater of the note rate plus 2 percent or the fully indexed rate (index plus margin).
The company also said it will continue to make available an interest-only loan product, but will change its qualification criteria. The maximum loan-to-value ratio cannot exceed 70 percent, the borrower's credit score must be 720 or higher and the borrower must have a minimum of 24 months of liquid asset reserves remaining after loan closing. Balloon mortgages, which typically offer lower initial interest rates but leave a significant balance due at maturity, will no longer be eligible, except with special approval.
All loans not meeting the new guidelines must be purchased as whole loans on or before August 31, 2010, or delivered into MBS pools with issue dates on or before August 1, 2010.
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