Borrowers' Defenses to Forclosure
A great source of information you can use, and since the Guy is in Washington I can give him all the credit
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Posts tagged ‘Predatory Lending’
Lenders Fighting Mortgage Rewrite Measure Targets Bankrupt Homeowners
Sen. Richard J. Durbin’s bill would allow bankruptcy judges to alter the terms of first mortgages for primary residences.
Sen. Richard J. Durbin’s bill would allow bankruptcy judges to alter the terms of first mortgages for primary residences. (By Alex Wong — Associated Press)
By Jeffrey H. Birnbaum
Washington Post Staff Writer
Friday, February 22, 2008; Page D01
The nation’s largest lending institutions are lobbying hard to block a proposal in Congress that would give bankruptcy judges greater latitude to rewrite mortgages held by financially strapped homeowners.
The proposal, which could come to a vote in the Senate as early as next week, is being pushed by Democratic congressional leaders and a large coalition of groups that includes labor unions, consumer advocates, civil rights organizations and AARP, the powerful senior citizens’ lobby.
The legislation would allow bankruptcy judges for the first time to alter the terms of mortgages for primary residences. Under the proposal, borrowers could declare bankruptcy, and a judge would be able to reduce the amount they owe as part of resolving their debts.
Currently, bankruptcy judges cannot rewrite first mortgages for primary homes. This restriction was adopted in the 1970s to encourage banks to provide mortgages to new home buyers.
The Democrats and their allies see the plan as an antidote to the recent mortgage crisis, especially among low-income borrowers with subprime loans. The legislation would prevent as many as 600,000 homeowners from being thrown into foreclosure, its advocates say.
“We should be giving families every reasonable tool to ensure they can keep a roof over their heads,” said Sen. Richard J. Durbin (Ill.), the Senate’s second-ranking Democrat and author of a leading version of the legislation.
But the banks argue that any help the proposal might provide to troubled homeowners in the short run would be offset by the higher costs that borrowers would have to pay to get mortgages in the future. The reason, banks say, is that they would pass along the added risk to borrowers in the form of higher interest rates, larger down payments or increased closing costs.
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If banks were unable to pass on the entire cost, they could be forced to trim their profits.
“This provision is incredibly counterproductive,” said Edward L. Yingling, president of the America Bankers Association. “We will lobby very, very strongly against it.”
The Durbin measure is part of a larger housing assistance bill being pushed by Democrats in the Senate. A separate version of the measure was approved late last year, mostly along party lines, by the House Judiciary Committee. The Bush administration has said that it opposes both provisions as overly coercive and potentially detrimental to the already strained mortgage market.
Lobbyists for major banks have made the proposal’s defeat a top priority. They have been meeting at least weekly to coordinate their efforts and have fanned out on Capitol Hill to meet with lawmakers and their staffs.
At least a dozen industry associations have banded together to fight the proposed legislation. They include the American Bankers Association, the Financial Services Roundtable, the Consumer Bankers Association and the Mortgage Bankers Association. These groups and others have signed joint letters to lawmakers on the issue.
In one of their letters, sent to Senate leaders last week, the groups wrote that the legislation would “have a very negative impact in the financial markets, which are struggling in part because of difficulties in valuing the mortgages that underlay securities [and] would greatly increase the uncertainty that already exists.”
Bank lobbyists have also gone online to make their case. The mortgage bankers have set up a Web site, http://www.mortgagebankers.org/StopTheCramDown, that can calculate how much mortgage costs might increase by state and by county if the Durbin measure were to become law. “Cram down” is the industry term for a forced easing of mortgage terms.
Supporters of the measure are also sending letters and meeting with lawmakers. A letter urging a quick vote on the proposal was delivered to Senate Majority Leader Harry M. Reid (Nev.) last week. It was signed by 19 organizations, including the Consumer Federation of America, the AFL-CIO, the National Council of La Raza, the U.S. Conference of Mayors and AARP.
The letter said, “The court-supervised modification provision is a commonsense solution that will help families save their homes without any cost to the U.S. Treasury, while ensuring that lenders recover at least what they would in a foreclosure.”
The Center for Responsible Lending, a pro-consumer watchdog group that backs Durbin’s effort, is trying to instigate voter e-mails to lawmakers on the subject. The group’s Web site includes a page that allows people to send electronic notes supporting the measure to their elected representatives with just a few clicks of a mouse.
AARP spokesman Jim Dau said his group will also ramp up its efforts. It may soon ask its activists to urge lawmakers to back the mortgage-redrafting legislation. AARP, which is the nation’s largest lobby group, has a list of 1.5 million volunteers whom it says it can call upon to contact lawmakers on legislative matters.
Lawyers that get it Niel Garfield list
Lawyers that get it Niel Garfield list
lawyers-that-get-it-02092
$8.4 Billion Countrywide Settlement… and why they only lower the interest!
I have gotten a number of calls asking if the home ownership retention program announced by Bank of America is likely to have an impact on foreclosures in CA. This program is a settlement with the CA Attorney General, Jerry Brown, and other state attorney generals that were suing Countrywide / Bank of America for predatory lending practices. It is expected to provide up to $8.4 Billion to 400,000 borrowers nationwide, with $3.5 Billion to 125,000 borrowers in CA.
While $8.4 Billion is a huge number – roughly 7.75% of BAC’s market cap today – it is literally a laughable amount. Problem is that it equals only $28,000 per loan in California. I compared that number to the average amount a California homeowner is upside down at the time of foreclosure – the average total debt is $26,200 more than they originally borrowed.(all that negative amortization) So in the best case scenario this puts borrowers back where they started, in loans they fundamentally can’t afford.So really it is nothing. The best thing is that it is admission of fault that could be used in individual cases against the lender in an individual action.
Note that they clearly state that principal balance reduction will only be available on a limited basis to restore negative equity from pay option ARMs – which makes sense given that they really don’t have enough money to do much more. Instead the primary goal is to ensure “modifications are affordable”. Given that they simply don’t have the money to lower principal balances to affordable levels, that means more artificially low payments… the exact thing that got us into this problem in the first place.
So back to the original question, will it likely impact foreclosures? Sort of, but only temporarily. It could impact your foreclosure if you were to copy the complaint and file your own case against countrywide at least you would not get a demur to the complaint. I posted the text of the complaint on Dec 31, 2008 California and everybody else V Countrywidecountrywide-complaint-form
They have graciously committed to not pursue foreclosure until they have contacted the owner and made a decision on program eligibility. So it appears to impact foreclosures, except that the recently passed SB1137 re codified as civil code 2923.5 and 2923.6 required them to do that anyway – so this claim is little more than spin.
Since this completely fails to address the underlying problem of the original loan amounts often exceeding current market value by $100k or more I’d also say the impact will only be temporary. Though that may still be a long time. In one case I recently reviewed Countrywide had a loan balance of over $900k on a home worth $550k – they modified the payment to 2% interest only for 5 years. The homeowner can afford it for now, but what happens in 5 years? Your’e kidding yourself if you think values are going back to those levels that quickly. Do we really still want to be cleaning this mess up 5 years from now?
Bottom line, Jerry Brown and the other state’s attorney generals have given Bank of America a gift. The opportunity to avoid litigation while getting the state’s endorsement for a plan that will never work and buying them precious time to find a way out of their dire predicament. Like the bailouts it’s possible it may help save this financial institution, but it will only delay our return to a stable and healthy real estate market.
The Doan deal
California Civil Code 2923.6 enforces and promotes loan modifications to stop foreclosure in the state. California Civil Code 2923.6 (Servicer’s Duty under Pooling Agreements) went into effect on July 8, 2008. It applies to all loans from January 1, 2003, to December 31, 2007 secured by residential real property for owner-occupied residences.
The new law states that servicing agents for loan pools owe a duty to all parties in the pool so that a workout or modification is in the best interests of the parties if the loan is in default or default is reasonably foreseeable, and the recovery on the workout exceeds the anticipated recovery through a California foreclosure based on the current value of the property.
Almost all residential mortgages have Pooling and Servicing Agreements (“PSA”) since they were transferred to various Mortgage Backed Security Trusts after origination. California Civil Code 2823.6 broadens and extends this PSA duty by requiring servicers to accept loan modifications with borrowers.
How does this law apply?
Attorney Michael Doan provides this example of how the new law applies in his article entitled “California Foreclosures: Lenders Must Accept Loan Modifications” on the Mortgage Law Network blog. We removed the borrower’s name from the example for the sake of privacy.
A California borrower’s loan is presently in danger of foreclosure. The house he bought 2 years ago for $800,000 with a $640,000 first and $140,000 second, has now plummeted in value to $375,000. The borrower can no longer afford the $9,000 per month mortgage payment. But, he is willing, able, and ready to execute a modification of his loan on the following terms:
a) New Loan Amount: $330,000.00
b) New Interest Rate: 6% fixed
c) New Loan Length: 30 years
d) New Payment: $1978.52
While this new loan amount of $330,000 is less than the current fair market value, the costs of foreclosure need to be taken into account. Foreclosures typically cost the lender $50,000 per foreclosure. For example, the Joint Economic Committee of Congress estimated in June, 2007, that the average foreclosure results in $77.935.00 in costs to the homeowner, lender, local government, and neighbors. Of the $77,935.00 in foreclosure costs, the Joint Economic Committee of Congress estimates that the lender will suffer $50,000.00 in costs in conducting a non-judicial foreclosure on the property, maintaining, rehabilitating, insuring, and reselling the property to a third party. Freddie Mac places this loss higher at $58,759.00.
Accordingly, the anticipated recovery through foreclosure on a net present value basis is $325,000.00 or less and the recovery under the proposed loan modification at $330,000.00 exceeds the net present recovery through foreclosure of $325,000.00 by over $5,000.00. Thus, California Civil Code 2823.6 would mandate a modification to the new terms.
This new law remains in effect until January 1, 2013. Restructuring your mortgage will stop foreclosure and lower mortgage payments. Depending on your circumstances, you may also be able to lower your interest rate, as well. Visit the “Get Started” page to find out if you can benefit from this new California law and avoid foreclosure.
My plan for Loan Modifications i.e. Attorney loan mod
Recent Loan Modification studies have shown that a large percentage of traditional loan modifications put the borrowers more upside down than when they started.
Unfortunately many loan mods are leaving people with higher monthly payments. In many loan modifcation the money you did not pay gets tacked on to the back of the loan… Increasing your loan balance and making you more upside down. This is why over 50% of all loan mods are in default. They are not fixing the problem they are just postponing it.
Before you go into default on your loans at the advice of some former subprime loan seller, make sure you understand that absent finding some legal leverage over the lender you have a good chance of seeing your payments going up.
Our Loan Modification program includes
1. Upside Down Analysis
2. Qualified Written Request and offer of Loan Modification
3. Letter informing lender of clients election to pursue remedies carved out by recent California Law under 2923.6 and or Federal Programs under the Truth in lending Act and the Fair Debt collection practices Act.
4. Letter Disputing debt (if advisable)
5. Cease and Desist letters (if advisable)
6. Follow up, contact with negotiator, and negotiation by an attorney when needed.
By now many of you have read about all the Federal Governments Loan Modification Programs. Others have been cold called by a former loan brokers offering to help you with your Loan Modification. Its odd that many of the brokers who put people into these miserable loans are now charging people up front to get out of the them.
Before you spend thousands of dollars with someone, do an investigation:
1. Is the person licensed by the California Department of Real Estate? Or, the California State Bar?
2. Are your potential representatives aware that have to be licensed according to the DRE?
3. Are they asking you for money up front? They are violating the California Foreclosure Consultant act if they are neither CA attorneys nor perhaps Real Estate brokers in possesion of a no opinion letter from the California Department of Real Estate? Note… if a Notice of Default has been filed against your residence only attorneys acting as your attorney can take up front fees. Don’t fall for “attorney backed” baloney. Are you retaining the services of the attorney or not? Did you sign a retainer agreement ?
4. If your potential representative is not an attorney make sure he or she is a Real Estate Broker capable of proving their upfront retainer agreement has been given a no opinon letter by the DRE. (As of November 2008 – only 14 non attorney entites have been “approved by the DRE.)
5. If somone says they are attorney backed – ask to speak with the attorney. What does attorney backed mean? From what we have seen it is usually a junk marketing business being run by someone who can not get a proper license to do loan modifications.
6. Find out how your loan modification people intend to gain leverage over the lender.
7. If you are offered a loan audit or a Qualfied Written Request under RESPA letter – will an attorney be doing the negotiating against the lender? Will you have to hire the attorney after you pay for your loan audit? Doesn’t that put cart before the horse?
8. Will it do you any good to have a loan audit done if you later have to go out and retain an attorney. You want to retain their services of an attorney before you pay for the audit. The loan audit is the profit center; negotiation takes time.
9. What kind of results should you expect?
10. Who will be doing your negotiating?
11. Will the Loan Modification request go out on Legal Letterhead?
12. How much will you have to pay? Are you looking for a typical loan mod result or are you looking to leverage the law in the hopes of getting a better than average loan mod result.
13. What if your are not satisfied with the loan modification offered by the lender?
14. Should you go into default on both loans prior to requesting a loan modification? Why? What happens if the loan mod does not work out to your satisfaction? (very important question.)
15. Will an attorney review the terms of your loan modification with you? Will you have to waive your anti-deficiency protections if you sign your loan modification paperwork? Will an attorney help you leverage recent changes in California law in an attempt to get a substantial reduction in the principle?
CTX Mortgage Company, LLC / CTX Mortgage / Centex HomesCTX Mortgage Company / Centex Homes Predatory Lending Bait and Switch? Maitland Central Florida
September 2005, we signed a purchase contract and made a $12,000 deposit for a Centex Town Home in Oviedo, Florida. The builder’s mortgage company, CTX Mortgage, offered $3,000 in incententives so we decided to use them. We were given a Good Faith Estimate and interest rate of 6.25% but were told we could not lock in because it was too far off from the closing.
By late November 2005, we had heard nothing from CTX, so we contacted them to lock in a rate. We were again told that we needed to wait until the closing date was determined. We were given three new Good Faith Estimates with rates between 6.840% – 7.090% and were told they were the best CTX could offer, but we were approved for all three scenarios. We decided to shop around and received a Good Faith Estimate with a rate of 6.625% from Wells Fargo. A few days later, Centex contacted us to schedule the closing. We told them we were going to use Wells Fargo but were told that we could not change lenders after the completion of the framing inspection, which took place on October 21, 2005. We reviewed the contract and found a page this to be true. So we agreed to proceed with CTX but complained about the rate increases on the good faith estimates. Our file was transferred to a new loan officer, Jennifer Powell. According to her, our original loan officer had never ran our credit and we were not approved for any of the good faith estimates she provided to us.
Our closing was scheduled for Dec 28, 2005. Between December 8th and December 27th, we received five different good faith estimates from Jennifer (6.75% on December 8th, 7.75% on December 20th, 7.99% on December 21st, 9.125% on December 22th, and 9.375% on December 28th). Jennifer said my ‘low income’ made me high risk, which caused the rates to jump. We told Jennifer that the significant rate increase made the mortgage payments completely unaffordable for us and pleaded with her to either allow us to seek other financing or cancel the contract. She said either take the rate they gave us or lose our deposit of $12,000. We did not want to close on the property, but were not prepared to walk away empty-handed, so we asked for a loan program that would allow us to refinance without penalty. This is what made the rates jump up to 9.375% and 13.550% (an 80/20 loan).
The closing documents were not made available to us until 6:30 p.m. the night before our closing. We stayed in their office to review everything and noticed that my income on the application that CTX had prepeared was double my true income. We asked Jennifer why this was and she told us that in order to get approval, my income had to be ?stated?, meaning my income would not be verified by the lender. Please note in the above paragraph that we were told the rates were high because of my ‘low income’. After the closing, CTX immediately sold our loans, even before the first payment was due. There is only one reason why they offer mortgages and that is to rip people off!!!!
We have struggled for the past year and now have two liens against our property and our credit is ruined! We believe that what CTX Mortgage did is termed Predatory Lending. They tricked us, showing us good rates until it was too late for us to change lenders. We have two young daughters, a 5 year-old and a 3 month-old, and we are in jeopardy of losing our home. We are going to file a complaint with any and all agencies we can but would really like to hear from anyone else who has had this problem. I don’t know how these people sleep at night!
Constance
Oviedo, Florida
U.S.A.
Click here to read other Rip Off Reports on CENTEX (CAVCO HOMES)
loan modification and mortgage reduction 