60 Minutes Investigates 'Cutting Corners' On Foreclosures

The mortgage crisis is far from over.
 
60 Minutes takes a new look at the state of the foreclosure crisis, interviewing homeowners, a regulator and so-called robo-signers, who approved thousands of foreclosure documents daily without reading them.

"It was just a matter of cutting corners," Sheila Bair, chair of the Federal Deposit Insurance Corporation, tells CBS' Scott Pelley.

Home prices continue to fall, and record numbers of homeowners continue to lose their homes to foreclosure. Worse, the crucial documentation that should help organize this mess often makes matters more complicated, as homeowners and investors claim that banks botched or forged paperwork, raising concerns that many homeowners have been wrongfully kicked out of their homes.

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FHA Announces It Will Continue To Insure Wholesale Houses

Once again the Federal Housing Administration (FHA) has announced that it will be extending its anti-flipping waiver, allowing buyers to continue to use FHA-insured loans to purchase homes that are being resold within 90 days of their purchase[1]. The law was originally enacted in 2003 to “ease fraudulent transactions” in which investors bought houses for low prices and then sold them for higher ones, relying on the fast pace of appreciation and the buying mania at that time to make the house salable at a higher value (FHA believes that these values were inflated) rather than taking time to make improvements to the property. The FHA found that buyers in these transactions were more likely to default on their loans and that incidences of straw buyers and unethical appraisal methods were much higher on flips. As a result, the administration opted to stop insuring home loans on these properties.

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Banks Push to Weaken Dodd-Frank Risk Rules

Bank regulators are set to hold an open meeting on Tuesday to discuss a controversial risk-retention rule for mortgages—and its even more controversial carve-out.

Under the Dodd-Frank financial reforms, banks are required to retain at least five percent of the risk on mortgages they securitize. 

The idea was that banks would be more careful about making loans and structuring mortgage-backed securities if they were required to keep a part of the credit risk. From the start, that has had banks griping that this will choke off the mortgage market and raise borrowing costs of home-buyers. 

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Republicans Seek to Sell Off Disposable Federal Real Estate to Help Pay Debt

Three Republican lawmakers are seeking to force Uncle Sam to sell about 3.3 million acres of land he no longer needs to help pay down the national debt.

Sens. John McCain of Arizona, Mike Lee of Utah and Rep. Jason Chaffetz of Utah introduced legislation this week in their respective chambers that would order Interior Secretary Ken Salazar to dispose of the federal property that the Clinton administration identified in a 1997 report as suitable for sale.

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Major Changes Ahead For Mortgage System

Fundamental changes are probably ahead for the American mortgage system as the federal government pushes to unwind its unprecedented involvement in the housing market.

These changes could significantly raise the down payments demanded by lenders, curtail the availability of long-term mortgages with fixed interest rates, and increase the cost of borrowing in general.

The government's effort to scale back its role in housing could show up in small ways soon. In April, the Federal Housing Administration plans to raise the annual premium it charges borrowers by a quarter of a percentage point. In October, the maximum size of loans that the federal government backs is scheduled to drop to $625,500 from $729,750. The most dramatic proposal - eliminating mortgage financiers Fannie Mae and Freddie Mac - could take five to seven years.

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House Votes To Kill FHA Short Refis

In a largely symbolic move given the Obama administration's veto warnings, the House of Representatives has voted to kill the Federal Housing Administration's short refinancing program.

HR 830, The FHA Refinance Program Termination Act, was approved by the House in a 256-171 vote, with 18 Democrats joining 238 Republicans in favor of ending the program.

Critics say the program -- which allows underwater borrowers who are current on their loans to refinance into an FHA-insured mortgage if their lender agrees to write off at least 10 percent of their principal -- has gotten off to a slow start. Taxpayers may be on the hook for up to $8 billion to reimburse lenders for a share of their potential losses on the loans, critics say.

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Foreclosed Homeowners Get Unexpected Windfalls

Dozens of former homeowners who lost their houses to foreclosure have been calling public trustee offices across Colorado to see whether they have any money coming to them.

"We had no idea until we saw it in the newspaper," said Anthony Michaels of Denver, whose mother, 92-year-old Fayetta Curry, and his younger sister, Sharon Parker, were among a list of individuals due funds from a foreclosure auction.

The Denver Post on Tuesday highlighted how county public trustees and treasurers have hundreds of thousands of dollars in unclaimed funds that belong to homeowners whose houses were sold at auction.
Michaels' family members were among those eligible to collect more than $635,000 in unclaimed money but never knew it.

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U.S. Inquiry on Military Family Foreclosures

The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.

A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing. 

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Banks Could Face Billions In Fines Over Foreclosures

Two of the nation's largest banks may face billions in potential fines or enforcement actions from state and federal regulators over allegations of improper foreclosure paperwork.

Wells Fargo & Co. and Bank of America say they're being investigated by several government agencies over their foreclosure practices.

Regulators could seek upward of $20 billion in penalties for problems with the foreclosures, which would come from the Treasury Department and Department of Housing and Urban Development, is still in the works, according to several news reports.

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Fed Official Calls For Major Foreclosure Reforms

A top federal regulator told bankers on Friday that a major investigation into Wall Street's foreclosure system has revealed a "broken" process that takes advantage of homeowners, further intensifying the debate over regulatory remedies to potential foreclosure fraud.

Mortgage companies have been accused of submitting fraudulent paperwork in the foreclosure process, prompting a brief suspension of foreclosures by several major servicers in the fall. This spectacle has undermined public faith in President Barack Obama's signature foreclosure-relief effort, the Home Affordable Modification Program, which relies on servicers to implement all of its critical components. The National Consumer Law Center estimates that half of the foreclosure cases it takes on are driven by improper actions by mortgage servicers, rather than fundamental problems with a borrower's ability to pay off a mortgage.

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HUD Extends Foreclosure Anti-Flipping Rule

The Department of Housing and Urban Development (HUD) announced that it is in the process of approving another one-year suspension of its anti-flipping rule on foreclosed properties bought with FHA loans. The suspension was first initiated on February 1st of last year to allow investors to quickly renovate foreclosed homes and selling them to first time buyers as a means to further sales of foreclosed properties.



In 2003, HUD issued a rule that prohibits the FHA from insuring a mortgage on a home that was owned by the seller for less than 90 days. HUD initiated the anti-flipping rule early last decade because the Federal Housing Authority (FHA) discovered that too many of these quick sales were made at grossly inflated prices and involved fraudulent activities.

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Fed Wants To Strip A Key Protection For Homeowners

As Americans continue to lose their homes in record numbers, the Federal Reserve is considering making it much harder for homeowners to stop foreclosures and escape predatory home loans with onerous terms.

The Fed's proposal to amend a 42-year-old provision of the federal Truth in Lending Act has angered labor, civil rights and consumer advocacy groups along with a slew of foreclosure defense attorneys.

They're not only asking the Fed to withdraw the proposal, they also want any future changes to the law to be handled by the new Consumer Financial Protection Bureau, which begins its work next year.


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What Happened to the Government’s Short Sales Program?

In April, the Obama administration formally rolled out a new program, called Home Affordable Foreclosure Alternatives, that was designed to spur more short sales, where banks allow homeowners to sell their homes for less than the mortgage debt outstanding.

Like other foreclosure-prevention initiatives, this one appears to be off to a slow start — just 342 sales have been completed through September.

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Has The Federal Government Gone Subprime?

Uncle Sam sure has a lot of explaining to do.

He's spent years pumping untold billions into the housing market, only to see home prices and sales sink again.

Now he's getting hit by critics on the right and now the left, who contend our wayward uncle, in his desperation to keep the real estate market from collapsing completely, has made the ultimate down market move.

He's gone subprime, according to a growing number of critics on both sides of the political spectrum, replacing the high-cost mortgage dealers of old on the neighborhood stoop.

My guess is that readers of this blog are more familiar with the right's critique of the federal government's takeover of the mortgage market. In order to keep the mortgage market alive, Fannie Mae, Freddie Mac and the FHA let through a lot of questionable borrowers over the past two years, only to reap a whirlwind of bad loans.

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U.S. Homeowners Drop Out of Foreclosure Program Amid Record Defaults

U.S. homeowners are dropping out of the Obama administration’s foreclosure prevention program at a faster rate than they are joining it, according to figures released today by the U.S. Treasury Department.
Borrowers aided by the Home Affordable Modification Program grew to nearly 520,000 in October, up 23,750 from a month earlier, the Treasury said in its monthly report. The increase was less than five percent. A total of 36,300 borrowers have dropped out of the plan for failing to make their payments, an increase of 24 percent from a month earlier.

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Bank of America Outlines Radical Foreclosure Reform Measures To Congress

Bank of America on Thursday said it was committed to making significant changes in its foreclosure process and that it had completed 25,000 mortgage modifications for financially distressed homeowners in October. That's more than a 50 percent increase from the previous month.
Only 2,600 modifications were made through the federal government's Home Affordable Modification Program. The rest were made through the bank's own programs.

The figures show the speed and extent to which the bank -- the only one to halt foreclosure sales in all 50 states while it reevaluated its procedures -- is taking voluntary measures to fix its foreclosure problems.
The quick action comes as federal regulators and the 50 state attorneys general investigate the industry's practices and as Capitol Hill has increased scrutiny of foreclosures. The House Financial Services Committee is scheduled to hold the week's second hearing on the subject at 10 a.m. Thursday.

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Mortgage Transfers Are Valid, Group Argues as Foreclosure Hearings Begin

A trade group for companies that help package loans and leases into securities rejected claims that mortgage-bond trusts can’t prove ownership of debt they hold as Congress began hearings on the foreclosure crisis.

The standard practices of the industry result “if followed, in a valid and enforceable transfer of mortgage notes and the underlying mortgages,” Tom Deutsch, executive director of the New York-based American Securitization Forum, said in a study released today. Lawmakers in Washington ordered hearings on mortgage practices after loan servicers including Ally Financial Inc. and JPMorgan Chase & Co. halted foreclosure proceedings following revelations of so-called robo-signing.

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Bankers Brace for a Tongue-Lashing

Bank executives are expecting to get an earful from lawmakers Tuesday when they defend themselves in front of the Senate Banking Committee against allegations they mishandled thousands of home foreclosures.

The banks’ likely defense – that the volume of foreclosures was so great that they were simply overwhelmed – isn’t likely to placate politicians looking to score points with struggling homeowners.

While the sputtering economic recovery has left far more people out of work than was expected, greatly hampering any recovery in the real estate market, bankers are nonetheless expected to concede that the foreclosure system is broken, and that they are working on ways to repair it. Part of the problem, the bankers will say, stems from the demands of investors – including Fannie Mae and Freddie Mac.

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Freddie Mac Says Foreclosure Problems May Drain Recovery

Freddie Mac economists said recent problems in the banks' foreclosure processes could slow what little momentum the recovery holds, and perhaps send the housing market down to a new low.

In the broader economy, October payrolls, manufacturing production and consumer spending picked up in the third quarter. Housing, the October job report and struggles in other major economies are keeping the recovery too gradual.

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Request For Foreclosure Probe 3 Years Ago Thwarted

As foreclosures began to mount across the country three years ago, a group of state bank regulators suspected that some borrowers might be losing their homes unnecessarily. So the state officials asked the biggest national banks for details about their foreclosure operations.
When two banks -- J.P. Morgan Chase and Wells Fargo -- declined to cooperate, the state officials asked the banks' federal regulator for help, according to a letter they sent. But the Office of the Comptroller of the Currency, which oversees national banks, denied the states' request, saying the firms should answer only to inquiries from federal officials.

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