Tag Archive | "Foreclosures"

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Special Report: New Mortgage Rules Take Effect

Washington Informer, News Report

 Although many economists claim the recession is over, millions of Americans are still reeling from its financial effects. In particular, communities of color continue to be disproportionately affected by billion-dollar losses in family wealth. New mortgage rules, effective as of January 10, offer a strong foundation to begin rebuilding what has been lost. These new rules will provide protections for consumers whether they are struggling with troubled mortgages, looking to buy a home or seeking access to credit.bank of america bank-of-america-150x150Summarizing the reasons for the new rules, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB) recently said, “Consumers want – and need – someone to stand on their side and provide safeguards against bad mortgage deals that ruin their credit, cost them their homes, and saddle them with additional problems. . . .No debt traps. No surprises. No runarounds. These are bedrock concepts backed by our new common-sense rules that take effect on January 10.”

A central part of the new rules is a new designation of a Qualified Mortgage (QM) which sets standards that apply to all lenders and covers about 95 percent of loans currently in the marketplace. QM loans are restricted from having the kind of risky features that caused the financial crisis. QM loans must be fully amortization, meaning that loan balances cannot increase as payments are made.

Read more here.

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Scams, Lies & Mortgage Fraud—How Homeowners Can Avoid the Traps

HARTFORD — Editor’s note: Millions of homeowners across the nation have faced foreclosures. And the number of foreclosures this year is expected to be even higher than last year. But the foreclosure crisis has also given rise to new waves of scam artists, from low-grade to high-tech, who are looking to profit off of vulnerable and desperate homeowners. NAM editor Ngoc Nguyen asks Deputy District Attorney David Lim, who leads the Alameda County District Attorney’s Real Estate Fraud Unit, how homeowners can protect themselves against mortgage fraud.

Has there been an increase in mortgage scams?

Lim: Since I’ve been here, it’s sort of been out of control. We went from having one DA and two inspectors to having two DAs and four inspectors and we’re still barely keeping up with the flow of real estate fraud complaints.

It started heavily in the sub-prime boom, 2005-06. We started to see a lot of equity fraud, where people were submitting false loans. Con artists were taking advantage of those very lax underwriting standards to use identity theft and falsify information, to get loans and take out equity way beyond what the property was worth. When the bubble burst in 2009, that fell away as the government tightened up regulatory standards and the less scrupulous banks started to fold and go under … In 2009, the focus shifted to loan modification fraud—people take advantage of people in foreclosure and charge upfront fees to do loan modifications.

Scams fall along a spectrum – from simple to sophisticated. What is the most common type of scam in the foreclosure crisis?

Lim: At the worst of those scams, you had people just collecting money from homeowners, saying they would modify the loan and negotiate with banks, and instead they weren’t doing anything. And those are pretty straightforward, almost just theft scams. You take money from someone and you don’t perform.

The law at the time [said] you could not take an upfront fee for somebody who owned a single-family home whose home was in default or in foreclosure. But there were loopholes in the law, where if you had permission from the Department of Real Estate or an attorney, you were allowed to collect upfront fees. That caused a huge problem because there was not really good oversight from the Department of Real Estate of who they approved to accept advance fees. The legislature closed that loophole in late 2009, so it’s basically a blanket prohibition on anyone accepting advance fees.

What do you see on the other side – the really complicated scams?

Lim: The more sophisticated scams were basically, you want to describe them as pyramid schemes, because they were designed to suck as much money away from an individual homeowner as possible. There’s no simple way to describe it. Scams by definition are not easy; they are designed to be complex by a con artist, so they can fool homeowners into believing they are legitimate.

When I give community presentations, I never go into deep specifics about the crime, because number one, we don’t know who is in the audience. Sometimes, our fear is that there are bad guys sitting in the audience looking to see what we do and how we do it so they can figure out ways around it.

The other reason I don’t necessarily tell people at the community meeting what scams are or what they have been is…number one, they are too confusing and number two—and of more concern to me in terms of consumer protection—is our fear that the consumer is only looking for that scam. And by the time I’ve described the scam to you or by the time I’ve figured out a scam, [the con artists have] already moved on.

What do all mortgage scams have in common?

Lim: The common elements of all scams are that they are wrapped in an aura or shroud of pretending to be legitimate. They rely on the con artist getting close to the victim and gaining the trust of the victim. And they rely on separating the victim from their money. So, in some ways, they are complex and in some ways they are not. If you know, if you remember what the three tenets of a scam are, it helps protect you from becoming the victim of a scam.

How can homeowners protect themselves from getting scammed?

Lim: It’s not like deciding where to get lunch or if you’re going to get your hair cut short or long. It’s a decision in real estate where you’re dealing with your house and large sums of money, and you shouldn’t just be making snap decisions like, ‘Oh, I like this person. I like the way they look, or they seem nice, or this program sounds good.’ You have to do your homework.

Don’t trust someone just because they look like you, just because they sound like you, and just because they say they come from the same village as you or went to the same high school as you. Assume that everyone is a stranger and assume everyone is out to con you. Remember that the goal of a con, at its most basic level, is to separate you from your money. Anytime anyone asks you for money, think long and hard before you give money and if you do give money, give money you can trace. Write a check; get a cashier’s check; don’t give cash. Do something where you can trace it, so if you need to find the person later, you can track them down.

What makes a scam effective? What vulnerabilities is the scam artist preying on?

Lim: It’s easy for me to say, ‘Don’t be a victim of a con,’ but the reason these people are con artists is that the best ones are good at it. They are playing on two levels. They’re playing on your emotions and catching you in a vulnerable position. They are catching homeowners either when they are being greedy and they think they can make money, or now in the current climate, because they face the loss of their home, and they are desperate.

The other thing con artists are doing is they do play on your very base emotion. If you see someone who looks like you, sounds like you and is related to your culture, [they may still be a con artist]. Most of these crimes are affinity crimes–black on black, white on white, Asian on Asian.

Do scams differ among different ethnic and racial groups?

Lim: There are cultural aspects that the con artist can use to their advantage. If you take victims from Central America, many of them have fled their home country because of turmoil in that country, so they either fled from a civil war or corrupt government, so in many cases, there’s a deep distrust of government, and police. If you talk to victims from Mexico, they never want to talk to police, because they think the police will shake them down. We are very clear to tell people, we are not a federal agency, we are not Homeland Security. We do not care about your immigration status. In fact, legally we are not allowed to ask you your immigration status.

It’s very hard. We’ve gone out into the field where we’re looking for witnesses we know that have been scammed. We want to talk to them to offer our assistance. We walk up the driveway, and we can see them looking at us through the window and they pretend they aren’t home, because they think we’re immigration. That’s another advantage the con artists have over us. We have to break down the barrier of mistrust and fear that lot of immigrant communities have toward governments in general.

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Who Got Loan Modifications and Who Didn’t—Gov’t Stalls on Data

News Report, Ngoc Nguyen

At the end of this month, for the first time ever, the U.S. Treasury plans to release to the public a treasure trove of demographic information on people who have received loan modifications. That is, if the government releases the information as promised— information that has a critical impact on policies that prevent home foreclosures.

So far, the Treasury has stalled on making this key information available, despite requests by housing and consumer advocacy groups and media organizations, including New America Media, under the federal Freedom of Information Act (FOIA). Loan modifications are changes made to the terms of a home loan and could include such things as being granted a different interest rate, a principal reduction, or a decrease in how often the loan must be paid off.

Housing advocates say they have been waiting for the Treasury to the release the information for more than a year.

National Consumer Law Center attorney Geoffry Walsh, whose organization filed a FOIA at the end of 2009, says the Treasury still hasn’t provided the information. Walsh says his group requested data detailing why borrowers were denied loan modifications.

“There were promises from the FOIA people that they would be sending [the data]…and that just went on and on for months,” he said. “They sent a few relevant things, but nothing substantial pertaining to what we asked for.”

New America Media first asked the Treasury for race and ethnicity data of those who received loan modifications under President Obama’s Home Affordable Modification Program (HAMP) last September. A Treasury spokesperson said the information would be released at the end of October. The release date was then pushed back to November. New America Media submitted a FOIA request last November, and is still waiting for the requested data. The Treasury now promises to release the data by the end of the month.

“Any delay in publishing the file is to ensure all proper precautions have been taken to protect homeowner privacy – our utmost concern,” Treasury spokesperson Andrea Risotto, said in an emailed reply to New America Media.

For housing advocates, the delay means not having access to critical data that could shed light on who’s getting loan modifications, which has been the key policy for preventing foreclosures, according to Kevin Stein, associate director of the San Francisco-based California Reinvestment Coalition.

The number of foreclosures nationally continues to rise and Stein believes they could reach 12 million by 2013.

“Many people will still need help,” Stein says, “and [loan modifications are] still the main way people will get help.” But, there’s little public information about who is getting the loan modifications and the terms of the deal, “except [what is] in the hands of the banks.”

According to Stein, in much the same way that demographic information on lending has revealed racial disparities, the HAMP data could be used to ensure fair housing laws are not being violated. The HAMP data has limitations though, as 80 percent of loan modifications occur outside of the program, Stein said, citing figures by bank regulators.

Walsh of the National Consumer Law Center says his organization was denied a request for information about a calculator that loan servicers use to determine who qualifies for a loan modification. The calculator, referred to as a net present value (NPV) calculator, takes inputs such as the borrower’s income, property value, length of time behind on payments, credit score, and modification amount and “shows if the investor would do better under the loan modification or by foreclosing,” Walsh said.

The request was denied on the grounds that it was proprietary information. “Basically, they said it belongs to Fannie Mae and private businesses,” Walsh said. “We don’t agree with that.” The group appealed the decision, but the appeal was also denied. “Under HAMP rules, if the NPV test shows that the loan modification is the better option, the servicer has to do the loan modification, they can’t foreclose,” he added.

Homeowners have expressed frustration with the lack of transparency on the part of the bank, while trying to modify home loans with their lenders. Walsh says at least two changes set to begin next month will offer homeowners more transparency about their loan modification process.

As a part of the Wall Street Reform Act of 2010, banks will be required to list the figures that they used in the NPV calculator in denial letters to homeowners. In addition, Walsh says, the Treasury has said it will make the calculators available in the spring. That too, remains to be seen.

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Lawsuits Claim Forgery, Fraud In Foreclosures

Amsterdam News, News Report, Cyril Josh Barker.

Reports indicate that several lawsuits have been filed against big banks due to the mishandling of important lending documents. The mishap has resulted in the stopping of foreclosure proceedings and reviewing past evictions in 23 states.

Banks that are being targeted in the lawsuits include Bank of America, JPMorgan Chase, Ally Financial Inc. and GMAC Mortgage because of document verification issues, particularly false signatures and documents. Tens of thousands of homeowners are being affected by the flaw.

Among the most common problem involves documents that were not verified before foreclosures could legally proceed. Several documents were signed by employees who said they didn’t verify important information. There are also questions about the notarization of documents.

Issues of forgery are also coming into play, as many documents contain different signatures in different versions.

Massachusetts, Illinois, Iowa and Florida are among the states that have stopped foreclosure proceedings. In Florida, a judge dismissed 61 foreclosure cases.

Data from RealtyTrac Inc. indicates that over 95,300 homes were taken by lenders in the country in August, along with lenders issuing over 338,000 foreclosure filings to homeowners. In a Princeton University study by Douglas Massey and Jacob Rugh, Blacks have suffered the most from foreclosures.

In mostly Black neighborhoods in America, there was an increase in foreclosures. Blacks were more likely to be given subprime loans with high interest rates and hidden fees. The study also revealed that worse deals were given to Blacks with similar credit scores as whites.

Blacks were found to be as likely as whites to receive predatory treatment among lenders that did not go bankrupt.

According to Brooklyn Congressman Ed Towns, New York is not one of the states that has stopped foreclosure proceedings because of the mishap. Several state attorney generals have asked lenders to freeze foreclosure proceedings in their states. Towns said New York will take the steps to do the same if necessary.

“We are going to look at this issue from a commitment stand point,” the congressman told the AmNews. “I’m not sure there is going to be a hearing, but there is a lot of interest. All these mistakes have been made by losing paperwork.”

Towns said that people have called his office in reference to the problem going on in other states, saying that the banks’ mistakes have put the economy into a deeper financial hole that is harder to dig out of.

“There’s no doubt it has made it worse,” he said. “I give credit to banks for correcting this. I can’t help thinking about those who have been foreclosed on. What recourse do they have? I’m hoping that others will follow through as we monitor and look at this.”

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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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