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!

Mortgage woes? Tell it to them!

Well, now you have a place to complain, gripe, and deal with all your mortgage issues and woes.  Developed by the Obama administration, the Consumer Financial Protection Bureau is now open for business.  And they want to hear all about your mortgage problems.  This government agency has been mostly dealing with credit card complaints (talk to them about that, too) but now want to hear about mortgages.  

When you get to their page, you can easily submit your complaint, watch a YouTube video from their director, and connect with them via Facebook or Twitter.  According to this Chicago Tribune article, when they initially opened up to hear credit card complaints, they received over 5,000 and were able to resolve over 3,100!  They’re hoping to handle complaints through the end of this year.  

As I mentioned, the easiest way to contact them is via their Web site.  However, they’re also reachable via postal mail at P.O. Box 4503, Iowa City, IA 52244, fax 855-237-2392, or telephone 855-411-2372.  Please be aware that it is not a toll-free number.  But they did mention that they’re hoping for virtually no wait time to speak to a representative.

You can also create an account through the site and visit often to check the status.  You can also view correspondence between CFPB officials and members of Congress as well as recent press releases regarding the bureau.  

I’d love to hear if anyone has submitted a complaint through you and whether they were successful in resolving it or not.  I hope that this is another avenue the government has established to take care of those underwater and remove some of the excess inventory we’re seeing on the market.  Please post your story if you have one in the comments!

New homeowners’ fees to increase

Let’s start with the good news first.  If you are in a home, paying a regular mortgage, nothing’s changed, you don’t have to worry.  No added fees for you.  

However, those that are purchasing a new home at the beginning of this year or planning to refinance, you’ll be paying an additional fee in your mortgage to help fund the payroll tax cut bill that the Senate passed over the weekend.

A quick review.  Originally planning to expire on January 1 (Sunday), a payroll tax cut and long-term unemployment benefits were extended two months when the Senate voted this weekend.  It should go through the House this week.  With this extension comes a $33 billion price tag.  So who pays for it?  Yep, you guessed it.  New homeowners and those refinancing.  That fee rises about a tenth of 1 percentage point and, therefore, increases the fee that Freddie Mac and Fannie Mae charge to insure home mortgages.  It will also increase if your loan is backed by the Federal Housing Administration.

So on a $200,000 mortgage, your rate will increase approximately $17 a month.  Nothing huge but still considerable in the scheme of things.  Obviously, for a higher mortgage it goes up and a lower mortgage will have a smaller fee.  About 9 in 10 mortgages are backed by Freddie Mac, Fannie Mae, or the Federal Housing Administration.

So my question is, is this fair?  Is it the homeowners’ responsibility to pay for this?  Looking at the large picture, I’m sure many people are thrilled that these benefits have been extended, given the state of the current economy.  And if it’s not covered this way, I would think Congress would tax us higher on something else, such as gasoline, income tax, or property tax.  They’ll get their money some way.  I’m curious to hear if you think this is right or if you have a better solution.  Please leave me a comment!  You can also reach me via my Web site.

What to do with all these foreclosures

So inventory is high with all these foreclosures and, therefore, property values are down.  So what does the government want to do about it?  According to the Wall Street Journal, they have two interesting options to help drive home values up again.

The first scenario is to sell packages of foreclosed properties in batches of hundreds or thousands to investors who would in turn agree to rent them out.  At the end of June, Fannie Mae, Freddie Mac, and the Federal Housing Administration owned about a combined 250,000 homes.  There’s about 830,000 that are still in the foreclosure process that would eventually land in their laps.  

 The second option they’re looking at is to “let investors enter joint ventures with Fannie or Freddie to invest in a pool of converted rental homes. A national property-management business would handle day-to-day landlord responsibilities. Investors would pay for rehabbing and maintaining properties and would share revenue from monthly rental income and the ultimate sale of the property.”  So they basically figure they can rent out the homes in order to keep them from being listed currently and to earn some money back.

Since there’s a lot less buyers today qualifying for loans or even willing to purchase, it’s investors who are picking up some of the inventory.

Both scenarios are interesting propositions.  I worry about the second one since that basically would make the government the landlord.  And that’s just another controlling factor that they shouldn’t be a part of.  And then on top of all the foreclosed homes they’re so slow to deal with already, how are they going to handle late rent payments or problems in the property?  They mention that a national property manager would deal with it, but that’s a huge influx of properties they will need to take over.  So can they really handle it?  I appreciate what they’re trying to do, but I don’t know if this is the best solution.

I’m definitely interested in hearing more about the first scenario, selling foreclosures in bulk.  By offering a package deal, that would also keep a lot of foreclosures off the market. 

I’d love to hear your thoughts on these scenarios and if you have other suggestions for how the government can or should be involved.  Please leave me a comment or visit me online.

 

Help on the way for unemployed homeowners

With talks still ongoing this weekend about the debt ceiling and if lawmakers will reach an agreement, there is good news to come from Washington, at least for those unemployed homeowners.

The Obama administration has announced that they will extend unemployed homeowners a few months’ forbearance on paying their mortgages to 12 months.  This is another action by Washington to put a halt to foreclosures and keep people in their homes.  Obama has been quoted as saying the housing market has been a terrible issue to solve and that “The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected, and so that’s continued to be a big drag on the economy.”

He also mentioned that they will be communicating with banks in the hopes that they will work more efficiently to help modify loans for those in need.  And in order to qualify for the 12 months’ relief, homeowners must be in the process of looking for a job.  And for those that can afford to pay a portion of the loan, they must do that, as well.  You wouldn’t be mortgage-free the entire time.

Comments to this USA article suggest that programs like I’ve described just drag this crisis out longer and makes it tougher for those not struggling to make money on their home.   What are your thoughts on this?  By offering relief to some, is it negatively impacting others?  Will this keep the housing market at an all-time low for too long?  I’d love to hear your thoughts.  Please leave me a comment or visit me online.

Government help for those underwater on 2nd mortgage

So now homeowners that are having trouble paying their second mortgage can be eligible for possible modification.  I was a little unsure of this initially, thinking about all the people who are struggling with paying their first mortgage.  I was wondering, “Why are we worried about those with two?”  But it makes sense.  Homeowners who are trying to get modifications on their first mortgages that have two mortgages are the ones having the most trouble.  Many lenders won’t do modifications or take losses on the loans of their first mortgage unless the second lien-holder does, too.  And because second mortgages usually are for a much smaller loan amount, homeowners are able to keep up with those payments. And that’s where this plan coms into play. 

Here’s what the Obama administration is introducing.  It’s called 2MP.  Currently it’s only available to those whose second loan originated on or before January 1, 2009.  Anything originated after that is not currently eligible.  And the first mortgage needs to be modified under the Federal program.  If the lender or lien-holder on the second mortgage is also participating in that program, they have to offer to modify the second mortgage.  They’re required to defer the payment of the same proportion of the principal that was deferred on the first loan.

Right now the program is expected to help about 1.5 million homeowners.  So far Bank of America, Wells Fargo, Citigroup, and JP Morgan Chase participate.  Bank of America recently started sending letters to home equity customers introducing this possible modification.

My concern is that it’s still too difficult to work out.  I understand and appreciate what the government is trying to do.  The banks are taking their sweet time approving these modifications, making it extremely difficult for customers to get them done on their own.  With the amount of time it takes to connect to someone, fill out paperwork, and hear back, it’s almost like a part-time job.  I’ve had clients say they’ve had to submit paperwork multiple times to their lender and still haven’t heard back.  It’s worth it to lower payments if you have the time and perseverance to wait.  It also may be worth it to you to talk to a company that offers to assist with loan modifications on your behalf.

More information on this new program can be found here. And I can be found on my Web site.