Fannie Mae Reports Decline in Business

Source: DSNews
Author: Tory Barringer April 1, 2014

Fannie Mae reported further contraction in its book of business for February—the second this year and the third in as many months—as new business acquisitions dropped to a five-year low.

According to the enterprise’s monthly volume summary for February, business shrank at a compound annual rate of 1.4 percent, bringing the book’s total growth rate for the year to -2.4 percent.

As of the end of the month, the book’s total value was approximately $3.15 trillion.

The decline in business was accompanied by a slight dip in new acquisitions, which totaled $29.3 billion for the month. The last time new business acquisitions were that low was January 2009, when they totaled $28.8 billion.

Also down once again was the single-family serious delinquency rate, which ended the month at 2.27 percent—the lowest since November 2008. The multifamily delinquency rate, meanwhile, edged up 1 basis point to 0.11 percent.

Fannie completed 10,837 loan modifications in February, totaling 23,402 year-to-date.

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Groups sue Gov. Brown over mortgage settlement funds

By Tim Logan, www.latimes.comView OriginalMarch 14th, 2014

California Gov. Jerry Brown diverted more than $350 million intended to fund housing counseling and foreclosure relief programs to plug budget holes in 2012. Three community groups are suing to have the funds restored.
Photo by: (Gary Friedman, Los Angeles Times / February 13, 2014)
Three community groups sued Gov. Jerry Brown on Friday, demanding he restore more than $350 million in mortgage settlement funds that were used to plug state budget holes two years ago.

The money — from California’s slice of the $25 billion national mortgage settlement with banks in 2012 — was supposed to fund housing counseling and foreclosure relief programs. But with the state facing a $16-billion budget deficit that spring, Brown diverted it to the state’s general fund and to pay down interest on housing bonds.

These days, though, state coffers are fat, with California projecting a $5-billion surplus this fiscal year. And so the groups, which work on housing counseling, want Brown to put the money back where it was intended.

“Our goal is a very simple goal,” said Robert Gnaizda, general counsel for the National Asian American Coalition, which filed the suit along with COR Community Development Corporation in Irvine and the National Hispanic Christian Leadership Conference. “We want an early settlement that will help 2 million California homeowners who are still in distress.”

Gnaizda said the suit was a last resort after several written and verbal requests to the governor’s office for a meeting on the topic drew no response.

Brown’s office had little to say Friday as well, issuing a statement from H.D. Palmer, deputy director for external affairs, defending the governor’s decision.

“While we haven’t yet seen the complaint, we’re confident that our budget actions are legally sound,” he said.

A spokesman declined to discuss the suit further.

Stuck in the middle is California Atty. Gen. Kamala Harris, who played a lead role in the national settlement and criticized Brown in 2012 for diverting the funds. But as the state’s chief lawyer, Harris must now defend Brown in the lawsuit. A spokesman for Harris declined comment.

California is hardly the only state that used mortgage settlement money for other purposes. A 2012 study by Enterprise Community Partners, a nonprofit affordable housing group, found that less than half of the $2.5 billion allocated to states in the deal had been used on housing. And there have been disputes elsewhere, including New York, where Gov. Andrew Cuomo and state Atty. Gen. Eric Schneiderman sparred for several months over how to divvy up a settlement with JP Morgan Chase before reaching a deal in January.

Gnaizda and Neil Barofsky, the former Treasury Department inspector general who is representing the plaintiffs in the suit, said they hope this case could provide a template for housing advocates in other states who are seeking more of the settlement money.

“There are perhaps 15 states where this could be done,” Gnaizda said. “Each case is a little different, but we suspect we’ll be hearing from some of them in the future.”

In California, foreclosure rates remain high, but lower than when the settlement was reached in February 2012. More funding for counseling, credit repair and financial literacy could have gone a long way toward helping borrowers recover, said Paul Leonard, California director for the Center for Responsible Lending. The center is not involved in the lawsuit but has criticized Brown’s use of the funds.

“That was a big chunk of money,” Leonard said.

The loss of funds has had a direct effect on housing counseling agencies and the people they work with, said Kevin Stein, associate director of the California Reinvestment Coalition.

“There are fewer counselors, fewer agencies. That means there are fewer people served,” he said. “It has resulted in people losing their homes.”

The loss — coupled with declining funding to develop new affordable housing — is making it harder for many Californians to find a decent place to live. Any future mortgage settlements, he said, need to take the whole picture into account.

“There should be significant resources for housing counseling, for affordable housing and for principal-reduction modifications,” Stein said. “And we need to ensure that all these are available in the hardest-hit communities in the state.”

Twitter: @bytimlogan

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New Defaults Trouble a Mortgage Program


Banks and other mortgage servicers have accepted $815 million in taxpayer-funded incentives for helping homeowners who have since redefaulted on their home loans, a watchdog for the Treasury Department’s Troubled Asset Relief Program, or TARP, reported on Wednesday.

More than a third of homeowners who received loan modifications under TARP’s mortgage modification program have since stopped paying, but servicers kept the money they received for modifying those loans, according to a report by Christy L. Romero, the special inspector for TARP.

Many of the homeowners received scant relief, with a large majority benefiting from a reduction of less than 10 percent on their monthly payments, according to an analysis by Ms. Romero’s office.

The Treasury has spent only about a fifth of the $38.5 billion allocated to help homeowners under TARP. Any TARP money not spent by the end of 2015 will be returned to the general fund.

“Treasury took extraordinary action to bail out the banks,” Ms. Romero said. “They still have to do the same for homeowners. The idea was not to put money into the banks and then have them fail later, and the same is true for homeowners.”

Treasury officials have defended the mortgage program, called the Home Affordable Modification Program, pointing to data showing that loan modifications under its rules have been longer-lasting, and more favorable to homeowners, than private loan modifications. The Obama administration has also taken a number of steps to improve the program, and more recent modifications show lower default rates after a year than those given in 2009 and 2010.

At first, servicers received $1,000 for every loan modified. Now they are paid $400 to $1,600 for permanent loan modifications, depending on how many months in arrears the homeowner was (a modification made at the first sign of trouble is more effective than one made after many months of failure to pay). They can receive extra money if they reduce the monthly payment more or the loan modification lasts longer.

Timothy G. Massad, assistant Treasury secretary for financial stability, said the loans in question already posed a high risk of default. “While the housing market and the economy are improving, it is important to acknowledge the variety of challenges homeowners faced during the economic crisis, including unemployment and underemployment,” he wrote in a letter to Ms. Romero. “These facts limit the ability to achieve a very low redefault rate by program design alone.”

The Obama administration was criticized for failing to help homeowners enough during the financial crisis, but such complaints have receded as the housing market improves. According to CoreLogic, the national foreclosure rate is still more than double what it was before home prices began to plunge in 2007 and 2008. As many as 9.7 million households, out of roughly 75 million owner-occupied homes, still owe more on their mortgages than their home is worth.

The Home Affordable Modification Program was initially supposed to help three to four million homeowners, but only 1.2 million received permanent modifications, of which about 27 percent have defaulted again.

The report found that the smaller the reduction in payments and overall debt, the more likely the homeowner was to redefault. Those who had low credit scores, owed significantly more than their home was worth or had mortgages less than five years old were also more likely to stop paying.

Ms. Romero said that Treasury had not collected enough information about what was causing loan modifications to fail.

“We’ve been focused on trying to get more people into the program, and Treasury has too,” she said. “And all of a sudden we were thinking, how many people are falling out of the program?”

Of the 865,000 people who have current loan modifications, she said, more than 10 percent are one or two payments behind. Those people may be eligible for help from other federal programs.

“Treasury should require, at the very least, the servicers to reach out to the homeowners,” she said, “and ask ‘What’s going on?’ ”

A version of this article appeared in print on July 25, 2013, on page B2 of the New York edition with the headline: New Defaults Trouble a Mortgage Program.

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Wells Fargo lays off 2,300 employees

By Aaron Smith @AaronSmithCNN August 22, 2013: 2:22 PM ET

Wells Fargo said it is reducing its workforce by 2,300 employees because of rising interest rates and declines in mortgage refinancing.

“Yesterday, at locations across the country, we provided a 60-day notice of displacement to approximately 2,300 mortgage team members,” the financial firm said Thursday in a prepared statement.

Wells Fargo (WFC, Fortune 500) said it was culling its staff as “the result of less mortgage refinancing volume than we experienced through 2012 and early 2013.”

Wells Fargo spokesman Alfredo Padilla said the reductions include 291 jobs in Tempe, Ariz., but would not specify any other locations affected.

Related: Mortgage rate climb to two-year high

Mortgage rates have been volatile over the past year. The average rate of a 30-year mortgage hit a two-year high of 4.58% this week, according to Freddie Mac, after slumping to 3.35% in May, which is one of the lowest rates on record. The average 30-year rate bottomed out at 3.31% in November of 2012, which was an all-time low.

Padilla would not say how many total people the company employs. To top of page

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2 Big Banks Face Suits in Mortgage Pact Abuses

New York’s top prosecutor plans to sue two mortgage titans, Bank of America and Wells Fargo, over claims that they breached the terms of a multibillion-dollar settlement intended to end foreclosure abuses.

On Monday, Eric T. Schneiderman, New York’s attorney general and top prosecutor, said that the lenders violated the terms of the National Mortgage Settlement, a sweeping $26 billion pact brokered last year between five of the nation’s biggest banks and 49 state attorneys general. The agreement came during a national outcry over potentially widespread foreclosure abuses like shoddy paperwork, erroneous fees and wrongful evictions.

Mr. Schneiderman says that Bank of America and Wells Fargo did not follow guidelines dictating how the banks field and process requests from homeowners trying to modify their mortgages.

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Under the terms of the settlement, banks have to abide by 304 servicing standards, like notifying homeowners of missing documents within five days of receiving a loan modification and providing borrowers with a single point of contact.

“Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure,” Mr. Schneiderman said. Since October 2012, Mr. Schneiderman’s office has documented 210 separate violations involving Wells Fargo and 129 involving Bank of America.

The move by Mr. Schneiderman is the first time that an attorney general has readied a lawsuit against one of the five participating banks on charges related to the settlement, which was aimed at halting the housing market’s downward slump and doling out relief to homeowners in foreclosure.

More attorneys general could follow Mr. Schneiderman’s lead. Last week, Martha Coakley, the Massachusetts attorney general, also sent a letter to Joseph A. Smith, the settlement monitor, outlining “recurring issues” with mortgage servicers, according to a copy of the letter reviewed by The New York Times. Among the problems she cited were “erroneous communications,” and servicing requirements that were “often ignored.” Ms. Coakley could pursue a lawsuit but hopes that the monitor will intervene to correct the problems, according to her office.

The settlement emerged from an investigation into mortgage servicing by all 50 state attorneys general that began in 2010 after revelations emerged that banks had churned through foreclosures using robosigned documents, legal paperwork that was seldom reviewed for accuracy.

After the deal was reached in February 2012, Mr. Schneiderman’s office began receiving a deluge of complaints from housing counselors across the state. The counselors, Mr. Schneiderman’s office said, reported that homeowners were still wading through a bureaucratic quagmire.

Mr. Schneiderman set the potential penalty in motion on Friday when he sent a letter to the settlement monitoring committee, outlining his plans to penalize the banks. “I am writing to inform you about a persistent pattern of noncompliance,” Mr. Schneiderman wrote, according to the letter. The committee has 21 days to decide whether to initiate a lawsuit, or whether Mr. Schneiderman will pursue the action alone.

Bank of America and Wells Fargo said on Monday that they would take steps to handle the issues raised.

“Through March we have provided relief for more than 10,000 New York homeowners through the National Mortgage Settlement, totaling more than $1 billion,” said Richard G. Simon, a spokesman for Bank of America. He noted that “Attorney General Schneiderman has referenced 129 customer servicing problems which we take seriously and will work quickly to address.”

Wells Fargo, which has helped 70,000 homeowners through the settlement, is “committed to full compliance with the National Mortgage Settlement and its associated standards,” according to Vickee J. Adams, a Wells Fargo spokeswoman. She added that “it is unfortunate that the New York attorney general has chosen this route rather than engage in a constructive dialogue through the established dispute resolution process.”

Michael Farnsworth, who fell behind on his mortgage after a spinal injury prevented him from working, is among the New York residents claiming that their mortgage paperwork was not handled properly. After submitting a loan modification application to Wells Fargo on Feb. 22, Mr. Farnsworth said he returned home on March 6 to find a note affixed to his farmhouse in Corfu, N.Y.

The note was ominous, he said: Mr. Farnsworth had 48 hours to resubmit many documents, including tax returns, or his loan modification would be scuttled. Under the mortgage settlement, though, Wells Fargo was required to notify Mr. Farnsworth about missing documents five days after he submitted a loan application and to then give him 30 days to submit any missing documentation.

Wells Fargo declined to comment on Mr. Farnsworth’s case, citing customer privacy, but said that the bank “is doing everything we can to assist customers so that they can stay in their homes if possible.”

The servicing standards were intended in part to address delays that can torpedo efforts to save a home. Before the settlement, housing counselors said that homeowners were ensnared in a bureaucratic maze when seeking foreclosure relief. Some borrowers were asked for the same document multiple times, while others were shuttled from one representative to another. As their applications for relief languished, housing counselors said, borrowers accrued fresh costs, like late fees and property taxes, that aggravated their distress.

“The price of this paperwork delay can be thousands of dollars for homeowners,” Vera Cedano, a foreclosure defense lawyer with Western New York Law Center. “It can mean the difference between saving a losing a home.”

Deonarine Nareen, a 52-year-old restaurant employee in Queens, had fallen behind on his mortgage as he petitioned Wells Fargo for a loan modification, according to court records. Since Wells Fargo began foreclosure proceedings against him in 2010, Mr. Nareen said he had tried to win a reduced monthly mortgage payment, but had been asked for documents numerous times.

In the latest chapter, Mr. Nareen said he applied for a loan modification on Feb. 19, so he was surprised when he received a brand new application for a loan modification from Wells Fargo in March.

A version of this article appeared in print on 05/07/2013, on page B1 of the NewYork edition with the headline: 2 Big Banks Face Suits In Mortgage Pact Abuses.

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Consumer Financial Protection Bureau rules establish strong protections for homeowners facing foreclosure

JAN 17 2013
Consumer Financial Protection Bureau rules establish strong protections for homeowners facing foreclosure
New rules prevent servicer surprises and runarounds for mortgage borrowers

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) issued rules to establish new, strong protections for struggling homeowners facing foreclosure. The rules also protect mortgage borrowers from costly surprises and runarounds by their servicers.

“For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures,” said CFPB Director Richard Cordray. “Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.”

Mortgage servicers are responsible for collecting payments from mortgage borrowers on behalf of loan owners. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. Generally, borrowers have no say in choosing their mortgage servicers. Lenders frequently sell loans to investors after the mortgage deal is signed, and the investors, not the consumers, often choose the servicers.

Even before the financial crisis, the mortgage servicing industry at times experienced problems with bad practices and sloppy recordkeeping. As millions of borrowers fell behind on their loans as a result of the crisis, many servicers were unable to provide the level of service necessary to meet homeowners’ needs. Many simply had not made the investments in resources and infrastructure to service large numbers of delinquent loans. Consumers complained about getting the runaround and being hit with costly surprises. Now, with millions of homeowners in distress, many borrowers are continuing to experience serious problems seeking loan modifications or other alternatives to avoid foreclosure.

The CFPB’s mortgage servicing rules ensure that borrowers in trouble get a fair process to avoid foreclosure. Borrowers shouldn’t have to worry about mortgage servicers cutting corners or losing applications for relief. They should be told about their options and given time to apply and be considered for loan modifications and other alternatives. Most of all, they shouldn’t be surprised by the start of a foreclosure proceeding until they have had time to explore all available options. If they act diligently to seek alternatives, they should not face a foreclosure sale before their applications have been evaluated. The new protections for struggling borrowers include:

Restricted Dual-Tracking: Under the CFPB’s new rules, dual-tracking – when the servicer moves forward with foreclosure while simultaneously working with the borrower to avoid foreclosure – is restricted. Servicers cannot start a foreclosure proceeding if a borrower has already submitted a complete application for a loan modification or other alternative to foreclosure, and that application is still pending review. To give borrowers reasonable time to submit such applications, servicers cannot make the first notice or filing required for the foreclosure process until a mortgage loan account is more than 120 days delinquent.
Notification of Foreclosure Alternatives: Servicers must let borrowers know about their “loss mitigation options” to retain their home after borrowers have missed two consecutive payments. They must provide them a written notice that includes examples of options that might be available to them as alternatives to foreclosure and instructions for how to obtain more information.
Direct and Ongoing Access to Servicing Personnel: Servicers must have policies and procedures in place to provide delinquent borrowers with direct, easy, ongoing access to employees responsible for helping them. These personnel are responsible for alerting borrowers to any missing information on their applications, telling borrowers about the status of any loss mitigation application, and making sure documents get to the right servicing personnel for processing.
Fair Review Process: The servicer must consider all foreclosure alternatives available from the mortgage owners or investors – those with decision-making power over the loan – to help the borrower retain the home. These options can range from deferment of payments to loan modifications. And servicers can no longer steer borrowers to those options that are most financially favorable for the servicer.
No Foreclosure Sale Until All Other Alternatives Considered: Servicers must consider and respond to a borrower’s application for a loan modification if it arrives at least 37 days before a scheduled foreclosure sale. If the servicer offers an alternative to foreclosure, they must give the borrower time to accept the offer before moving for foreclosure judgment or conducting a foreclosure sale. Servicers cannot foreclose on a property if the borrower and servicer have come to a loss mitigation agreement, unless the borrower fails to perform under that agreement.
Mortgage borrowers should not be surprised about where their money is going, when interest rates adjust, or when they get charged fees. The CFPB’s rules help every borrower, whether struggling or not, by bringing greater transparency to the market with clear and timely information about mortgages. These rules include:

Clear Monthly Mortgage Statements: Servicers must provide regular statements which include: the amount and due date of the next payment; a breakdown of payments by principal, interest, fees, and escrow; and recent transaction activity.
Early Warning Before Interest Rate Adjusts: Servicers must provide a disclosure before the first time the interest rate adjusts for most adjustable-rate mortgages. And they must provide disclosures before interest rate adjustments that result in a different payment amount.
Options for Avoiding Costly “Force-Placed” Insurance: Servicers typically must make sure borrowers maintain property insurance and if the borrower does not, the servicer generally has the right to purchase it. The CFPB’s rules ensure consumers will not be surprised by this insurance, which often can be more expensive than the insurance borrowers buy on their own. The rules say servicers must provide more transparency in this process, including advance notice and pricing information before charging consumers. Servicers must also have a reasonable basis for concluding that a borrower lacks such insurance before purchasing a new policy. If servicers buy the insurance but receive evidence that it was not needed, they must terminate it within fifteen days and refund the premiums.
When mortgage servicers make mistakes, records get lost, payments are processed too slowly, or servicer personnel do not have the latest information about a consumer’s account, the consumer suffers the consequences. The CFPB’s rules will require common-sense policies and procedures for handling consumer accounts and preventing runarounds. These rules include:

Payments Promptly Credited: Servicers must credit a consumer’s account the date a payment is received. If the servicer places partial payments in a “suspense account,” once the amount in such an account equals a full payment, the servicer must credit it to the borrower’s account.
Prompt Response to Requests for Payoff Balances: Servicers must generally provide a response to consumer requests for the payoff balances of their mortgage loans within seven business days of receiving a written request.
Errors Corrected and Information Provided Quickly: Servicers must generally acknowledge receipt of written notices from consumers regarding certain errors or requesting information about their mortgage loans. Generally, within 30 days, the servicer must: correct the error and provide the information requested; conduct a reasonable investigation and inform the borrower why the error did not occur; or inform the borrower that the information requested is unavailable.
Maintain Accurate and Accessible Documents and Information: Servicers must store borrower information in a way that allows it to be easily accessible. Servicers must also have policies and procedures in place to ensure that they can provide timely and accurate information to borrowers, investors, and in any foreclosure proceeding, the courts.
Today’s rules originate from the Dodd-Frank Wall Street Reform and Consumer Protection Act, which directed the CFPB to implement reforms for the mortgage servicing industry. The CFPB announced in August that it was considering a number of proposals to implement the Dodd-Frank Act requirements and address systemic problems in the industry. Today’s rules are a result of the public’s feedback on those proposals.

Recognizing that small servicers approach servicing quite differently, the CFPB made certain exemptions to today’s mortgage servicing rules for small servicers that service 5,000 or fewer mortgage loans that they or an affiliate either own or originated. These servicers are mostly community banks and credit unions servicing mortgages for their customers or members.

The mortgage servicing rules take effect in January 2014. The CFPB plans to work with mortgage servicers to ensure an easy transition to implementation. To help with compliance, the CFPB will, among other things, be issuing plain language implementation guides and, in coordination with other agencies, releasing materials that help servicers understand supervisory expectations. For many of the new rules that require specific notifications, the rule contains model and sample forms. As the effective date approaches, the CFPB will also give consumers information about their new rights under these rules.

The mortgage servicing rules can be found Thursday

A summary of the rules is available at:

A factsheet about the rules can be found at:

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Tax Forgiveness Extension.. Will it Happen ?

Push Is on to Extend Tax Forgiveness on Foreclosures, Short Sales

Posted November 28, 2012, at 9:35 a.m.
By Dennis Rodkin

Part of a distressed sale—a foreclosure or a short sale—or a loan modification entails the mortgage lender forgiving some or all of a homeowner’s debt. Formerly, tax laws counted that forgiven amount as taxable income. But in 2007, President George W. Bush signed legislation that temporarily exempted forgiven mortgage debt from taxable income. That law expires December 31—unless Congress acts to extend it.

Without an extension, “you’re going to be taxed on a gain when you didn’t really gain anything,” says Brian Bernardoni, the senior director of government and public policy at the Chicago Association of Realtors. “Folks who have already gotten wiped out will have to pay for that privilege.”

The push is on to get an extension. In the U.S. House of Representatives, Resolution 4336 and Resolution 4202 aim to extend the tax forgiveness. Seven of Illinois’s 18 members of the House are cosponsors of one bill or the other. Neither of Illinois’s senators is among the 19 cosponsors of Senate bill 2250, which also provides for extending mortgage debt tax relief.

Taxing forgiven mortgage debt “would impose a significant financial burden on struggling homeowners and present those who have suffered through the short sale process an additional heavy burden,” Representative Jan Schakowsky (D-9th) said in a prepared statement. “The result would be disastrous to our overall economy and Chicagoans who are struggling [over whether] to keep or walk away from underwater homes.”

Last week, the attorneys general of 41 states, including Lisa Madigan of Illinois, signed a letter to Congress urging passage of the extension. In a statement issued at the time, Madigan said, “Failure to extend this tax relief would hurt the very families we set out to help in the national foreclosure settlement. We need to do everything we can to encourage—not deter—struggling homeowners to seek help to stay in their homes.”

The 2007 legislation passed at a time when it wasn’t yet clear that the housing crisis would persist for more than five years. But with the market still struggling to revive—the Case-Shiller index data released Tuesday shows that, in the Chicago area, home prices in September 2012 had only returned to their September 2001 level—short sales and foreclosures aren’t going away. According to Midwest Real Estate Data, there were 30,229 short sales and foreclosures in northern Illinois in the first ten months of 2012. There were 30,077 in all of 2011.

There is no clear data on how much debt individual home-sellers have been forgiven. The Congressional Budget Office estimates that allowing the exclusion to expire would cost forgiven homeowners about $1.3 billion in taxes.

And that, says Bernardoni, is what makes the difference between the extension being an obvious no-brainer and a sticky question. It’s easy to understand that people who lose their homes to foreclosure or sell for less than the amount of the mortgage aren’t profiting and thus shouldn’t be taxed as if they collected a windfall. But the political winds these days are blowing against tax relief of any kind. “This could be one of the unintended consequences of a deal to avoid the fiscal cliff,” Bernardoni says. “Singling out any one group for tax relief is going to be difficult.”

None of the measures call for making mortgage-debt tax relief permanent; they only call for an extension while the real-estate market continues to stagger. Nursing along housing’s recovery is an essential part of stabilizing the larger U.S. economy, as Mesirow Financial’s Diane Swonk wrote just before Thanksgiving. “Housing is finally showing signs of healing after a prolonged illness,” she explained. “We still have a long way to go, but it has reached a critical shift in momentum, if allowed to continue; the choice is in the hands of our elected officials, and the clock is ticking.”

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U.S. Objects to Ocwen Buy of ResCap Loan

The U.S. is worried Ocwen Financial Corp. (OCN) won’t abide by a home-lending industry overhaul that was “designed to protect homeowners from future occurrences of mortgage-related abuse and fraud” when it takes over Residential Capital LLC’s servicing platform as part of a $3 billion deal.

Papers filed in advance of a Nov. 19 bankruptcy court hearing at which Ocwen will seek a judge’s permission to seal the deal say talks are under way, but for now the government plans to object to Ocwen’s acquisition unless Ocwen agrees to honor reforms agreed by ResCap.

Ally Financial Inc. also filed papers saying it is concerned about Ocwen’s willingness to honor the industry settlement, as well as a 2011 consent order with banking regulators.

Earlier this year, ResCap was one of the parties to a historical mortgage servicing settlement agreement with the U.S. and 49 state attorneys general designed to quiet allegations of systemic fraud in the home lending and mortgage servicing industry. The fraud ranged from misrepresentations to consumers to false filings with courts in foreclosure proceedings.

“These are matters of great concern to the U.S.,” lawyers for the government wrote in a filing with the U.S. Bankruptcy Court in Manhattan, adding the reforms agreed to by ResCap and other major players are “critical to protecting homeowners.”

A spokesman for Ocwen couldn’t immediately be reached Wednesday to respond to the government’s papers or to related concerns raised by the Neighborhood Corp. of America, a housing nonprofit that says Ocwen gets in the way of the agency’s efforts to help consumers hang on to their homes.

“Ocwen’s inaction has thus contributed to increased foreclosures,” lawyers for Neighborhood Corp. wrote in court papers this week.

A spokeswoman for Walter Investment Management Corp. (WAC), which is joining in Ocwen’s deal, couldn’t be reached for comment.

So far, Ocwen has agreed to use “best efforts” to “address” the nationwide settlement as part of its ResCap buy, but the U.S. said it needs to make sure Ocwen sticks to the industry deal.

The mortgage-industry settlement contained provisions meant to ensure that if a distressed servicer was forced to sell its assets in bankruptcy, as ResCap ultimately was, a buyer would be bound to the terms of the settlement, according to papers filed by lawyers for the U.S. this week.

In the template deal for its bankruptcy auction, however, ResCap proposed to take its buyer off the hook for some of the industry cleanup provisions. That deal was with Nationstar Mortgage Holdings Inc. (NSM), which ultimately lost to Ocwen at a bankruptcy auction.

Efforts continue to reach terms with Ocwen on the industry cleanup, including an enforcement mechanism if the buyer of ResCap’s business is found to have run afoul of the agreed rules, government attorneys said.

Ally is calling for the sale to Ocwen to be disapproved unless Ocwen agrees to honor the nationwide settlement and the consent agreement with banking regulators.

A plan to allow the sale to be approved leaving Ocwen to tie up loose ends regarding the industry reforms later won’t work, Ally said. Once a bankruptcy judge signs off on the sale to Ocwen, Nationstar is released from its obligation to stand by as backup bidder.

If Ocwen later resists shouldering ResCap’s settlement obligations, ResCap’s creditors could be stuck holding the bag, Ally fears.

ResCap was once the mortgage division of auto lender Ally Financial. It sought bankruptcy protection in May. Ocwen wants to buy the right to service 2.4 million home loans with a principal value of $375 billion.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to )

Write to Peg Brickley at

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Mortgage Relief Scam

Bondi: Asset freeze, temporary injunction obtained in mortgage relief scam

South Florida Business Journal

Date: Thursday, September 27, 2012, 6:20am EDT

Pam Bondi

“By obtaining a temporary injunction and asset freeze, we have stopped this company from preying on even more of Florida’s homeowners,” Attorney General Pam Bondi said in a statement.

Attorney General Pam Bondi announced Wednesday that a temporary injunction and asset freeze had been obtained against a company that allegedly preyed on distressed homeowners, defrauding them out of thousands of dollars in a mortgage relief scam.

According to the complaint filed by the Attorney General’s Office, Edward Cherry,Lawrence DiodatoPaul Gellenbeck,Shane FrankovicAnthony C. Pintsopoulosand their businesses charged homeowners $3,500 in up-front fees and, in return, falsely guaranteed that the defendants would “void” the homeowner’s “upside-down mortgage.”

The Broward County Circuit Court ordered the defendants on Wednesday to immediately cease operations and freeze their assets.

“This mortgage relief scam targeted hundreds of distressed homeowners who were already facing financial hardship,” Bondi said in a statement. “By obtaining a temporary injunction and asset freeze, we have stopped this company from preying on even more of Florida’s homeowners.”

The temporary injunction bars the company from advertising for or providing services to Florida homeowners by which the defendants claim to cancel or otherwise void previously recorded mortgages.

The temporary injunction and asset freeze were obtained against: Cherry, Diodato, Gellenbeck, Frankovic, Pintsopoulos, The Fidelity Land Trust Company, LLC, The Sunshine State Land Trust Company, LLC, Florida Land Trust Services, LLC, Growth Capital Funding, LLC, August Belmont And Company, LLC, Esquire Litigation Support.

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What HARP 2.0 can — and can’t — do for you

While we’ve all heard about people who bought homes during the housing boom that they couldn’t afford and who are facing foreclosure. But even responsible consumers who bought homes well within their means and can still afford their payments are in trouble these days. Stuck with homes worth far less than they fork out every month on the mortgage, such borrowers are essentially throwing money away.

To help responsible borrowers in this boat, the Obama administration rolled out the Home Affordable Refinance Program in 2009 as part of the Making Home Affordable program. The first program fell short of its goals, so the government made some changes and rolled out HARP 2.0. That seems to have boosted participation in the program. Twenty percent of all U.S. refinancings in May (the latest figures available) were under the HARP program, according to the Federal Housing Finance Agency.

Fixed mortgage costs sink to record low
Foreclosures reach lowest level since 2007

Given the renewed interest in HARP, it’s a good opportunity to go over what the program is all about.

What is HARP 2.0? HARP 2.0 is a program that allows homeowners who are “underwater” on their mortgages to refinance. In particular, it’s geared toward people who can’t find assistance elsewhere. “These are people who don’t qualify for a traditional refinance because their homes are underwater,” said Fred Glick, principal of US Loans Mortgage and US Spaces Realty. “This is the only program that allows them to refinance their loans.”

How is HARP 2.0 different than HARP 1.0? There are two key changes between the first and second versions of the program. First, unlike its predecessor, HARP 2.0 allows borrowers with mortgage insurance to qualify for a refi. This opens up the program to an entirely new — and much larger — pool of borrowers.

Perhaps most important, the new originator is relieved of responsibility for anything that happened on the first loan. “If there was massive fraud on the underwriting of the first loan, the new lender is not responsible,” Glick explained. “They’re only responsible for any new fraud that occurs. This means lenders are more willing to help.”

Who is eligible for a refi under HARP 2.0? According to, in order to qualify for the program your mortgage must:

  • Be owned or guaranteed by Freddie Mac or Fannie Mae
  • Have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009
  • Not have been previously refinanced under HARP, unless it is a Fannie Mae loan that was refinanced under HARP between March and May of 2009

The current loan-to-value ratio on a mortgage also must be greater than 80 percent to be eligible for refinancing, and you must be current on payments for the last 12 months. On its site, MakingHomeAffordable points out that these criteria are for guidance only and that interested borrowers should call their mortgage servicers to find out if they qualify.

Glick said that borrowers interested in using HARP 2.0 need to have a credit score of at least 620, noting that these are “full doc” loans. In other words, homeowners must be able to prove income and assets in order to qualify for the reduced payment.


Find a mortgage broker who knows the ins and outs of your particular loan when trying to refinance under HARP 2.0.(Credit:

How do I find out if my lender is participating? Any mortgage originator can issue a HARP loan, so it’s not necessary for borrowers to go back to their original lender. That said, just because any lender can participate doesn’t mean all of them do. Call around to find lenders who are offering refinancing under HARP.

Who should I contact? Since you’re not required to go to your original lender to obtain a refi under HARP 2.0, you have the option of working with any broker or bank lender. Shop around so you understand what kinds of programs lenderes are offering. If you want to make it easier, Glick suggests finding a mortgage broker who is familiar with your particular situation. “Each lender has its own quirks,” he said. “In particular, Freddie Mac has a lot of quirks in its system right now.”

Ask a trusted friend, family member, or real estate professional if they have any brokers they can recommend. Also make sure to interview more than one to find the right fit. Glick said you’ll know you’ve found a good broker when the person starts asking lots of questions about your loan. “There are a million little things they have to know, the little twists and turns,” he added. So if a broker doesn’t know enough to understand the questions she needs to ask, it’s time to move on.

Understand that because you’re going into a HARP refinance, you won’t get the kind of interest rates you’re hearing about, like 30-year fixed-rate loans at 3.25 percent. HARP loan rates this month are generally over 4 percent.

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