Lawsuits for nation’s largest banks

Another lawsuit is in the works for the mortgage industry.  I had recently blogged about the Obama administration’s plans to create a Justice Department unit whose main goal and intent was to prevent mortgage fraud by bringing together investigators from across the country aimed at finding out what the causes of residential mortgage backed securities.  They want to know what led to it and how to continue to prevent it.  

Well, New York Attorney General Eric Schneiderman has taken it one step further by suing Bank of America, J.P. Morgan Chase, and Wells Fargo.  His lawsuit accuses the three big banks of deceit and fraud over their use of MERS, the Mortgage Electronic Registration Systems.

He has a few claims here.  (1) That the banks submitted court documents that appeared to provide authorization for foreclosures with false and misleading information. (2) The system stores inaccurate data.  (3) It prevents homeowners from being able to track property transfer information from public records.

Schneiderman said, “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”

He’s claiming that over 70 million loans were affected and that the banks saved over $2 billion.  Of course, none of the banks had any comments in response to the lawsuit when it was filed Friday.  More information can be found in this USA Today article.

So the question is, will this affect the mortgage industry and homeowners in the long run?  If anything, I can see a possible settlement by the banks rather than fighting it in court.  It seems to be something that will continuously happen throughout the next few years, banks being sued because of inaccuracies that led to false foreclosures.  Do you see this as something that can drastically change how banks loan money to future homeowners?  To me, it seems like another check mark on a checklist but nothing that would change lending terms as a whole.  Please leave me your comments.  I’d love to hear from you!

Are the banks involved in more short sale fraud?

I came across a very interesting article on CNBC’s Web site.  Writer Diana Olick was alerted that some big banks were taking bribes to get short sales closed.  The lenders were asking for cash “under the table” from buyers of short sales and/or their Realtors.

How it’s working is if there’s two loans on the property, the second lienholder has to drop the lien for the short sale to go through.  If they don’t, the house goes into foreclosure and it’s owned by the first lienholder.  If that happens, the second lienholder doesn’t get any money from the deal.  Some banks/lenders are negotiating with the second lienholders to drop the lien by offering them some partial payment.  This whole process is completely legal.

What’s not legal is that they are now requesting money under the table to drop that lien since they are generally getting nothing or very little from the first lienholder.  If you’ve bought a house before, you’re familiar with the HUD-1 statement or RESPA that you get at the end of closing that details what the buyer is paying in fees, what the seller is paying in fees, and who ends up with what.  Everything needs to be reported on the RESPA.  So the second lienholders are asking for money that doesn’t show up on the RESPA to allow the short sale to go through. 

Olick’s source said he’s heard from over 200 agents that have requested this illegal deal from representatives at Bank of America, JP Morgan Chase, and Citi Mortgage.  When confronted with these accusations, JP Morgan Chase had no comment.

 Bank of America said, “Bank of America enforces a policy that all disbursements are documented on the settlement statement for short sales. When we are servicing a first mortgage with a second lien held by another investor, if the second lien holder asks for off-HUD payments, we will not approve the transaction (if we have knowledge of it). It is also against Bank of America’s policy to accept off-HUD payments on its second liens.

Citi Mortgage said, “We work very hard to help distressed homeowners find solutions for their financial challenges. In our attempt to amicably resolve the debt, we will generally negotiate a reduced settlement with the homeowner in order to release a second lien. Unlike some lenders who refuse to reduce the payoffs on second liens, we choose to reduce the payoff amounts in some situations to assist the borrower. We do not provide instructions to settlement agents on how to fill out the settlement statement or any other closing documents, and we certainly do not require settlement agents or any other parties to violate applicable laws.”

Olick writes, “I contacted the Treasury Department, HUD, FINCEN (Financial Crimes Enforcement Network) and the Federal Trade Commission, and none of their representatives could tell me of any active investigation into this. The folks at HUD said they’d be very interested to see my story.

So now the lenders want bribes to get rid of homes?  They haven’t gotten in enough trouble by approving loans for borrowers that didn’t have the money to pay them in the past?  That’s how we got into this mess in the first place.  We’re stuck with all these short sales because the lenders got greedy.  This is going to create a whole slew of problems.  Realtors could lose their licenses over it.  Buyers could end up having to bring even more money to the table to close. 

What is the solution?  How can we prevent this from happening?  Is it something we should consider making legal?  Let me know your thoughts.  Leave me a comment or visit me online.

The bank’s going to foreclose – now what?

42-17679037While I’ve talked a lot about the housing bills out of Washington and how they’re designed to help homeowners keep their homes if they’re in foreclosure, there are plenty of homeowners out there who just received notices from their mortgage companies saying they’re going to start foreclosure proceedings.  This is probably the worst news you can get if you’re worried that the recession is going to take your home from you.  AOL Real Estate offers these tips on what to do when you receive that notice in the mail:

1. Remain calm.  Before you go and do something drastic out of anger (like put a hole in your wall), take a second to breathe.  There are plenty of steps you can take to keep your house.  Figure out if your inability to pay is on a short-term scale or a long-term one.  Did you lose your job but you start your new one next week?  Or are you unable to work for months because of a medical problem?  This will help you when you speak to your creditor about your situation.  Do your best to remain calm and composed.

2. Budget.  If it comes down to paying your mortgage or your monthly credit card payments, most loan officers would rather see a late payment on a credit card than a mortgage.  It will help your credit score in the long run.  However, it’s important that you cut out expenses that aren’t absolutely necessary.  Are you regularly watching those HBO and Cinemax channels on your TV?  Get rid of them.  Do you make it to the gym regularly to take advantage of your membership?  Cancel it.  Do you go out to eat for lunch every day at work?  Brown bag it.  Make sure you have the necessities, but cut out the extras.  You’ll be amazed at how much you can save. 

3. Negotiate.  The banks are having as hard of a time as anyone selling homes that go through foreclosure.  They’d prefer it if you could stay in your home, too.  See if you qualify for a loan modification program by getting your interest rate lowered.  See if they’ll postpone the foreclosure date for you until you get back on your feet.  So don’t necessarily just stop paying your mortgage once you receive this notice.  Do your best to make your next payment.  New York Real Estate Attorney Edward A. Mermelstein says, “Know your mortgage rights. Review loan documents so you know what your lender may do if you can’t make payments. Also, research the foreclosure laws and time frames in your state [every state is different] by contacting the State Government Housing Office.”

4. Avoid scams.  I’ve talked about these before.  You should be able to get credit counseling without being charged.  But make sure you speak to a HUD-approved housing counselor before you sign any document or hand out any money. 

I hope these tips will help you if you happen to be in this situation.  If you do have more questions, or need to sell your home to save money, please visit me online. Have a safe and happy Memorial Day.

More important news from Washington

On Wednesday, President Obama signed another law that he’s hoping will help owners get relief on foreclosures.  This law encourages lenders to adjust a mortgage if the homeowner agrees to pay an insurance premium.  Obama said that it cracks down on lenders who take advantage of them.  The second part of the bill extends an increase in deposit insurance with the FDIC from $100,000 to $250,000 through 2013.  barack-obama-for-president

The bill/law is called the Helping Families Save Their Homes Act.  The House approved it 367-54 and the Senate voted 91-5 in favor of the bill.  Once the final version was signed, it was unanimously approved. 

Also in Washington, a recently created FBI team put in place to help get rid of mortgage fraud, is going to be using wiretaps, undercover operations, and computer technology to get their evidence.

The National Mortgage Fraud Team now has 2,400 cases, more than three times what they’ve had in the past few years.  The team is going to try to identify the worst perpetrators of mortgage fraud and determine where more FBI agents are needed.

FBI Director Robert Mueller said, “In addition, sophisticated investigative techniques, such as undercover operations and wiretaps, not only result in the collection of valuable evidence, they provide an opportunity to apprehend criminals in the commission of their crimes, thus reducing loss to individuals and financial institutions.”

And speaking of foreclosures, government-owned homes have now jumped to over 50,000 across the country.  The government is struggling to get rid of these homes and could lose billions of dollars because of it.  According to a USA Today article, The Department of Housing and Urban Development (HUD) lost 39 cents on the dollar for every home it resold last year.  They say that this year’s recovery rates are even worse. 

So hopefully Obama’s new law will protect more homeowners from foreclosures.  Little by little, we might get a jump start on the housing market.  Visit me online for additional info.

Crackdown on mortgage fraud starts in Washington

With so many reports of mortgage fraud in the news lately, the United States Senate voted this week to hire hundreds more FBI agents and prosecutors to investigate.  There’s an estimate 5,000 allegations of fraud reported each month.

This comes after recent news of the CFO of Freddie Mac’s alleged suicide.  The Securities and Exchange Commission is currently investigating Freddie Mac.  Documents they’ve requested have been provided and employees have been made available for interviews.

Senators Patrick Leahy of Vermont (a Democrat) and Chuck Grassley of Iowa (a Republican) sponsored this bill.  The bill is expected to cost about $265 million a year over the next two years.  President Obama and supporters believe the bill will pay for itself because of the fines and penalties imposed on these fraudulent companies.  The bill passed in a 92-4 vote.

handcuffThere are currently about 250 FBI agents assigned to financial fraud cases.  The bill would allow the hiring of at least 160 more.  200 more attorneys would also be hired by the Justice Department. 

The House will be voting on the bill as early as next week.  Congress is trying to encourage lenders to offer mortgages where borrowers put down a 20% down payment and the loan is a 30-year fixed one.  They’re hoping to discourage other creative financing measures.

Hopefully this is a step in the right direction.  It can prevent another recession.  Do you believe that it’s the right thing to do for Congress to step in?  What types of punishments do these mortgage fraud companies deserve?  Should they be eligible for automatic shutdowns of their companies if they’re discovered?

I’m curious to hear what you think.  Please leave a comment or visit me online. More information on the Senate bill can be found in this article.

How to avoid foreclosure scams

I just read a very interesting article out of the Rockford Register Star.  Apparently, many scam artists are targeting homeowners to try to “help” them get out of their tricky financial situations.  The central Illinois regional manager of a credit counseling service says that for-profit companies are targeting delinquent customers from all over the country to get them to pay for services that should be free.

scam_of_the_week_logo_black_and_white_2Illinois Attorney General Lisa Madigan has filed lawsuits against more than 20 of these companies.  Unfortunately, a lot of homeowners don’t know what to look out for.  Here are 3 of the most common scams:

1. Title transfer: This scam tends to be the most dangerous.  Companies might try to get homeowners to sign over the title of their home to them, allowing the homeowner to remain in the home as a renter, and opening up the possibility of them getting to buy it back at a later date.  Another scam has the homeowner sign over title to a “federal land grant,” which supposedly would stop the foreclosure process altogether.

2. Bait and switch: This scam will make anyone read the fine print of any document they sign.  Homeowners believe they’re signing paperwork to for a new loan to make their mortgage current.  However, they are really signing away ownership of their home.

3. Phantom help: The “rescuer” charges homeowners ridiculous fees for either paperwork that they could do themselves or for the promise of counseling, which never comes.

Some scammers use what’s called affinity marketing.  They’ll use senior citizens, for example, to prey on other senior citizens. 

Here are some tips on how to avoid these scams:

1. Keep in touch with your lender.  Contrary to what anyone else tells you, the lender is the person you should be speaking to as soon as you have trouble making a payment.

2. Understand the process.  Make sure you know the ins and outs of how foreclosures work if you are facing one yourself.

3. Never agree to anything verbally.  Make sure everything is in writing and that you ALWAYS read the fine print.  Contact an attorney to help you if you need it.

4. Get help from a legitimate foreclosure counseling company.  HUD’s Web site provides a list of approved counseling companies.

If you’re looking to sell your home to get out of a foreclosure, or need some more tips on avoiding foreclosure, visit me online.