Proposed Settlement Would Force Banks To Allow Short Sales For Delinquent Homeowners

Major banks may be forced to let severely delinquent homeowners sell their houses for less than the loan amounts owed as part of a broad settlement of federal and state investigations into botched foreclosure paperwork, according to government officials involved in the negotiations.

The requirement to allow so-called short sales would be in addition to forcing mortgage servicers to reduce the amount some homeowners owe on their loans, said two officials, who spoke on the condition of anonymity because negotiations are ongoing.

The goal of short sales would be twofold: provide a quicker and more economical way for banks to dispose of distressed real estate and to help stabilize the real estate market by clearing out a backlog of defaulted mortgages that are poised for foreclosure.

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Banks’ Loan Quagmire Snares 3 In Utah Family

If the Olsens of Utah County are any indication, the dysfunction among the nation’s banks who service mortgages runs long and deep.

Three members of the same family have experienced mounting frustrations, dislocations and months of stress in trying to renegotiate loans on their homes after they had financial setbacks. Each had bought or constructed homes near the height of the housing market only to see their finances and homeownership threatened for a variety of reasons in the economic meltdown.

Each at some point made decisions about their loans and their dealings with the banks out of frustration or naivete about negotiating with large and, based on their experiences, what appears to be poorly administered processes at the institutions.

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Oh my, oh MERS!

First the robo-signing controversy. Then the U.S. Bank v. Ibanez ruling. Now the next bombshell ruling in the foreclosure mess has just come down from a New York federal bankruptcy judge.

The case is In Re Agard, and it essentially throws a huge monkey wrench into a hugely important cog of the entire U.S. mortgage market, the Mortgage Electronic Registration System, Inc. known as MERS.

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30% Of Mortgages Are Underwater

Sometime, somehow, the foreclosure crisis will ease. But probably not anytime soon.

Home prices dropped 2.6% nationwide during the last three months of 2010, pushing more borrowers underwater, according to a quarterly real estate market survey from Zillow.com.

Now 27% of homeowners with mortgages owe more than their homes are worth. That's up from 23.2% a quarter earlier.

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What Delays a Mortgage Foreclosure

Six hundred days. That's how long, on average, mortgage loans in the foreclosure process in New York have been delinquent.

That's the longest average in the nation, but not by much, according to LPS Applied Analytics, in Jacksonville, Fla. Loans in foreclosure in Florida, New Jersey, Hawaii and Maine have been delinquent more than 500 days, on average, while home loans in California and Nevada have been delinquent 461 and 427 days, respectively. In the two speediest states, Nebraska and Wyoming, loans in the foreclosure process are delinquent by an average of 358 days.

Those statistics raise a question: Why do foreclosures take so long?

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Philadelphia Law Firm Used Nonlawyers to File Foreclosures, Suit Alleges

A Philadelphia law firm has been accused of the “unauthorized practice of law” by using nonlawyers to file hundreds of foreclosure cases and collect attorneys’ fees, according to a lawsuit.

In a further indictment of the mortgage industry, it also contends that banks, loan servicers and other creditors knew of the practice.

Patrick Loughren, a Pittsburgh, Pa., trial lawyer with Loughren, Loughren & Loughren, sued the law firm of Goldbeck, McCafferty & McKeever, along with 35 employees of the firm, according to the case, filed in Allegheny County, Pa. Messages seeking comment were left with the Goldbeck firm and Loughren. They could not be immediately reached for comment.

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Fannie, Freddie Say Mortgage Servicers Triggered Foreclosure Crisis

Fannie Mae and Freddie Mac defended their role in the foreclosure crisis in prepared testimony to Congress on Wednesday, while at least one federal regulator said the mortgage giants had contributed to the problem.

Speaking to the Senate Banking Committee at a hearing on the national foreclosure debacle, Fannie and Freddie executives emphasized that they are not responsible for managing payments by borrowers on home loans or foreclosing on homeowners when they default.

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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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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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Homeowners Say Loan Mods Led Them To Foreclosure

Grocery store owners William and Esperanza Casco were making enough money to stay current on their mortgage, but when JPMorgan Chase & Co. offered a plan that reduced their payments, they figured they could use the extra cash and signed up.
The Cascos say they never missed a subsequent payment, so they were horrified when the bank decided the smaller payments weren't enough and foreclosed on their modest Long Beach home.
Their story is echoed across the country by people who claim — some in lawsuits — that banks didn't live up to their end of the deal when they agreed to trial mortgage modifications.

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Short Sale Of Home Similar To Foreclosure In Its Effect On FICO Score

Dear Liz: In 2005, I purchased a town home for my children, and they have since vacated the property. The town house is now worth 60% of what I owe, and I am considering a short sale. All my other obligations are current with no late payments in years. My credit scores are over 800 and my only other debt is a car payment. After a short sale, what kind of hit can I expect on my credit score, and about what would be the recovery time for my credit score?

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Foreclosure Mess Will Take Years To Clean Up

How long will it take before the American nightmare of home foreclosures is over? Ask Mike Dillon, who’s been fighting to keep his New Hampshire home for most of the past decade. 

Though he missed two payments in 2002, Dillon then caught up and was current on his loan by later that year, he said. That’s when his mortgage problems began.

After the company servicing his mortgage failed to properly credit monthly payments to his account, it placed the loan in default. As he worked to straighten out the bookkeeping, with canceled checks in hand, the servicer began adding additional fees for property inspections, insurance and other charges.

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FHA Commissioner: Mortgage Industry Must Regain the Public’s Trust

During the Mortgage Bankers Association conference in Atlanta, GA, Federal Housing Administration Commissioner said the mortgage business should shine a light on bad participants in the industry and regain the public’s trust.

“There’s a reflection in the media that we aren’t holding ourselves accountable enough,” said David H. Stevens, commissioner of the FHA, noting that the recent news of flaws in some banks’ foreclosure processing methods is adding to the problem.

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Watchdog Panel to Grill Treasury on Foreclosure Robo-Signings

A Treasury official will be on the hot seat tomorrow as a Congressional watchdog group, known largely for its scathing assessments of the federal bank bailout, will hold the first public hearing to tackle the foreclosure robo-signings scandal.
Tomorrow's hearing, by the Congressional Oversight Panel for the Troubled Asset Relief Program, was originally to focus on the government's foreclosure mitigation programs, including the Home Affordable Modification Program. 

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Long Road To A Short Sale: Struggling Homeowners Turn To Lenders For Last-Chance Option

The house that Anna Bogaard-Hazen and her husband, Barry Hazen, bought on a cul-de-sac in Eldorado in 2005 had everything on their list of amenities — views, privacy, a pretty front porch.

In fact, when they first saw it, "Our jaws just dropped," she recalled.

Because others were bidding on the property, the couple paid the owners their asking price of $389,000 for the 1,800-square-foot house.

When they refinanced in 2007, the appraised value of the property had jumped to $460,000 and they thought, "Oh boy, we made a great investment. We were thrilled," Bogaard-Hazen said.

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3 Signs the Mortgage Market Has Hit Bottom

After more than two years of misery in the housing market, the worst may finally be over.

A handful of recent developments in the mortgage market all point to an easing of lending standards, which have been onerously high since 2008. Private lenders and the federal government have reinvigorated the jumbo mortgage market, making bigger loans more available to more borrowers. And in general, would-be homeowners can now qualify for a loan with a lower credit score and make a smaller down payment – in some cases, as low as 5%. Those moves, taken together, mean that more borrowers have access to mortgages, a necessary precondition for housing to rebound.

“When you see those moves on the upswing, it gives you a hint of what’s coming later on,” says Chip Cummings, president of Northwind Financial, a consulting company for mortgage and realtor firms.

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Why Government Shouldn't Block Home Foreclosures

If one word best summarizes the current housing market, "foreclosure" would be it. Despite record-low interest rates, American homeowners are losing their properties with greater frequency than at any time since the Great Depression. Yet banks and other financial institutions, until very recently on track to seize 1.2 million homes by the end of this year, are facing growing pressure to impose "voluntary" nationwide moratorium on foreclosure repossessions and sales. If they don't do the job themselves, say critics, government should do it. Several major lenders in fact have ceased property seizures in the wake of widespread revelations of foreclosures lacking proper documentation. The calls for action are understandable. Yet a moratorium, rather than restore integrity to our financial system, would further imperil it.

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NY Fed, 8 Firms Threaten BofA Over Mortgage Securities

The New York Federal Reserve Bank is part of a consortium of eight large institutional investment firms that is demanding that Bank of America repurchase loans included in mortgage securities.

Bloomberg reported earlier Tuesday that the New York Fed had joined with the Pacific Investment Management Company, better known as Pimco, and investment management firm BlackRock in an attempt to force BofA to buy back $47 billion in mortgage bonds.

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U.S. Trying To Assess Foreclosure Crisis Scope - FDIC

U.S. financial regulators are trying to gauge the scope of improper processing of foreclosures while banks need to assess their level of risk exposure, banking regulator Sheila Bair said on Sunday.
Federal Deposit Insurance Corp Chairman Sheila Bair said in an interview on C-SPAN's "Newsmakers" that the problems with processing foreclosures appeared to be an industry-wide practice, at least with larger loan servicers.

"I think this is really a symptom of size. It's very unfortunate," she said. "So in our backup supervisory capacity we are working with our regulatory colleagues. I think it is necessary for the regulators to go in and verify."

Last week, attorneys general from all 50 states said they were looking at allegations some banks did not properly review files or submitted false statements to evict delinquent borrowers from their homes. They are investigating accusations that lenders and banks employed "robo-signers" to sign hundreds of affidavits each day without vetting all the information.

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Mortgage Damage Spreads

The unfolding foreclosure-processing debacle is causing bank stocks to slide and putting millions of delinquent borrowers in limbo.

But how disruptive the crisis ultimately becomes—for homeowners, the housing market and the broader economy—depends on how quickly a number of technical problems and legal challenges are resolved in the months ahead.

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