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Oregon House passes foreclosure protection bill addressing mediation, dual track

Oregon House passes foreclosure protection bill addressing mediation, dual track


Oregon Line-

Oregon lawmakers reached a last-minute deal Monday on protections for homeowners facing foreclosure, passing legislation that will require lenders to meet face to face with borrowers before initiating foreclosure.

The House approved Senate Bill 1552 by a 56-4 vote late Monday as the Legislature approached adjournment. It will require lenders to meet with borrowers in mediation and end the “dual track” practice of foreclosing while negotiating a loan modification.

[OREGON LIVE]

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WA SB 6337: An act relating to protecting short sale sellers from payment of forgiven home loan debt if such debt forgiveness is reported to the IRS

WA SB 6337: An act relating to protecting short sale sellers from payment of forgiven home loan debt if such debt forgiveness is reported to the IRS


Title: An act relating to protecting short sale sellers from payment of forgiven home loan debt if
such debt forgiveness is reported to the internal revenue service.

Brief Description: Protecting short sale sellers from payment of forgiven home loan debt if
such debt forgiveness is reported to the internal revenue service.

Sponsors: Senators Frockt, Fain, Haugen and Litzow.

Brief History:

Committee Activity: Financial Institutions, Housing & Insurance: 1/24/12.

 

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Washington State SB6199 | Heh, Lookie Here (Felony For False Swearing) – Market Ticker

Washington State SB6199 | Heh, Lookie Here (Felony For False Swearing) – Market Ticker


via Market-Ticker

23 (ii) A declaration by the beneficiary made under the penalty of perjury stating that the beneficiary is the actual holder of the promissory note or other obligation secured by the deed of trust shall be sufficient proof as required under this subsection. A violation of this subsection (7)(a)(ii) is a class C felony as provided in RCW 28 9A.20.020 and 9A.20.021.

Full Text Below:

[ipaper docId=78164671 access_key=key-pnkcyfnw5zy5fvkgmc2 height=600 width=600 /]

 

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Florida HB 65 – Foreclosure Debt Relief

Florida HB 65 – Foreclosure Debt Relief


General Bill by Soto

Foreclosure Debt Relief: Creates “Foreclosure Debt Claims Act”; authorizes creation & administration of deficiency judgment reimbursement program by Florida Housing Finance Corporation contingent upon occurrence of certain conditions precedent; provides for future termination of program; authorizes continuation of program after depletion of funds; provides procedures & eligibility requirements for homeowners & financial institutions to file specified monetary claims.

Effective Date: upon becoming a law

Original Filed Version

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Florida HB 145 – Residential Foreclosure Proceedings

Florida HB 145 – Residential Foreclosure Proceedings


General Bill by Soto

Residential Foreclosure Proceedings: Designates act “Florida Mortgage Collection Fairness Act”; prohibits certain acts by mortgage collection firms; provides that violations are deceptive & unfair trade practices; provides penalties & remedies; provides for award of attorney’s fees & costs.

Effective Date: July 1, 2012

Original Filed Version  

[ipaper docId=77031054 access_key=key-16zod5x7qutjvybvp5sh height=600 width=600 /]

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Idaho gets new foreclosure law

Idaho gets new foreclosure law


Sleep better knowing that new Idaho foreclosure law was drafted w help of Idaho Bankers Association

- Josh Rosner

STANDARD-

A new foreclosure law that took effect Thursday provides Idaho homeowners with better information regarding their rights and ensures lenders provide ample notice of sales and respond accordingly with mortgage modification requests.

Unfortunately, said Brett DeLange, foreclosures will not stop as a result of the new legislation.

“The most upsetting thing is that we have so many foreclosure matters facing homeowners in our state,” said the Idaho Attorney General’s chief of consumer protection.

[STANDARD-EXAMINER]

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H.R. 2056 – To instruct the Inspector General of the FDIC to study the impact of insured depository institution failures, and for other purposes.

H.R. 2056 – To instruct the Inspector General of the FDIC to study the impact of insured depository institution failures, and for other purposes.


Suspend the Rules and Pass the Bill, HR. 2056, with An Amendment
(The amendment strikes all after the enacting clause and inserts a new text)

112TH CONGRESS
1ST SESSION H. R. 2056

To instruct the Inspector General of the Federal Deposit Insurance Corporation to study the impact of insured depository institution failures, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 31, 2011

Mr. WESTMORELAND (for himself, Mr. DAVID SCOTT of Georgia, Mr. BROUN of Georgia, Mr. GARY G. MILLER of California, Mr. POSEY, Mr. MARCHANT, and Mr. MACK) introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To instruct the Inspector General of the Federal Deposit
Insurance Corporation to study the impact of insured
depository institution failures, and for other purposes.

[ipaper docId=61474745 access_key=key-i90rmr58tbiw36pfh2f height=600 width=600 /]

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S 967 BILL | `Regulation of Mortgage Servicing Act of 2011′

S 967 BILL | `Regulation of Mortgage Servicing Act of 2011′


To establish clear regulatory standards for mortgage servicers, and for other purposes.

IN THE SENATE OF THE UNITED STATES
May 12, 2011

Mr. MERKLEY (for himself, Ms. SNOWE, Mr. REED, Mr. DURBIN, Mr. BLUMENTHAL, Mr. INOUYE, Mrs. SHAHEEN, Mr. SANDERS, Mr. WHITEHOUSE, Mr. WYDEN, and Mr. AKAKA) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

[ipaper docId=58354921 access_key=key-1et614jx4hbq0yfnhql3 height=600 width=600 /]

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MERS foreclosure amendment dies in Oregon House committee

MERS foreclosure amendment dies in Oregon House committee


Oregon Live-

A late attempt by the finance industry to change Oregon mortgage recording laws is dead.

Oregon House Judiciary co-chair Wayne Krieger opened a hearing this afternoon and said the amendment sought by loan servicers, title companies and credit unions would not pass out of the committee today. Minutes later, the committee voted to approve Senate Bill 519, the bill that the financial industry lobby attempted to amend.


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Tennessee BK Trustee Says In 60 Cases This Year, Lenders Couldn’t Produce Original Note

Tennessee BK Trustee Says In 60 Cases This Year, Lenders Couldn’t Produce Original Note


SHOW ME THE NOTE!!

Bizjournals Nashville-

Federal legislation introduced last week is giving credence to a battle being fought in Middle Tennessee by bankruptcy trustee Henry “Hank” Hildebrand.

The Bill can be found in the link below…

VT Senator Patrick Leahy Introduces Bill To Fight Creditor Fraud In Bankruptcy Courts

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Oregon SB 519 MERS foreclosure fix postponed but effort appears in jeopardy, legislator says

Oregon SB 519 MERS foreclosure fix postponed but effort appears in jeopardy, legislator says


At least they agree a cloud hoovers over foreclosures…

Oregon Live-

A bid by major financial institutions to retroactively waive Oregon recording requirements blocking foreclosure sales appears in jeopardy but will get at least one more day, a legislative leader says.


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SB 519 | Oregon Financial Industry Lobby, Proposed “MERS” Amendment, Past and Future Foreclosure Sales with Improperly Recorded Deeds

SB 519 | Oregon Financial Industry Lobby, Proposed “MERS” Amendment, Past and Future Foreclosure Sales with Improperly Recorded Deeds


Poll: Should Oregon lawmakers give foreclosures, MERS a do-over?

OregonLive-

A federal judge this week issued a stern rebuke to big banks and the Mortgage Electronic Registration System in its handling of foreclosures and what he called a violation of a long-standing Oregon recording law.

Now, the financial industry lobby wants the Oregon Legislature to amend an affordable housing bill to retroactively waive those reporting requirements.

[ipaper docId=56562854 access_key=key-1i78dfa8ydriwym94290 height=600 width=600 /]

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VT Senator Patrick Leahy Introduces Bill To Fight Creditor Fraud In Bankruptcy Courts

VT Senator Patrick Leahy Introduces Bill To Fight Creditor Fraud In Bankruptcy Courts


‘‘Fighting Fraud in Bankruptcy Act of 2011’’


Senator Patrick Leahy (D-Vt.) introduced legislation Tuesday to strengthen the tools available to U.S. bankruptcy trustees to protect American homeowners from creditor fraud in bankruptcy court.  Leahy introduced the Fighting Fraud in Bankruptcy Act, with cosponsors Sheldon Whitehouse (D-R.I.) and Richard Blumenthal (D-Conn.).

“The Fighting Fraud in Bankruptcy Act is another step forward in the Judiciary Committee’s important efforts to protect American citizens from fraud,” said Leahy.  “As Congress looks at ways to mitigate the foreclosure crisis to reduce its impact on homeowners and the economy, I hope all Senators can agree that the foreclosure process for Americans should be a fair one and one in which there is accountability for fraud or other misconduct.  And I hope we can all agree that the integrity of our judicial system is something worth protecting.”

“It’s inexcusable when big banks hit homeowners with bogus mortgage fees and improper foreclosures,” said Whitehouse.  “This bill will help ensure that Rhode Islanders who fall on hard times have access to a fair bankruptcy process and a chance at a fresh start.”

“Homeowners facing foreclosure, including military personnel serving our country far from their homes, are entitled to full legal protection from fraud and misconduct,” said Blumenthal. “This commonsense proposal simply strengthens existing authority for holding creditors accountable for abuses. It will deter needless litigation that is currently wasting resources, clogging the bankruptcy courts, and slowing our economic recovery.”

The Fighting Fraud in Bankruptcy Act includes four key provisions.  The legislation will:

  • Clarify that U.S. trustee has a duty to take action to remedy creditor abuse of the bankruptcy process;
  • Permit the bankruptcy court, either on its own or in response to a motion from the trustee, to correct or sanction misconduct and fraud committed by creditors in the bankruptcy process;
  • Empower the trustee to establish audit procedures to ensure that creditors are complying with the law;
  • Require a mortgage lender to certify under penalty of perjury that a foreclosure proceeding against active duty members of the military who are deployed is in compliance with the Servicemembers Civil Relief Act (SCRA).  The SCRA protects active duty military personnel by requiring a stable, manageable interest rate for military homeowners on active duty, and staying foreclosure actions during their deployment.

The Judiciary Committee has held several hearings in recent years regarding the foreclosure crisis.  Earlier this year, the Committee considered and reported to the full Senate the Limiting Investor and Homeowner Loss in Foreclosure Act  to authorize bankruptcy courts to establish loss mitigation programs to avoid foreclosures.

# # # # #

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[Source: http://leahy.senate.gov]

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CT Senator Bob Duff Brings Stronger Neighborhood Protection Bill SB 957 Through Senate, Eliminate MERS?

CT Senator Bob Duff Brings Stronger Neighborhood Protection Bill SB 957 Through Senate, Eliminate MERS?


Measure puts more teeth into 2009 law, moves to House for final action

In regular session this afternoon, the state Senate approved legislation that updates law enacted in 2009 that helps protect municipalities from the disrepair and blight of foreclosed properties in the state of Connecticut.

The 2009 bill required a registration system to track the owners of uninhabited one-to-four family dwellings obtained by strict foreclosure or foreclosure by sale and allowed municipalities to enforce any provision of the General Statutes or any municipal ordinance on the repair or maintenance of uninhabited real estate.

“This action puts a lot more teeth into issue that is rampant in not just our state, but many other states across the country,” said Senator Duff. “The blight that many times comes along with foreclosed properties is more than unattractive. It brings down neighboring property values and leads to an increase of neighborhood crime. As we continue to cope with the foreclosure crisis in our state, this bill gives municipalities even greater opportunity to enforce blight ordinances and combat some of the negative effects that accompany foreclosure.”

Additionally, property owners would no longer be allowed to register with the Mortgage Electronic Registration System (MERS) and instead would be required to register with the local municipal town clerk.

[source: http://www.senatedems.ct.gov ]

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Oregon Senate Bill 827 to help families in foreclosure, passed out of the Rules Committee today and is headed to the floor for a vote!

Oregon Senate Bill 827 to help families in foreclosure, passed out of the Rules Committee today and is headed to the floor for a vote!


Sponsored by Senator BONAMICI; Senators BATES, BOQUIST

SUMMARY

The following summary is not prepared by the sponsors of the measure and is not a part of the body thereof subject
to consideration by the Legislative Assembly. It is an editor’s brief statement of the essential features of the
measure.

Provides that failure to include required modification form with notice of sale, failure to comply with provisions governing loan modifications and failure to record required affidavit of compliance with loan modification requirements are unlawful practices subject to enforcement under unlawful trade practices law.  Prescribes  time within which beneficiary or beneficiary’s agent must file affidavit for recording. Requires trustee to send copy of required affidavit to Department of Justice.

Requires Department of Consumer and Business Services by rule to prescribe form of affidavit and specifies minimum requirements for affidavit.

Removes certain exemptions from requirement to comply with law governing mortgage loan modifications.

Permits grantor to record affidavit stating that grantor requested loan modification in accordance with law and by applicable deadline.

Requires trustee to be resident of this state or have registered agent that meets certain qualifications.

Declares emergency, effective on passage.

[ipaper docId=55863283 access_key=key-bwmvunoxetdjgxzsouj height=600 width=600 /]

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Senator Al Franken to introduce bill making net neutrality violations a crime

Senator Al Franken to introduce bill making net neutrality violations a crime


By Eric W. Dolan
Monday, March 14th, 2011 — 4:37 pm
.

While House Republicans push to eliminate new net neutrality regulations adopted by the Federal Communications Commission (FCC), Sen. Al Franken (D-MN) announced Monday he will introduce legislation to make violations of net neutrality a crime.

“I’m introducing a new bill that would call violations of net neutrality out for what they are – anti-competitive actions by powerful media conglomerates that represent violations of our anti-trust laws,” Franken said at this year’s South By Southwest (SXSW) Interactive Festival in Austin, Texas.

“We don’t allow big corporations to use their size to bully their competition, and my bill would make it clear that this applies to telecoms that use their power to control the Internet.”

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Free From Foreclosure? Oregon Senator Sponsors ‘Anti-MERS’ Bill to Protect Homeowners

Free From Foreclosure? Oregon Senator Sponsors ‘Anti-MERS’ Bill to Protect Homeowners


March 2nd, 2011 By JAMES PITKIN

State Sen. Suzanne Bonamici (D-Washington County) is sponsoring a bill in the Legislature that could affect thousands of Oregon homeowners.

As reported in today’s WW, homeowners have accused Virginia-based Mortgage Electronic Registration Systems of foreclosing on their properties without the correct paperwork or legal standing. The company has faced legal challenges across the country—including from former Portland mortgage broker Dawn Lind, the subject of our story.

Experts say one of the problems with MERS is that it’s unclear who actually owns the mortgage for the homes MERS tries to foreclose.

Continue reading … Willameet Week

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ATTORNEY GENERAL MADIGAN FILES LEGISLATION IN SPRINGFIELD TO ENSURE INTEGRITY OF FORECLOSURE PROCESS, PROTECT HOMEOWNERS

ATTORNEY GENERAL MADIGAN FILES LEGISLATION IN SPRINGFIELD TO ENSURE INTEGRITY OF FORECLOSURE PROCESS, PROTECT HOMEOWNERS


Via: Foreclosure Blues

(735 ILCS 5/15-1504) (from Ch. 110, par. 15-1504)
Sec. 15-1504.

Pleadings and service.
(a) Foundational requirements for affidavits. Every
affidavit filed in a foreclosure proceeding shall include a
detailed description of the basis of the affiant’s claimed
personal knowledge of the facts set forth in the affidavit,
including:
(1) a statement of which specific data systems the
affiant queried in preparing the affidavit, if the affiant
queried data systems in preparing the affidavit;
(2) a detailed factual statement of the basis of the
affiant’s belief that each data system identified
contained accurate information; and
(3) if applicable, a detailed description of the basis
of the affiant’s statement that the attached mortgage and
note are true and correct.
(b) Lost note affidavit. A copy of the mortgage and note
secured thereby shall be attached to the foreclosure complaint.
If any note required to be attached to a complaint filed
pursuant to this subsection (b) cannot be located for filing as
an exhibit, the moving party shall file an affidavit stating
the following:

…Continue reading

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Please tell President Obama NOT to sign the Interstate Recognition of Notarizations Act

Please tell President Obama NOT to sign the Interstate Recognition of Notarizations Act


Secretary Brunner: Please tell President Obama NOT to sign the Interstate Recognition of Notarizations Act

On Monday, September 27, 2010, U.S. Senator Bob Casey (D-PA), on the Senate floor, asked that the Judiciary Committee be discharged from further consideration of a bill that would hurt consumers.

H.R. 3808 requires federal and state courts to recognize notarized documents from other states, including ones that contain electronic notarizations that are not subject to the same consumer safeguards of documents notarized in person. Some financial institutions are using electronic notarizations to process home foreclosure documents.

Sen. Casey asked that the Senate move forward with immediate consideration of the bill with unanimous consent that the bill pass with no other action or debate. The Senate passed the bill without amendment by unanimous consent. It now sits on the President’s desk. I’m asking you to email or call the President at 202-456-1111 to ask him not to sign the bill.

H.R. 3808 is known as the “Interstate Recognition of Notarizations Act.” It passed the House under a suspension of the rules in April 2010. It requires federal and state courts to recognize any notarization that is lawful in the state where the notary is licensed. Now, in one day, it passed in the Senate.

When I learned of it last Thursday, it sounded innocuous to me, but then I started looking at the timing of the bill. GMAC, owned by Ally, had just suspended its foreclosure actions in 23 states, including Ohio. I had already referred Chase Home Finance, LLC, on August 23, 2010, to the U.S. Department of Justice, asking it to review and investigate Chase’s document notarization practices in home foreclosures (18,000 documents per month were being notarized by 8 people, along with other irregularities). I license notaries in the State of Ohio. Even though I don’t have the power under state law to investigate or prosecute, I couldn’t stand idly by without acting. That’s why I’m asking you to email or call the President at 202-456-1111 to ask him not to sign the bill.

Last Wednesday, the day before I announced the DOJ referral, JPMorgan Chase announced it was having third party counsel review its document procedures for foreclosures. Just two days before, the U.S. Senate had rushed through H.R. 3808. Something didn’t seem right. Since then others agree with me.

Notarizing a document requires the signer to make a fundamental statement, an acknowledgment, before a notary public. It is used for documents of great sensitivity or value, like when the title of a car is transferred on its sale or when a bank tells a court how much is owed on a note for a mortgage when it wants to foreclose.

Some states have adopted “electronic notarization” laws that ignore the requirement of a signer’s personal appearance before a notary. A notary’s signature is that of a trusted, impartial third party, whose notarization bolsters the integrity of the document. Many of these policies for electronic notarization are driven by technology rather than by principle, and they are dangerous to consumers.

President Obama was presented with HR. 3808 on Thursday, September 30, 2010. As of today, he has not signed the bill. Please join me in urging him not to sign the bill by sending an email or calling the White House at 202-456-1111.

Mortgages are now being used as backing for securities traded all over the world by financial institutions. When a mortgage goes into default, a “chain of title” (list of its owners) must be created. It’s being discovered that many financial institutions have taken shortcuts in creating lawful chains of title that allow them to foreclose and take homes when they would not otherwise have the right under the law.

Banks demand we follow every letter of their contracts. We must demand they follow the law. It’s that simple. Please join me in urging President Obama not to sign the bill by sending an email or calling 202-456-1111.

Thanks for working together,

jBrunner300dpi_blue.jpg

Jennifer Brunner
Ohio Secretary of State

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Statute of Limitations coming for Foreclosures?

Statute of Limitations coming for Foreclosures?


Mortgage Players Look to Soften Bill

By NICK TIMIRAOS JUNE 21, 2010 NYTimes

As Congress moves to finalize new financial regulations, the mortgage industry is working to soften a series of provisions that reshape how most Americans obtain home loans.

The provisions in the legislation seek to eliminate questionable practices that proliferated during the housing boom by outlining clear underwriting standards, holding lenders more responsible for loans, and changing the way loan originators are paid. In addition, consumers would get new rights to seek damages when the mortgage process goes awry.

New Rules Take Shape

Requirements in proposed legislation:

  • Lenders required to hold 5% of the loans they originate that are sold to investors as securities
  • Borrowers get greater protections when the mortgage process goes awry
  • Fees must be charged upfront or reflected in the mortgage interest rate, but not both

Changes wanted by mortgage industry:

  • Exception for “qualified mortgages” that meet certain underwriting standards
  • Lenders get greater protection from lawsuits if they satisfy tougher loan standards
  • Ability to charge fees upfront and to embed them in the mortgage interest rate

Industry officials are trying to limit their liability on new consumer-friendly provisions while pushing for greater flexibility on rules that aim to improve underwriting standards by forcing the original mortgage lender to keep a stake in the loan.

A panel of lawmakers reconciling the differences between the House and Senate bills is set to take up the mortgage provisions on Tuesday.

Both bills would require lenders to retain a 5% stake in loans that are bundled with others and sold in pieces to investors. The idea is that if lenders hold on to a stake, they are more likely to make sound loans.

Lenders want to secure a provision, included in the Senate bill, to exempt mortgages that meet certain underwriting standards from the risk-retention requirement that they keep 5% of loans they sell off. Such loans would have to fully document a borrower’s income and assets and couldn’t include features such as interest-only payments, negative amortization or balloon payments. Loans would also have to cap certain mortgage-origination fees at 3% of the loan.

Risk-retention rules are likely to raise the costs of making loans because banks will be required to hold more capital, a particular challenge for smaller lenders.

While consumer groups generally support exceptions for certain loans perceived as safer, some analysts say the provision would effectively promote certain loan types over others.

“One thing that disappoints me is that it revives the fetish of the traditional, fixed-rate, 30-year loans … without examining any of the risks of those loans,” such as higher interest-rate costs, said Todd Zywicki, a professor of law at George Mason University in Fairfax, Va.

Already, both bills would limit the ability of mortgage lenders to charge borrowers fees if they refinance or pay off their loans early.

The proposed legislation would also require lenders to ensure that borrowers can repay their loans and to prove that any refinancing provides a “net tangible benefit” to the borrower.

The industry wants to limit lenders’ legal liability when they make loans that meet the new standards. “If you comply with the provisions in the law…the borrower shouldn’t be able to challenge you later on,” said Glen Corso, managing director of the Community Mortgage Banking Project, which represents independent nonbank mortgage lenders.

Consumer groups oppose efforts to weaken the ability of borrowers to take legal action if they believe lenders have run afoul of the new rules.

Lenders also want to limit the amount of time that borrowers can dispute a foreclosure if they later find that their loan didn’t satisfy the new standards. Right now, the bill doesn’t include a statute of limitations on those claims. Consumer groups say time limits shouldn’t be added because some loans could contain features that don’t take effect for several years. But lenders say that a loan that defaults long after its origination isn’t likely to fail because of underwriting defects.

All together, the measures should lead banks to become more diligent about documenting a borrower’s income and assets. While that will curtail the abuse of “liar’s loans” that saw many borrowers and brokers report false incomes on loan applications during the past decade, the tougher standards could make it harder or more expensive for self-employed borrowers to get a loan.

Another key provision in the bill would change the compensation model for loan originators and mortgage brokers to prevent them from steering borrowers into loans with a higher rate. The bill would bar lender-paid commissions based on the rate or type of loan; origination costs would have to be paid upfront or over the life of the loan in a higher rate, but not a mix of both.

Brokers say that the rule would make it harder for them to compete with banks and that it would reduce competition, raising costs for consumers. “Most mortgage brokers will have to charge their fees upfront, which means the competitive landscape just shifted to banks and lenders,” said Roy DeLoach, chief executive of the National Association of Mortgage Brokers.

Consumer advocates say the changes will make it easier for borrowers to shop for loans and compare prices.

The new provisions will shift the burden of proof “from the consumers having to protect themselves from unreasonable fees to the providers of services justifying their costs,” said Barry Zigas, director of housing policy for the Consumer Federation of America.

“The whole market should be much safer now,” said Julia Gordon, senior policy counsel at the Center for Responsible Lending.

Meanwhile, brokers and real-estate-industry lobbyists want to relax new home-valuation rules imposed last year to ensure appraiser independence. Those rules bar mortgage brokers and loan officers from selecting appraisals by requiring the use of third-party appraisal management firms. Many banks, which own or have stakes in those firms, oppose the effort to alter the rules, as do consumer groups that say any attempt to weaken them could lead to appraisal fraud.

But brokers and real-estate agents say the rules have produced unrealistic appraisals from individuals who aren’t familiar with specific neighborhoods. Brokers say a new system should be created that allows them to order appraisals without being able to select the actual appraiser, and that consumers should be free to use an appraisal ordered by one lender even if they decide to get a loan from a different lender.

Write to Nick Timiraos at nick.timiraos@wsj.com

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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Q & A: What’s Next for Fannie and Freddie? WSJ

Q & A: What’s Next for Fannie and Freddie? WSJ


MAY 24, 2010, 9:53 AM ET

By Nick Timiraos

It turns out that Fannie Mae and Freddie Mac, already becoming the most expensive legacy for taxpayers from the financial crisis, aren’t just too big too fail. As my column in Monday’s WSJ explains, they’re also proving too tough to reform.

Here’s a closer look at five common questions about what’s happening with—and what’s next for—Fannie and Freddie:

1. Why doesn’t the financial-overhaul bill address Fannie and Freddie?

The Obama administration says it’s too soon to take action to address the future of the housing-finance giants because markets are still fragile, and others have said the bill is already too complex without Fannie and Freddie in the mix.

Revamping the housing-finance giants, which own or guarantee around half of the nation’s $10.3 trillion in home mortgages, was never going to be easy. But the fact that, together with the Federal Housing Administration, the companies guaranteed 96.5% of all new mortgages last quarter has made the challenge only greater.

During the debate on financial-overhaul legislation, Republicans proposed measures that would have wound down the companies and limited the amount of further government aid. But the amendments didn’t specify what would take the place of Fannie and Freddie.

Both parties are “ignoring the issue,” says Lawrence White, an economics professor at New York University. Yes, markets may be too fragile for action now, but he says a plan now would give markets time to prepare for the future.

2. Why are Fannie and Freddie still losing money?

The companies have taken $145 billion in handouts, including $19 billion this quarter, from the U.S. Treasury so far, and that number could rise as foreclosures mount. Each quarter, as more mortgages go delinquent, Fannie and Freddie have to set aside more cash in reserve to cover losses if those loans end up defaulting and the homes they’re secured by go through foreclosure.

Nearly all of those defaults are coming from loans that the companies made during and immediately after the housing boom. Loans today have significantly tighter lending standards and should be profitable.

While losses could continue for several quarters, there are signs that delinquencies may have peaked during the first quarter. Fannie Mae and Freddie Mac each said that the number of its loans that were seriously delinquent fell in March, from February.

3. Why is the government still putting money into the companies?

Each quarter, the government injects new money into Fannie and Freddie to keep the companies afloat. That allows the firms to meet their obligations to investors, which keeps the mortgage market moving. If the government decided to stop keeping the firms afloat, that could send borrowing costs up sharply for future homeowners and could create new shocks for the housing market.

In February 2009, the Obama administration said it would double to $200 billion the amount of aid it was willing to put into each of the two firms. Then in December, it said it would waive those limits, and allow for unlimited sums over the next three years. The companies are now akin to government housing banks, with an independent regulator, but one that ultimately must answer to the Treasury Department, which controls the purse strings.

The current arrangement has raised concerns that the companies could continue to make business decisions that might lead to higher losses and that they wouldn’t be making if they were still being run for private shareholders. “Unregulated pots of money—that was a cause of their demise, and now we’ve taken that monster and turned it into a super-monster” with little independent oversight, says David Felt, a former senior lawyer at the companies’ federal regulator, the Federal Housing Finance Agency.

What would the mortgage market look like today without government support?

Consider the market for “jumbo” loans, or those too large for government backing. Rates on jumbos are around 0.6 percentage points higher than conforming loans. That’s nearly double the historical spread, but an improvement over the peak 1.8 percentage point spread during the financial crisis.

Lending standards are also much tighter for loans without government backing, and 30-year fixed rate loans are much less common. Mike Farrell, chief executive of Annaly Capital Management, estimates that mortgage rates today would be two to three percentage points higher without government guarantees.

What will ultimately happen to Fannie and Freddie?

Congress has to decide what it wants the housing-finance system of the future to do. “Everyone acknowledges that the model is broken, that the model was flawed, yet we don’t know how to run a mortgage market without them and we have nothing with which to replace the broken system,” says Howard Glaser, a Clinton administration housing official and housing-industry consultant.

Still, a consensus is growing between some academics and policymakers that the government will continue to play some role at least in backstopping mortgages. Recent testimony from top administration officials over some general insight into what the administration wants the future system to do.

What will ultimately happen to Fannie and Freddie?

Congress has to decide what it wants the housing-finance system of the future to do. “Everyone acknowledges that the model is broken, that the model was flawed, yet we don’t know how to run a mortgage market without them and we have nothing with which to replace the broken system,” says Howard Glaser, a Clinton administration housing official and housing-industry consultant.

Still, a consensus is growing between some academics and policymakers that the government will continue to play some role at least in backstopping mortgages. Recent testimony from top administration officials over some general insight into what the administration wants the future system to do.

There have been other clues: The Obama administration has made clear its view that the failure of Fannie and Freddie shouldn’t be pinned on government affordable-housing mandates, which suggests that any future housing-finance entities would continue to serve a role supporting that function. And an administration report on the foreclosure crisis said that better regulation of the entire mortgage market, and not just any government-related entities, would be a “high priority” for the future.

Readers, what do you think the government should do with the firms?

Posted in fannie mae, foreclosure, Freddie Mac, mortgage modificationComments (0)


GARY DUBIN LAW OFFICES FORECLOSURE DEFENSE HAWAII and CALIFORNIA
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