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AG: $25 Billion Mortgage Settlement Finalized


HARTFORD – Attorney General George Jepsen on Tuesday said Connecticut consumers will soon benefit from direct mortgage relief and new mortgage servicing standards under terms of the $25 billion national settlement agreement with the five largest mortgage servicers.

Consent judgments with Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc (formerly GMAC), were approved last week and entered Friday in U.S. District Court for the District of Columbia, finalizing the national settlement announced Feb. 9.

The state’s share of the settlement is $190 million.

•             Connecticut borrowers will receive an estimated $119 million in benefits from loan modifications and other direct relief.

•             The estimated 7,500 Connecticut borrowers who lost their home to foreclosure from January 1, 2008 through December 31, 2011 and suffered servicing abuse qualify for an estimated $1,500 cash payment.

•             The value of refinanced loans to Connecticut’s underwater borrowers would be an estimated $36 million.

•             The state will receive a direct payment estimated at $27 million to help pay for local foreclosure prevention programs, such as the Connecticut Department of Banking’s foreclosure prevention hotline, HUD-approved housing counselors, the Judicial Branch’s foreclosure mediation program, nonprofit legal aid groups that help homeowners facing foreclosure, and loan modification programs supported by the Connecticut Housing Finance Authority.

Some Connecticut borrowers have received principal reduction loan modification offers from the servicers, Jepsen said. While many more are expected to benefit, he cautioned that not everyone will qualify. The mortgage servicers are required to complete 75 percent of their consumer relief obligations within two years and 100 percent within three years.

Jepsen urged borrowers whose loans are owned by the five servicers, to contact them directly at the following numbers for more information about the assistance programs and whether they qualify for help: Bank of America: 1-877-488-7814; Citigroup: 1-866-272-4749; Chase: 1-866-372-6901; Ally/GMAC: 1-800-766-4622; Wells Fargo: 1-800-288-3212.

In addition, the five mortgage servicers are subject to extensive new servicing standards, which take effect over the next two to six months. These new standards will stop many past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork. They will also require strict oversight of foreclosure processing, including by third-party vendors; restrict banks from foreclosing while the homeowner is being considered for a loan modification and make foreclosure a last resort, by requiring servicers to evaluate homeowners for other loan mitigation options first.

The new standards also establish procedures and timelines for reviewing loan modification applications, and give homeowners the right to appeal denials. They also require the servicers to provide a single point of contact for borrowers seeking information about their loans and adequate staff to handle calls.

Independent settlement monitor Joseph A. Smith, Jr. will oversee the terms of the agreement and prepare quarterly compliance reviews. Jepsen will serve on the monitoring committee of state attorneys general, the U.S. Department of Justice, and the U.S. Department of Housing and Urban Development, which will work with the monitor to ensure the servicers fulfill their obligations under the settlement.

While only borrowers whose loans are owned by one of the five servicers are eligible for modifications under the settlement, Jepsen urged anyone who has fallen behind on their mortgage loan or who is anticipating difficulty making their payments to contact the Connecticut Department of Banking Foreclosure Assistance Hotline at 1-877-472-8313 for foreclosure-related and general loan-modification questions.

Assistant Attorneys General Joseph Chambers and Matthew Budzik, head of the finance department, are assisting the Attorney General in this effort.

For more information, see www.NationalForeclosureSettlement.comwww.MortgageOversight.comwww.ct.gov/ag;www.HUD.gov

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AG: Wells Fargo Settles Fraud Case


HARTFORD – Attorney General George Jepsen announced a $58.75 million multi-state settlement with Wachovia Bank N.A. and Wells Fargo Bank, N.A., as its successor by merger, as part of an ongoing investigation of alleged anticompetitive and fraudulent conduct in the municipal bond derivatives industry.

Connecticut and New York led the investigation for the working group of 25 states and the District of Columbia.

As part of the multistate settlement, Wachovia has agreed to pay $54.5 million in restitution to affected state agencies, municipalities, school districts and not-for-profit entities nationwide that entered into municipal derivative contracts with Wachovia between 1998 and 2004.

“This settlement with Wachovia is another example of the state task force’s determination to prosecute anticompetitive conduct in the municipal bond derivatives marketplace,” said Attorney General Jepsen. “Wachovia was entrusted with taxpayer money and Wachovia violated that trust. This settlement is about righting that wrong.”

A preliminary estimate of the state’s share of the restitution payments is less than $50,000, given the limited impact of the conduct in Connecticut. However, as a lead state in the investigation, Connecticut also will receive an as-yet undetermined share of a $1.25 million civil penalty and $3 million in fees and expenses for the investigation, which Wachovia agreed to pay to the settling states.

The multistate settlement is one part of a coordinated $148 million settlement that Wachovia entered into today. The bank also reached agreement with the U.S. Department of Justice’s Antitrust Division, the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Internal Revenue Service.

 

Wachovia is the fourth financial institution to settle with the multistate task force in the ongoing municipal bond derivatives investigation, which has obtained settlements for the participating states worth approximately $310 million to date. The other settlements were with Bank of America, UBS AG and JP Morgan.

 

Jepsen acknowledged Wells Fargo, Wachovia’s parent, “for its cooperation and its willingness to address the wrongdoing by providing meaningful restitution to those harmed. Wells Fargo’s agreement to continue cooperation – a critical component of this settlement – will provide the task force with further evidence against Wachovia’s co-conspirators.”

 

Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest proceeds of bond sales until the funds are needed, or to hedge interest-rate risk.  In April 2008, the states began investigating allegations that various schemes to rig bids and commit other deceptive, unfair and fraudulent conduct in the municipal bond derivatives market, were being used by certain large financial institutions, including national banks and insurance companies, and certain brokers and swap advisors.

 

The ongoing investigation uncovered alleged collusive and deceptive conduct involving individuals at Wachovia and other financial institutions, and certain brokers with whom they had working relationships. The alleged wrongful conduct took the form of bid-rigging, submission of non-competitive courtesy bids and submission of fraudulent certifications of compliance to government agencies, among others, in contravention of U.S. Treasury regulations.

 

The objective of the schemes was to enrich the financial institution and/or the broker at the expense of the issuer – - and ultimately taxpayers – - depriving the issuer of a competitive, transparent marketplace. As a result of the alleged wrongful conduct, state, city, local, and not-for-profit entities entered into municipal derivatives contracts on less advantageous terms than they would have otherwise.

Assistant Attorney General Michael E. Cole, chief of the Antitrust Department, along with Assistant Att

 

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AG Reaches Agreement With Wells Fargo Bank


HARTFORD – Attorney General George Jepsen on Wednesday announced an agreement with Wells Fargo Bank over allegedly deceptive marketing of payment-option, adjustable-rate mortgage loans by Wachovia and Golden West Financial, two corporations Wells Fargo acquired in 2008.

Under the agreement, Wells Fargo will consider approximately 1,535 eligible Connecticut homeowners for loan modifications.  In addition, the bank will provide Connecticut with $741,465 to support the State’s foreclosure prevention efforts.

The agreement resolves claims that Wachovia and Golden West violated state consumer protection laws by failing to fully explain to borrowers that the minimum payment on their so-called “pick-a-payment” loans did not cover the full amount of accrued interest, and that choosing to make the minimum payment would increase the amount of the loan.

Some borrowers in Connecticut eventually faced higher loan balances and unaffordable monthly payments when they had to begin making full principal and interest payments.

“I am pleased that Wells Fargo is addressing this issue. Connecticut homeowners struggling with these risky, ‘pick-a-payment’ loans will have a fair opportunity to achieve a loan modification or other relief,” Jepsen said.

The agreement provides that Wells Fargo will offer modifications to eligible, qualified borrowers who reside in their homes and who are either 60 days delinquent or facing imminent default.  Borrowers will first be considered for the federal Home Affordable Modification Program, and if the borrower cannot qualify or elects not to accept a modification under that program, Wells Fargo will consider the borrower for the bank’s modification program, known as Mortgage Assistance Program 2.

Modified loan terms will vary depending on the circumstances of the borrower, but can include principal forgiveness, loan extension, interest-rate reduction, and principal forbearance.  Borrowers who remain current on their modified payments for three years may be able to earn additional principal forgiveness.  Borrowers who qualify may also convert into a fixed-rate loan.  Wells Fargo will also offer other foreclosure alternatives where warranted, including short sale, deed-in-lieu, and relocation assistance.

Wells Fargo customers who originally took out mortgages through Wachovia or Golden West and are looking for information about the loan modification program can call (888) 565-1422 to speak with a bank representative.  The eligibility period to be considered for a loan modification under the agreement ends June 30, 2013.

Jepsen encouraged all homeowners having difficulty making mortgage loan payments to seek assistance as soon as possible.  The website of the state Department of Banking,www.ct.gov/dob,  contains valuable information on avoiding scams, applying for loan modifications and navigating the foreclosure process, he said.  Homeowners may also call the Department’s Foreclosure Assistance Hotline at (877) 472-8313.

Assistant Attorney General Joseph J. Chambers handled this matter for the Attorney General with Department Head Matthew Budzik of the Finance Unit.

 

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Wells Fargo Sued in Reverse Mortgage Dispute


By Viji Sundaram, NAM Contributor

SAN FRANCISCO – A California resident has become yet another victim of the reverse mortgage program that is making it difficult for him to stay in the home he grew up in.

When Robert Chandler’s mother died last year, Chandler got saddled with a reverse mortgage loan that his mother had taken out five years earlier on the Elk Grove, Calif. home he inherited. When he was unable to pay the full loan balance, Wells Fargo initiated foreclosure proceedings on his home.

The bank didn’t tell him that he could have purchased his home for the current market value, as per the contract.

On Aug. 3, AARP Foundation Litigation, along with two law firms, filed a class action suit against both Wells Fargo and Fannie Mae on behalf of Chandler and other reverse mortgage heirs for foreclosing on their homes without giving them notice of the right to purchase their homes for the market value.

Chandler, who is in his 60s, believes that he should not have been told by Wells Fargo that he had to pay the approximately $338,000 outstanding balance on his mother’s reverse mortgage loan. His lawyers say he should have been allowed to pay just the $194,000 market value at the time of her death, and get clear title to it.

“What Wells Fargo did doesn’t make sense,” asserted Kelly Corcoran of the San Francisco-based law firm Kerr and Wagstaff, which co-filed the lawsuit. In fact, “it was wrongful and irrational.”

Teri Schrettenbrunner, senior vice president of the San Francisco-based office of Wells Fargo Home Mortgage Communications, declined to comment on the Chandler case, citing pending litigation. She would only say that the bank had operated in accordance with the U.S. Housing and Urban Development (HUD) guidelines.

“We are bound to operate within the rules set by HUD,” Schrettenbrunner said.

The Chandler case is yet another dispute stemming from the nation’s housing collapse, much of which can be blamed on steering people of color toward subprime loans by some of the country’s top banks.

But the complexities of reverse mortgage rules seem to be creating problems for the borrowers and their heirs.

“Historically, there have been widespread abuses in the marketing of reverse mortgages that are not in the best interest of seniors,” said Caryn Becker, policy counsel with the Center for Responsible Lending.

Reverse mortgages allow homeowners 62 or over to borrow against the equity of their home so that they can receive a lump sum or monthly payments from the lender.

Authorized by Congress some 25 years ago, the Home Equity Conversions Mortgages (HECM) program, the most popular reverse mortgage program, which is insured and regulated by HUD, was intended to protect borrowers from financial upheavals they may face in their later years.

The borrowers pay high upfront costs when they sign the contract, as well as monthly insurance premiums to cover any decline in value of their property. After their death, the house is sold and the mortgage is paid off.

In 2008, HUD changed its policies on reverse loans, forcing scores of spouses and heirs of borrowers into foreclosures. One of the changes HUD made was to a rule that allowed the heir to sell a property for 95 percent to 100 percent of its appraised value at the time of the borrower’s death. The new rule stated that only “arm’s-length transactions” would be allowed under that range of prices. That effectively meant that a surviving spouse or heir could retire a reverse mortgage only by repaying the full loan balance, but that a third-party buyer could purchase the property for as little as 95 percent of the appraised market value.

The heir “could sell the property to anyone off the street for 95 percent of the appraised value and that would have satisfied the bank,” Chandler’s attorney, Corcoran, said. “Because Chandler wanted to purchase it himself, the bank wouldn’t allow it.” That, she said, was illegal.

AARP sued HUD in April, saying that as a result of the rule change, many spouses and heirs who want to purchase the property have been unable to do so because they can’t get financing that exceeds the current value of the property.

That lawsuit argued that the rule violates existing contracts between reverse mortgage borrowers and lenders, and that it negates a key purpose for which borrowers had been paying insurance premiums.
Two months after AARP sued HUD, the federal agency reversed that rule.

Called for a comment, HUD declined to discuss the issue.

According to Jean Constantine-Davis, a senior attorney with AARP Foundation Litigation, Chandler’s mother, Rosemarie, got a reverse mortgage loan in 2005 on a home the family has owned and lived in since the 1940s.

Rosemarie’s contract with Wells Fargo allowed her, and by extension her heir, to sell off the property at 95 percent of the fair market value at the time of her death.

Soon after his mother died, Chandler said he spoke to a Wells Fargo home mortgage consultant in Elk Grove on three occasions about purchasing the property for the appraised value, according to the lawsuit. The consultant allegedly told him that he wouldn’t be allowed, and that he would have to pay off the full loan balance if he wanted to keep the house.

This past January, Wells Fargo, acting as a servicer for Fannie Mae, issued a “notice of default” to the property, and told Chandler he could “cure the default” by paying off the $338,000 balance as of January 6, 2011.

“Wells Fargo did not inform him of the 95 percent rule,” asserted Constantine-Davis, noting that Chandler’s case is not an “isolated one.”

In the wake of HUD’s reversal of its rule on the rights of surviving spouses and heirs earlier this year, “we have been contacted by many, many others facing the same problem.”

And, she noted: “It is difficult to understand why reverse mortgage lenders continue to deny (heirs) their contractual and legal rights.”

 

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Foreclosed Homeowners Vent Anger at Wells Fargo


By Suzanne Manneh and Ngoc Nguyen, New America Media

NATIONWIDE —  Oakland resident Sara Kershnar has been trying to get Wells Fargo bank to modify her home loan for two years.

After the bank allegedly lost some vital documents “three to four times,” Kershnar, began to think they were “negligent.” She began to get angry.

Kershnar had an opportunity yesterday few homeowners in her shoes get: She got to vent her anger and grill Wells Fargo CEO John Stumpf about the bank’s policy on foreclosures. She and about a half dozen other homeowners took a stand during the bank’s annual shareholder meeting in San Francisco.

The meeting took place immediately following a demonstration at Justin Herman Plaza, where hundreds of fed-up homeowners, renters, clergy and union organizers rallied to protest what many said were Wells Fargo’s unfair practices.

The crowd marched in the afternoon heat through San Francisco’s Financial District to Wells Fargo’s headquarters on Montgomery Street, where the shareholders meeting took place.

Last Tuesday’s rally was one of a series of actions that will be held in May, and was the launching of a national campaign, The New Bottom Line, organized by a coalition of community, faith-based and labor organizing groups.

In addition to this protest at Wells Fargo, demonstrations are planned at the Bank of America shareholder meeting in Charlotte, N.C., on May 11, and at a JP Morgan Chase shareholder meeting in Columbus, Ohio, on May 17.

Among the campaign’s major demands is for Wells Fargo to “place a moratorium on all foreclosures until the bank negotiates with the coalition to establish comprehensive loan modification reforms.”

Another demand is to cease “illegal evictions of tenants in foreclosed properties.”

At the end of 2009, there were 350,169 Wells Fargo homeowners eligible for the Home Affordable Modification Program (HAMP). However, as of February 2011, only 77,402 of those homeowners received permanent loan modifications.

Wells Fargo also cancelled 118,697 trial loan modifications and has denied 175,336 eligible homeowners access to HAMP since 2009, according to a press release from organizers of Tuesday’s rally.

According to a bailout money overview study by Nomi Prins of the nonpartisan think tank Demos, Wells Fargo received an estimated total of $43.7 billion in federal bailout funds. The bank reported $12.3 billion in earnings last year.

At the shareholders’ meeting, Kershnar pointed out that the bank is making a profit at a “time when families in the country are barely surviving.” She called Wells Fargo CEO John Stumpf’s annual compensation of $17 million “obscene,” at a time when families are hurting.

“It is not an issue of business, it’s an issue of ethics and should be an issue that all shareholders should be concerned about,” said Kershnar.

After a scandal last fall that exposed improper home foreclosures by some of the nation’s biggest banks, Bank of America, JP Morgan Chase and other banks issued moratoriums on foreclosures, while they reviewed their internal procedures. Wells Fargo did not.

Stumpf maintained that Wells Fargo has modified 700,000 loans and has forgiven $4 billion of shareholder capital to keep people in their homes. “I get it,” he said Tuesday. “There is a lot of pain.”

“It’s not pain. It’s exploitation,” responded Kershnar, adding that the bank intentionally gave out loans to homeowners, knowing that those loans would fail.

She charged that the bank has profited “obscenely” from servicing debt, affecting people’s ability to have a home, and feed and clothe their children. Hundreds of thousands of people are waiting for a home modification, Kershnar said.

Raleigh McLemore, a homeowner and teacher at Bancroft Middle School in San Leandro, echoed Kershnar’s concern. He, too, attended the shareholder meeting and was one of the protestors to be arrested.

McLemore said parents and other teachers at his school are reeling from the foreclosure crisis.

Often, he added, parents are too ashamed to talk about their foreclosure troubles. “There’s still a lot of silence,” McLemore said. “Suddenly, the student is gone.”

Stumpf said the HAMP program is just one option and that 80 percent of loan modifications occur outside of it.

“Foreclosures are not good for the housing market,” he said.

Stumpf reiterated, “We do not make profit on foreclosures.” He went on, “We spend a lot of resources to help people stay in their homes.”

According to information in the shareholder proxy materials, citing an estimate by Morgan Stanley, “9 million U.S. mortgages that have been or are being foreclosed on may face challenges over the validity of legal documents.”

Campaign organizers and supporters aren’t the only ones putting pressure on banks. This year’s proxy included one item introduced by the New York City Office of Comptroller on behalf of pension funds of teachers, firefighters and police officers.

The campaign’s shareholder resolution calls for an independent review of Wells Fargo’s mortgage processing and foreclosure policies to ensure that it complies with federal regulations.

However, Well Fargo’s board recommended against the resolution, saying multiple audits of the bank’s foreclosure processes have already been completed by federal regulators and the bank itself.

But Kristina Bedrossian, with the Coalition Reinvestment Committee, who played a role in organizing yesterday’s event, believes the “resolution is critical because the public and shareholders do not have access to Well’s internal audit of its processes.”

 


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Mass. Ruling Gives Homeowners New Power in Foreclosures


By Nina Martin and wire services

BOSTON—In a decision that could have a far-reaching impact on foreclosures nationwide, Massachusetts’ highest court ruled Friday that Wells Fargo and US Bancorp had no right to seize the homes of Antonio Ibanez and Tammy and Mark LaRace because the banks could not prove that they legally owned the mortgages at the time they foreclosed.

That 6-0 ruling rejected the way lenders in recent years have conducted foreclosures — without having all the documentation in place at the time a property is seized.

Joshua Rosner, an analyst at the New York-based research firm Graham Fisher & Co., called the ruling “a landmark” and predicted it would “open the floodgates to more suits in Massachusetts and strengthens cases in other states.”

While the ruling itself only applies to Massachusetts, the same arguments are being made in other cases in other states. “This decision is going to raise serious problems in hundreds of thousands of foreclosure cases,” Thomas Cox, a Maine attorney who defends the rights of homeowners, told the Associated Press. “It has the potential to require that foreclosures be done over, and I think there’s going to be significant turmoil nationally.”

The unanimous ruling by Massachusetts’s Supreme Judicial Court—the same court that overruled the state’s ban on same-sex marriage in 2003—upheld a controversial lower court decision from 2009.

The high court found that Wells Fargo and US Bancorp—which did not issue the original mortgages to Ibanez and the LaRaces but received them through a complicated series of financial transactions that are common in the mortgage-lending industry—”failed to make the required showing that they were the holders of the mortgages at the time of foreclosure.”

Both Ibanez and the LaRaces bought homes in Springfield, Mass., in 2005 and lost them to foreclosure in 2007. Rose Mortgage was the original issuer of Ibanez’s $103,500 loan, which eventually ended up with US Bancorp; the LaRaces’ $103,200 loan was issued by Option One and eventually found its way to Wells Fargo.

Foreclosures are supposed to occur only when lenders can prove they own the bank note underlying the property. But it turned out that in the Ibanez and LaRace cases, the banks had not yet completed the formal paperwork to carry out an assignment from the existing owner even though, for business purposes, the transfer had effectively taken place.

In a concurring opinion, Justice Robert Cordy blasted “the utter carelessness” that the banks demonstrated in documenting their right to own the properties.

It is often difficult to prove which institution owns a particular mortgage because millions of home loans were bundled into bonds and sold to investors during the housing boom, creating long and twisted paper trails, the Boston Globe noted. Before the 2009 lower court in the Ibanez and LaRace cases, however, lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgages.

Banks have argued that the paperwork requirements are just technicalities. But the Massachusetts high court court responded that because state law gives financial institutions “substantial power” to foreclose, they must “follow strictly” the procedures for doing so.

Analysts said the decision may threaten banks’ ability to package mortgages into securities, and may raise the specter that loans transferred improperly will need to be bought back.

“What they were doing was peddling these mortgages and leaving the paperwork behind,” said Michael Pill, a Massachusetts lawyer who represents homeowners but was not involved in the case.

In another blow for the banks, the Massachusetts high court also rejected their request that the ruling apply only in the future.

“I’m ecstatic,” Glenn Russell, a lawyer for the LaRaces, said in an interview with Reuters. “The fact the decision applies retroactively could mean thousands of homeowners can seek recovery for homes wrongfully foreclosed upon.”

Russell said the LaRaces moved back to their home after the 2009 ruling, while Collier said Ibanez has not. “U.S. Bancorp will have to compensate him in exchange for the deed, or will have to walk away,” Collier told Reuters.

In the last year, lenders’ foreclosure practices have come under intense scrutiny, much of that focusing on the so-called robo-signing scandal, in which mortgage servicers approved hundreds of thousands of foreclosures without scrutinizing the underlying documents to see whether the seizures were legal or fair.

Claims of wrongdoing triggered a 50-state investigation into the robo-signing claims, and mortgage servicers nationwide issued a temporary moratorium to make sure their paperwork was in order.

Although the decision was issued by a Massachusetts state court, it will be used by homeowners in foreclosure cases in other states, said Matthew Weidner, a St. Petersburg, Florida, told Bloomberg News.

“This is a very detailed, very specific indictment of an entire industry’s practices and procedures, and it’s an indictment that is going to send shockwaves throughout the entire mortgage, foreclosure, real-estate servicing industry,” he said.
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Collier III, who represents Ibanez, agreed that the ruling could have a far-reaching impact on the nation’s banking industry.

“For homeowners and foreclosures in general, it means that any mortgage foreclosure which was initiated by a securitized trust at a time when the trust had not obtained a mortgage assignment which gave it the lawful right to do so is void. Those homeowners, like Mr. Ibanez, still own the property,” he told the Associated Press.

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CT Foreclosure Filings Up, Many Stuck in Court Mediation


By Wendy Innes and Andrew White, Staff Writers

HARTFORD –  Roberto  Rodriguez  is knee deep in foreclosure-related paperwork, sorting out fax receipts from folders he has stacked in his two-bedroom condominium in Windsor.

His papers date back to May 2008 when he first sought help to avoid an impending foreclosure. But help didn’t come soon enough. Six months before Wells Fargo filed foreclosure paperwork in New Britain Superior Court, Rodriguez  contacted the bank’s bill collector, America\’s Servicing Company, and sought ways to overcome his unfortunate situation. First, he was underemployed, then unemployed. Then his mother died, and he lost his job. But the bank did not offer a solution. He then learned about a Connecticut Housing Finance Authority’s Housing Fair in late spring 2008. While there, he talked to someone at Department of Banking, which in turn referred him to Association of Community Organizations for Reform Now ( ACORN)  and Neighbohood Assistance Corporation of America (NACA) programs. Both program representatives in 2008 requested financial information and other personal documents after telling him they had a record of getting modifications for their clients.  To date, Rodriguez  has yet to get a help from  ACORN  or NACA.

Then in May 2009, the bank filed foreclosure papers and Rodriguez applied for foreclosure mediation. Since then he has been in mediation. Armed with his fax receipts of paperwork he sent to the bank, he would meet with the bank’s lawyers from Hunt, Liebert and Jacobson, P.C. Each lawyer would have a different story. They didn’t receive the paperwork. After he produced the fax receipts, they would tell him to refax the information and wait. He would wait only to hear on his second and third meetings that his paperwork was still being reviewed. And by the time the paper work was processed, he was told to refax the information—again.

“I don’t think there is any good faith effort in these mediation sessions,” Rodriguez  says. “They are playing ridiculous games that even a five-year old can decipher. How can you mediate with someone who doesn’t want to mediate?”

In March, there was a 22 percent spike in new foreclosure filings statewide, according to  RealtyTrac, a foreclosure tracking firm that gives monthly state by state foreclosure trends.  In April, that number rose again by 4.4 percent, with another 2,915 new foreclosure filings.  In Hartford county alone the number  is down almost 3 percent from the previous month but up almost 13 percent  from the previous year with one in every 593 housing units in some stage of foreclosure, including those who are stuck or are on their way to being stuck in mandatory mediation. According to the latest number released by the mediation program, about 10, 000 homeowners are in Connecticut’s mandatory court mediation program—and in limbo.

“It is a significant number,” says Foreclosure Mediation Program Manager Roberta Palmer. “But saying people are in limbo is, I guess, accurate, but they are in a much better place because their homes cannot be foreclosed on.”

Rising Mortgage Defaults, Rising Frustration

Industry experts at first linked rising default rates across the country to looser lending in the subprime market, which provides mortgages to people with poor credit or low income. Some were drawn in by initially low teaser rates, and then when the low-interest rate period ended, they got stuck and realized they can’t pay the loan,” says Erin Kemple, executive director of the Connecticut Fair Housing Center, a Hartford-based nonprofit organization that advocates for fair housing.

Because subprime lending in Connecticut appears to be concentrated in urban areas, the rise in foreclosure filings raises concerns about deteriorating rates of home ownership in city neighborhoods, Kemple, says.

“People have gotten into loans that have unaffordable terms,” she says. “We would call them predatory; not everyone would.”

Concentration of Foreclosures in Urban Areas

Now, the foreclosure crisis is also driven by people who lost their jobs. And they are turning to the courts for help.

Connecticut’s mandated mediation program is a judicial process that allows homeowners to meet with a representative who has the authority to negotiate for the lender. The mediator’s role, Palmer says, is to ensure there’s an accurate review of homeowner’s financial information and to  make sure the federal guidelines are accurately applied.  The Lender may reduce interest rate, fixt interest rate, extend the term of loan and/or reduce principal balance. Or the homeowner may qualify for the Home Affordale Modification Program (HAMP) where the federal government help with some of the arreagage and mortgage payments. However, some homeowners may still lose their homes after their paperwork is reviewed. These would receive “graceful exists” such as short sales, deed in lieu of foreclosure or an extended sale date.

But some who are considered qualified  for what’s called the Obama plan or HAMP, never get to the end of the process, housing advocates say, because lenders come unprepared to sessions and are usually unaware of the guidelines and how to apply them.

Foreclosure Attorney Keith Fuller places most of the blame for the delays with the lenders. Fuller supports the program, but says that banks are making it difficult for the homeowners.

“I find that it takes a lot of these banks a while to do a full review of a loan for modification. By the time they get around to putting all the pieces together to analyze it for a full modification, the last financial information that’s been submitted is outdated.” Fuller says.

According to Fuller, it takes the bank 60-90 days to review all of the required information and by the time their review is complete, the information is no longer considered valid and the bank requests the information again.

“It’s sort of this cycle that goes on and on,” he says. “It’s extremely difficult and really emotionally taxing for these people to go weeks and weeks or months and months without a straight answer from the bank because from their perspective, it’s confusing to know what the bank is doing.”

In addition, borrowers will call their lenders only to find that the information that they had sent in weeks before has disappeared.  Fuller expresses his frustration for his clients’ situations, “In this information age, it seems to me, that the banks should be a little bit more organized in collecting all this information.”

Eugene Melchionne, foreclosure attorney and chairman of the National Association of Bankruptcy Attorneys in Connecticut is a critic of the program, and he champions federal intervention in bankruptcy court.  Melchionne also represents homeowners who are stuck in the foreclosure mediation process.  

“The oldest mediation I have now is easily going on a year and a half,” he says.  “The mediators don’t really have any power to be able to force banks to cooperate fully. Security is “the primary reason why people buy houses. Clearly those stuck in limbo, waiting to find out if they will keep their home have little of that.”

But there is a silver lining here. That’s because to being in limbo, Palmer says, is better than being out of the house. She says the court is aware of the frustration level on both sides and how burdensome it is for mediators as their caseload grows.

The court, however, is resolute on one matter. “We won’t let those cases out of mediation until we get an answer one way or the other on whether or not they qualify on any settlement,” Palmer says.

Mediation, A Success Story

Connecticut’s mediation session is touted as a model for other states across the country. In February, the program  boasts a success rate of about 60 percent. But some question the accuracy of that number. Attorney Melchionne says that the statistics put out by the court don’t tell the whole story. The court only tracks those people who have completed the mediation process. There is no data on those who are in limbo. In addition, Melchionne says,  his clients are making payments under temporary modification, but are continuing to be reported as late on their credit reports and receiving notices from the banks that their homes are going to be foreclosed on.  

“They’re showing a huge success rate, but they’re counting people who are leaving their homes as successes,” he says.  When asked what he would define as a successful mediation, he says that homeowners staying in their homes are what he considers a success.

Matt Silverman, a Boston-based businessman who was  banking specialist for 10 years, agrees with Melchionne. Silverman says the state’s program has a phenomenal success rate and is too good to be true.

“I’d like to see that number verified because it would be the most successful program in the nation, especially when compared with about a 5 percent success rate everywhere else,” Silverman says. “If a program like this is working that well, they should be talking with the Obama administration’s highest officials to roll out … a national program that finally solves the housing crisis.”

Silverman offers a free online course at www.hopeforfree.org. This site helps homeowners with how to package their story for the lender and how to find a lawyer experienced in debt negotiation, he says.

The state also has measures to help homeowners stuck in limbo, thanks to the works of housing advocates such as Connecticut Housing Center. They recognized early on the limitation of the mediation program and have been pushing for state officials to strengthen the program. advocates say. As a result of their work, the General Assembly in May passed a bill to extend the state’s foreclosure mediation program for two years. The bill promises to punish lenders and servicers who come to the mediation unprepared to do good faith negotiation.

The new bill will take effect on July 1. 

Helpful Links:

Connecticut Housing Finance Authority

Connecticut\’s Forelcosure Mediation Program

Mortgage Law Network

Editor’s Note: Roberto  Rodriguez  is a pseudonym for a person who wants to remain anonymous. The name and other identifiers have been changed to protect the person’s identity.

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Wells Fargo Faulted for Record on Failed Mortgages


New America Media, News Report, Anuja Seith

SAN FRANCISCO–When consumer activists protesting Wells Fargo’s record on home mortgages gathered recently at Justin Herman Plaza, they brought with them a black coffin topped by yellow tulips.

But the coffin didn’t contain a body. Organizers said it was meant to represent the depths of the recession and the extent of the foreclosure crisis.

The inscription on the coffin, “Five million homes and eight million jobs lost,” spotlighted an epidemic of foreclosures they said are turning the American dream of owning a home into a nightmare.

A coalition of faith, labor and community organizations called the action to target Wells Fargo’s annual shareholders’ meeting, taking place a few blocks away in the city’s financial district.

Outside protesters complained that big banks like Wells Fargo have received billions of taxpayer dollars but have not used the money to help homeowners struggling with their payments. Inside the meeting, Wells Fargo executives announced first-quarter profits of $2.55 billion.

“People are very upset with the banks for continuing with their risky lending practices and awarding exorbitant bonuses to their executives,” said Steve Smith, spokesperson for California Labor Federation. “It was these very practices that led to the collapse of the economy.”

Struggling homeowners with Wells Fargo mortgages were among the demonstrators.

“I was a real estate agent, but the collapse of the market affected my business and I took up another job that left me earning 60 percent less than what I was making earlier,” said Antioch resident Domingo Delgadillo. “I am now pushing for modification of my loan so that I can keep my home where I have lived for 10 years.”

But Delgadillo says Wells Fargo doesn’t want to help him. They’ve sent him an application for a short sale, which would allow Delgadillo to sell his home for less than his outstanding mortgage.

The Antioch resident is hardly alone, according to Adam Kruggel, director of the Contra Costa Interfaith Supporting Community Organization, which brought Delgadillo to the rally.

“According to the Department of Treasury, they have offered permanent loan modifications to less than 8 percent of the families who qualify and need a loan modification under the federal HAMP program,” Kruggel said. “They need to do better and they need to be held accountable.”

HAMP is the Home Affordable Modification Program, a federally funded effort that pays banks to adjust mortgages for homeowners at risk of foreclosure.

Community groups also said big banks like Wells Fargo have a history of targeting minority communities with predatory, high-cost loans.

“In Contra Costa, 80 percent of the foreclosures during the first two years of the foreclosure crisis were due to subprime loans that were targeted to Latinos and African-Americans,” Kruggel said. “People of color were targeted for the predatory loans, so they bore the greatest impact of the first wave of foreclosures.”

A recent report by the National Association for the Advancement of Colored People (NAACP) estimates that communities of color could lose $213 billion in the foreclosure crisis.

Among the large financial institutions with home mortgage business, Wells Fargo has been one of worst subprime lenders, Kruggel said.

“Wells Fargo has a horrific record of targeting people of color for subprime loans, regardless of their income or credit,” he said.

“They also have a horrific record of denying conventional loans to low- and moderate-income communities of color,” he added.

A report released last month by the organization National People’s Action found that Wells Fargo originated $27.8 billion in subprime loans at the height of subprime lending in 2006, funding approximately 185,000 subprime home mortgages.

Using data made public under the Home Mortgage Disclosure Act, National People’s Action found that while African-American and Latino borrowers together accounted for only of 11 percent of Wells Fargo’s lending volume, they accounted for 25 percent of the company’s $47.5 billion high-cost refinance lending business.

Earlier this month, the NAACP agreed to drop a class action lawsuit against Wells Fargo after the bank agreed to give the civil rights group access to its lending records.

The NAACP had alleged African Americans were forced to pay loans at interest rates 30 percent higher than whites.

In settling the case, Wells Fargo also agreed to work with the NAACP to improve fair credit access, sustainable homeownership and financial literacy for communities of color.

However, Wells Fargo stressed that as a fair and responsible lender Wells Fargo does not tolerate discrimination and is making every effort to keep its borrowers in their homes.

“Wells Fargo is focused on doing what we can to provide solutions for our clients facing financial distress,” said Chris Hammond, the bank’s senior vice president for communications.

Hammond said Wells Fargo has organized seven homeownership preservation workshops across the country. At an Oakland event from April 26 to 27, there were “200 Wells Fargo team members on-hand to assist mortgage customers who may be facing financial difficulties,” he said.

But the community groups who turned out to protest Wells Fargo said those outreach events aren’t enough.

The federal government, they said, needs to take steps to force the banks to deal with struggling homeowners. President Barack Obama’s HAMP was meant “to give incentive to lenders to encourage principal reduction, a key motivator to keep people in their homes. However, representatives of some of the biggest banks have gone to Congress and refused to do so,” said Liz Ryan Murray, senior policy analyst at the National People’s Action.

The activists are calling on the federal government to impose a moratorium on foreclosures until 50 percent of HAMP-eligible families get assistance.

They also want foreclosed properties to be given to public groups, non-profit or city agencies who can sell them at affordable prices to local residents.

Kruggel noted that after the Great Depression, Americans launched a massive movement to regulate financial institutions and build community banks around the country.

“These changes laid the groundwork for a period of great prosperity that lifted millions of people out of poverty,” he said. “We need action with the same urgency and boldness today.”

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Countrywide Pays Out $1.2 Million to CT Consumers


HARTFORD –  Connecticut residents fleeced by one of the top ten sub-prime lender will receive more than $3,000 each for being a victim of the company’s abusive lending practices.

Attorney Richard Blumenthal at press conference  today announced that Countrywide Financial Corporation on Friday mailed payments to  370 Connecticut residents. Each resident will get up to $3,452.54, Blumenthal said.

The payments are part of  an $8.4 billion, nation-wide settlement with Countrywide. Connecticut’s slice of that $113 million agreement is $1.27 million.

Countrywide is one of the top ten subprime lenders that contributed to the housing crisis, which led to millions of foreclosures, helping to sink the economy deeper into an already recession.

And in the meantime, they crushed dreams of many.

” Countrywide turned the American dream of homeownership into a nightmare for thousands of home buyers and families,” Blumenthal said.

Another lender accused of doing just that was Wells Fargo. This lawsuit accuses  the bank of unfair and misleading lending practices to minority communities and what’s often known as “reverse red-lining.”

In January of 2008, the city of Baltimore sued Wells Fargo for a range of deceptive practices to push high-interest, subprime loans onto African Americans in Baltimore and in Maryland suburbs, leading hundreds into foreclosure. In July, the Illinois Attorney General Lisa Madigan sued Wells Fargo for having, quote, “transformed our cities into ground zero for subprime lending.” DemocracyNow highlighted this story last August.
In August 2008 Blumenthal was among  several state attorneys general to file suit against Countrywide, claiming that the loan company used  “oppressive, unethical, immoral and unscrupulous” practices.

In October 2008 Bank of America, which bought Countrywide, settled in June 2009, Blumenthal said.

The money sent out went to consumers who have mortgages that have been foreclosed, or is in serious default. And the first mortgage payments must have been due between Jan. 1, 2004 and Dec. 31, 2007.

Other aspects of the settlement include loan modifications and another type of restiution, Blumenthal said. He warns that some people who receive payments, however, may still end up losing their house.

Related Story From Other Source

Former Wells Fargo Subprime Loan Officer: Bank Targeted Black Churches as Part of Predatory Subprime Lending Scheme

“American Casino”–Doc Investigates Roots of the Subprime Mortgage Meltdown and Tells the Stories of Its Victims

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