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Harris Requesting Principal Reductions From Fannie and Freddie

February 29, 2012 Leave a comment

While exact details of the multi-billion dollar state settlement to help struggling homeowners are expected out this week, Fannie and Freddie have come under increasing pressure to grant principal reductions, especially since loans backed by the mortgage giants (roughly half of all mortgage loans) are not eligible for relief under the recent state settlement.

And Attorney General Kamala Harris is adding to the pressure.

The New York Times reports that Harris asked Edward J. DeMarco, the regulator who controls Fannie and Freddie, to suspend foreclosures until the Federal Housing Finance Agency, completes a promised review of its policy forbidding debt reduction for delinquent homeowners who owe more than their home is worth.

In a letter, which was sent on Friday and disclosed on Monday, she requests “a thorough, transparent analysis of whether principal reduction is in the best interest of struggling homeowners as well as taxpayers.”

Harris and others including, Massachusetts AG Martha Coakley and other high-profile politicians and housing analysts, argue that principal reduction is the surest way to prevent foreclosure. Yet DeMarco has a differing opinion stating that it would cost tax-payers too much.

From the New York Times:

“Proponents of debt forgiveness note that roughly one out of five Americans owes more on a home than it is worth, and that negative equity totals almost $700 billion. Reducing some of that debt will save families’ homes and save lenders money, they say, by reducing the number of foreclosures. In California, banks agreed to give $12 billion in debt reduction under the settlement, and the architects of the settlement hope that will pry open the spigot of debt reduction, which banks have been reluctant to do on a large scale.

For his part, Mr. DeMarco has said that while debt forgiveness would save taxpayers money in the long run by preventing foreclosures, it would not save as much as another type of loan modification called forbearance. With forbearance, a portion of the debt is suspended until the end of the mortgage term or until the house is sold. The homeowner’s payments are reduced but he does not regain an ownership stake in the home.

A recent letter to Mr. DeMarco from two Democratic members of the House Committee on Oversight and Government Reform took issue with his reasoning. It said that using the Federal Housing Finance Agency’s own analysis, principal reduction of Fannie Mae loans would save taxpayers more money than forbearance. It also questioned the assumptions underlying the agency’s calculations.”

Friday Foreclosure Story: Man Arrested for Fighting for His Home

February 24, 2012 Leave a comment

Homeowners Arturo De Los Santos and his wife Magdalena have been fighting to keep their Riverside home from which they were evicted this week, for the second time.

The Huffington Post explains Arturo’s familiar story:

“After reaching an agreement to make reduced payments on a trial basis until a final settlement was defined, and making three payments in accordance to that agreement, “the loan modification department didn’t accept my money. They said, we are not accepting more payments,” said De Los Santos.

He was left in limbo. At the same time, “the foreclosure department didn’t know they had told me that,” he said. “They just thought I was not paying.” The bank returned the fourth check, un-cashed.”

The family was evicted last June but the bank was unable to find a buyer. De los Santos continued contacting Chase, hoping to persuade the bank to renegotiate the mortgage, but he soon found his home stayed empty while he and his family moved to an apartment in Orange County. Fed up with the way the bank was treating him, and with the help of the Alliance of Californians for Community Empowerment (ACCE) and Occupy Our Homes, De los Santos moved his family back into their Riverside home in time for the holidays but continued to fight with the banks.

“De Los Santos has resumed working overtime, enabling him to make the mortgage payments. He said he “begged” officials to meet with him and work out an agreement.

Francisco Perpely of Alpha One Group, a Riverside brokerage firm that took possession of the property on Freddie Mac’s behalf, told California City News Service that De Los Santos “knew what was going on and had an attorney, trying to get this resolved and have the foreclosure rescinded. The bank was more than helpful with him, trying to offer relocation assistance… It ended up going to court, and a judge issued a writ of possession.”

Freddie Mac spokesman Brad German told CNS in an email, “We have no choice but to re-evict since no payment has been received on his mortgage for nearly two and a half years.”

On Thursday, Feb. 16, he was arrested in the lobby of Freddie Mac’s offices in Los Angeles while attempting to negotiate. About 150 supporters were with him, according to KTLA. De Los Santos will likely risk arrest again Tuesday morning, when the county sheriff is scheduled to evict him and his family.

Study Finds 84% of Foreclosures in SF Erroneous

February 24, 2012 Leave a comment

An audit commissioned by the San Francisco city assessor found that of almost 400 foreclosures conducted in San Francisco, 84% appeared to have missing documents or signatures or otherwise violate the law. An attorney at the National Consumer Law Center told Reuters that the San Francisco audit is the most detailed and comprehensive to-date but its numbers are likely to comparable nationally.

A majority of the foreclosures in question showed signature irregularities, in-line with the illegal practice of “robosigning” documents.

The study examined properties subject to foreclosure sales between January 2009 to November 2011, of which, 45 percent were sold to entities improperly claiming to be the owner of the loan.

According the Reuters, the report states “It is not impossible that there are homeowners who are alleged to have defaulted on loans to which they never fully agreed to and, further, are being foreclosed upon by lenders that might not even own such loans.”

The San Francisco Assessor-Recorder, Phil Ting, commented that while many of the errors were technical, the number of fraudulent forecloses demonstrates the need for the state to change its antiquated real estate regulation.

The Other Foreclosure Settlement

February 22, 2012 Leave a comment

Distressed homeowners have heard a lot recently about the national $25B mortgage settlement. And while only some are able to cash in on the settlement, others are left wondering what other options are available to them.

Well they may be able to find some relief in the lesser known settlement that could lead to an even bigger payoff, in some cases.

According to CNNMoney.com, up to 4.3 million mortgage borrowers who were foreclosed on in 2009 and 2010 will have a chance to request an independent review of how their foreclosure was handled. This is part of a settlement that was approved last April with several mortgage servicers including Bank of America, Chase, Citibank, HSBC, MetLife Bank, PNC Mortgage and Wells Fargo.

However, only 90,000 eligible homeowners have requested independent reviews of their loans. The federal government has now extended the deadline to July 31 for those who wish to submit claims.

Compensation for claims is still to be determined but it will depend on the severity of their losses. According to Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency, borrowers who were improperly charged even just a single fee could be repaid for it and borrowers who suffer much larger losses could be eligible to receive more than the expected $2,000 from the recent national mortgage settlement.

From CNNMoney.com:

“Unlike the $26 billion settlement with the state attorneys general, borrowers didn’t have to lose their homes in order to receive compensation, according to Hubbard.

“It could be anyone who suffered financial loss because of errors made in the foreclosure process,” he said.

Since the settlements are completely independent of one another, claimants can double-dip, filing for compensation under both settlements.”

OC Foreclosure inventory at 20-month low

February 17, 2012 Leave a comment

According to the Orange County Register’s Jonathan Lansner, 34% of Orange County homes for sale were distressed properties – foreclosures and short sales.

Lansners reports from Steve Thomas’s ReportsOnHousing.com that states that foreclosure inventory is its lowest since June 2010 and the short sale inventory is its lowest since December 2009.

Lansner’s highlights from Thomas’s report includes:

  • Thomas calculated “market time” — cross of supply and new escrows showing how long, theoretically, it would take to sell inventory. Using that “market time” math, there’s 1.79 months worth of distressed properties on the market vs. 4.07 months worth of non-distressed homes. So, distressed homes currently sell 2.3 times faster than non-distressed homes.
  • 14% of the distressed listings were foreclosures being sold by banks.
  • 86% of the distressed listings were short sales.
  • 53% of the distressed listings were detached homes.
  • 86 of the listed distressed homes were price above $1 million — 3% of all distressed listings.
  • 2,104 of the listed distressed homes were priced $500,000 or less — 78% of all distressed listings.

Also, on the riding low trend: OC home prices. Median selling price for all Orange County residences was $390,000 —4.0% less than a year ago and the lowest since April 2009. The $390,000 median selling price is 40% below June 2007′s peak of $645,000.

Banks pay big money for short sales

February 16, 2012 Leave a comment

To help ease the foreclosure rate, and cut their losses, banks have started paying out big bucks to distressed homeowners on the verge of losing their homes to foreclosure – to the tune of $35,000 a pop. This incentive to homeowners who owe more on their house than it’s worth, or homeowners who are already delinquent on their payments is meant to steer them in the direction of short selling as opposed to foreclosure.

Typically, short sales are avoided by banks since they take a loss on the home but in recent years, it more beneficial to banks to short sell than to foreclose, leaving homeowners, some who have even been denied a loan modification, skeptical at this new approach.

CNN Money reports:

“From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.”

Banks also are acknowledging a long-known fact that short sales command higher prices than foreclosed homes. For perspective, foreclosed properties sold for an average of 22% less than conventional sales in December. Comparatively, the discount for short sales was only 14%, according to the National Association of Realtors.

Whether sellers can expect incentives from their banks depends on multiple factors, including where they live as this program hasn’t been introduced nation-wide, yet. Still, generally speaking, short sales are a great alternative for homeowners looking to avoid foreclosure and have many benefits even if the banks are ponying up the incentive and we recommend speaking with a short sale specialist and attorney to discuss your options.

How the $25B Mortgage Settlement Affects Californians

February 14, 2012 Leave a comment

The federal government, 49 attorneys general including California’s Kamala Harris, and five the nation’s largest banks announced last week the approval of the $25 billion settlement that’s aimed at helping distressed homeowners and keeping them in their homes.

While much ado has been made around this much needed aid, homeowners everywhere are asking how this will benefit them and Californians specifically are wondering how they can cash in on their portion of the $18 billion granted to California.

First of all, not all borrowers will be helped – The settlement only covers loans owned and/or serviced by Bank of America, Wells Fargo, JPMorgan Chase, Citibank and Ally Financial. So anyone with a Fannie or Freddie loan is left out – which is equal to about 30 million mortgage loans.

The main provision in the settlement provides principal reductions on loans for people who are underwater and are behind or “almost behind” on their mortgage payments. According to the San Francisco Chronicle, “About $8.9 billion – or almost half of the $18 billion in borrower benefits California expects to receive – will reduce principal for an estimated 250,000 borrowers. That’s about $35,000 per homeowner.”

Homeowners who prove they have an economic hardship that makes it impossible for them to continue paying their mortgage are eligible for a principal reduction. The tricky part: This is only true for loans owned by the big five banks. Loans that are serviced by the big five but owned by investors may be eligible, but the investors have the final say and need to agree to the principal reduction. And again, loans owned or backed by Fannie Mae, Freddie Mac, the Federal Housing Administration or Veterans Administration are not eligible.

Another provision in the settlement includes restitution payments for those whose loan was serviced by one of the five banks, regardless of who owned it, and were foreclosed on between Jan. 1, 2008 and Dec. 31, 2011. Those homeowners are automatically eligible for a one-time payment estimated at $1,500 to $2,000. The San Francisco Chronicle reports that “In California, about 140,000 people could share $279 million in payments. Nationwide, about 750,000 are expected to share $1.5 billion. These payments are supposed to punish servicers for robo-signing and other shoddy foreclosure practices.”

While homeowners will not have to prove they were victim of such practices to receive a payment, if they can prove they were wrongfully foreclosed on due to these wrongful doings, they can also pursue damages individually or in a class action – and if they can only expect a maximum of $2,000, it’s a likely course of action for many.

The rest of California’s settlement will be divided as follows, as reported in the San Francisco Chronicle:

  • California expects only $849 million – or 4.7 percent of the total benefits – for refinancing.
  • California anticipates that banks will devote $3.1 billion to help 23,000 homeowners do short sales.
  • California expects banks to put $3.5 billion toward “unpaid balances” on home loans, not necessarily deficiency judgments which are uncommon in California.

For more information, see oag.ca.gov or www.nationalmortgagesettlement.com.