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Federal Housing Chief Supports California Bill of Rights

The series of bills backed Attorney General Kamala Harris to help avoid future foreclosure abuses have found a new supporter in federal housing chief, Shaun Donovan.

The so-called California Bill of Rights “would restrict practices such as foreclosing on homeowners as they try to negotiate a loan modification and mandate that banks designate a single person to work with troubled borrowers,” as reported by the Los Angeles Times.

The financial-industry and business trade groups have opposed the bills, arguing that while the national mortgage settlement’s terms are temporary and apply to only five banks, the bills’ changes would be permanent and universal. In fact, the proposed California Bill of Rights provides longer term protection for homeowners where the national mortgage settlement expires.

Those who oppose the bills also object to giving borrowers the right to sue to block foreclosures or recover losses when banks violate the law in more than just a trivial way. We feel strongly that banks should not be able to take advantage of distressed homeowners and ignore their rights in any way during the foreclosure process. The national mortgage settlement does not acknowledge individual borrowers whose lenders violate the new safeguards but the proposed California Bill of Rights provides a remedy to that.

The California Homeowners Bill of Rights

April 20, 2012 Leave a comment

California Attorney General Kamala Harris has been working since earlier this year on a package of bills to help protect homeowners from foreclosure and wrongful foreclosure practices by banks.

The so-called California Homeowners Bill of Rights was to be put to vote by the California Assembly’s Senate Banking and Finance Committee on Monday. However, Chairman Mike Eng (D-Monterey Park) of the Assembly Banking and Finance Committee asked that debate be postponed for a week in an effort to amend the bills so a compromise could be reached during negotiations with consumer groups and mortgage bankers.

In a press release issued by the Office of the Attorney General, the provisions of the bills were outlined and were aimed at making sure that homeowners are not put on a so-called dual-track process that allows banks to continue a foreclosure process at the same time they are negotiating possible loan modifications.

According to the Huffington Post,

“Other provisions in the bundle require banks to provide homeowners with a single point of contact during the loan modification process and levy a $25 fee on banks every time they register a default. Proceeds from the default fee would then go into a pool of money funding mortgage fraud investigations.”

While some of the provisions outlined in the proposed Bill of Rights overlap with the national mortgage settlement, the settlement expires in three years and Harris wants the rules to extend into perpetuity.

Harris has support from many political leaders on the proposed Bill of Rights, including San Francisco Mayor Ed Lee, as well as dozens of consumer, fair-lending and economic justice organizations, but faces opposition by mortgage bankers, bankers, credit unions and the financial industry.

AG Harris Proposes California Homeowner Bill of Rights

Atty. Gen. Kamala D. Harris is proposing a California Homeowner Bill of Rights which, she says, is aimed at fixing some of the most serious flaws in the system.

The proposed legislation would, if approved, stop banks from pursuing foreclosures against troubled borrowers they negotiate loan modifications. The proposed bill would also ensure that borrowers work with a single point of contact at the banks instead of being passed from one department to another as traditionally the case.

The Los Angeles Times reports on Harris’s statement regarding the legislation:

“California communities and families are being devastated by the mortgage and foreclosure crisis. We must ensure the deceptive practices that caused it never happen again,” Harris said. “The California Homeowner Bill of Rights will provide basic fairness and transparency for homeowners, and improve the mortgage process for everyone.”

In addition, the proposed bill would also give local governments tools to force banks and property owners to maintain blighted, foreclosed homes and to give new owners incentives to improve their properties; allow renters more time to stay in foreclosed residences; collect fees from banks to pay for enhanced law enforcement actions to defend homeowners and create a statewide grand jury to investigate alleged financial and real estate foreclosure crimes.

The new legislation now sits before the state Senate and Assembly for approval.

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.”

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.

California Returns to the Negotiation Table

February 6, 2012 Leave a comment

According the Los Angeles Times, California has resumed negotiations on the multibillion-dollar, multi-state mortgage settlement with the nation’s largest banks. Friday’s deadline for individual states to either reject or accept the deal has been pushed to today.

California Atty. Gen. Kamala Harris walked away from negotiations last year and had originally held out on agreeing to the settlement, seeking tougher terms for banks. In a statement Sunday night, Harris said the door still remained open for California to join.

“For the past 13 months we have been working for a resolution that brings real relief to the hardest-hit homeowners, is transparent about who benefits and will ensure accountability,” Harris said. “We are closer now than we’ve been before, but we’re not there yet.”

If California agrees to the settlement the pot for mortgage relief nationwide would increase to $25 billion from $19 billion. Another important potential backer, Attorney General Eric T. Schneiderman of New York, has also signaled that he sees progress on provisions that prevented him from supporting it in the past. Support from both states would be a significant accomplishment for the administration, which in recent weeks has been trying to step up its aid for the failing U.S. housing market.

Under the proposed settlement, banks would be forced to provide financial assistance for homeowners who experienced foreclosure or are in danger of losing their homes. If approved, the settlement would require banks to overhaul their mortgage servicing and foreclosure practices and include a component for principal write-downs which has been recognized as the best way to help underwater homeowners and stabilize the housing market.

Harris Holds Out For Tougher Terms

January 30, 2012 1 comment

California Attorney General Kamala Harris is seeking tougher terms in the multi-state proposed agreement with banks over foreclosure practices.

The proposed deal, announced last week, is expected to range from $17 billion to more than $30 billion, depending on how many state attorneys general sign on to it and how many servicers take part in it. If California supports the deal covering the five biggest servicers, a settlement is likely to hit $25 billion but Harris is pushing for a broader probe of banks’ mortgage practices, including securitization of the loans.

According to Bloomberg, some analysts say that this move may be an effort to strengthen her political standing as a rising star in the Democratic Party. By holding out she can put her mark on the issue but it can be at the risk deepening the “blight and despair” for many of the 2.2 million distressed California homeowners needing assistance now who can’t afford to wait for a political gamble.

Bloomberg reports:

“A person involved in California’s negotiations confirmed the origination of mortgages is a sticking point in the deal, along with other releases of liability for violations of state “false claim” laws, and securitization, or the packaging of mortgages into bonds sold to investors.

The most recently drafted terms of the deal offer the banks such releases in exchange for a refinancing program for people who are still in their homes and current on their mortgage payments, the person said. It ignores victims of the most egregious origination fraud who were the first to lose their homes to foreclosure, the person said.”