Tag Archive | "FHA"

Branch Banking & Trust Company Agrees to Pay $83 Million to Resolve Alleged False Claims Act Liability Arising from FHA-Insured Mortgage Lending

Branch Banking & Trust Company Agrees to Pay $83 Million to Resolve Alleged False Claims Act Liability Arising from FHA-Insured Mortgage Lending

Thursday, September 29, 2016

Branch Banking & Trust Company Agrees to Pay $83 Million to Resolve Alleged False Claims Act Liability Arising from FHA-Insured Mortgage Lending

Branch Banking & Trust Company (BB&T) has agreed to pay the United States $83 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today.  BB&T is headquartered in Winston-Salem, North Carolina.

“The FHA program depends on Direct Endorsement Lenders endorsing only eligible loans for FHA mortgage insurance, and complying with HUD’s quality control requirements,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Lenders like BB&T that participate in the FHA program must make adherence to the FHA program rules a priority.  The Department has and will continue to hold accountable those lenders that prioritize profits over program compliance.”

“While profiting from the FHA program, BB&T exposed the taxpayers to losses by failing to comply with HUD guidelines, and then took the additional step of falsely certifying that it had complied with such guidelines,” said U.S. Attorney John Horn of the Northern District of Georgia. “This settlement recovers substantial losses caused by BB&T’s decision to place its own profits above its commitment to adhere to HUD underwriting and quality control requirements.”

Since at least January 2006, BB&T has participated as a Direct Endorsement lender (DEL) in the FHA insurance program.  A DEL has the authority to originate, underwrite, and endorse mortgages for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, the FHA does not review a loan before it is endorsed for FHA insurance for compliance with FHA’s credit and eligibility standards, but instead relies on the efforts of the DEL to verify compliance.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance.

The settlement announced today resolves allegations that BB&T failed to comply with certain FHA origination, underwriting and quality control requirements.  As part of the settlement, BB&T admitted to the following facts: Between Jan. 1, 2006 and Sept. 30, 2014, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s quality control requirements.  BB&T significantly increased its loan volume between 2006 and 2009—more than doubling all loan originations, while increasing the number of FHA insured loans six fold.  This increase in volume was accompanied by an increase in the number of loans internally rated “Serious-Marketability” by BB&T’s quality control department —the most significant quality control defect rating and a defect that rendered a loan ineligible for FHA insurance.  Between 2007 and 2011, the percentage of loans underwritten by BB&T each year that were rated Serious-Marketability by its quality control department always exceeded 30 percent, and exceeded as much as 50 percent in 2010 and 2011.  BB&T nevertheless endorsed many of these loans for FHA insurance and, if they defaulted, sought payment from HUD for the insured loans.

The monthly reviews and reports that BB&T’s quality control department shared with management alerted BB&T to deficiencies in many of its FHA loans.  A 2010 internal memorandum at BB&T stated that “increased volume of FHA requests and changes to regulatory requirements have resulted in origination, processing and underwriting errors.  Some employees are not applying current and accurate FHA guidelines.”  A proposal to improve BB&T’s underwriting of FHA loans with additional training as well as a testing and certification process for underwriters was prepared in 2010, but neither recommendation was implemented until after 2014.

Additionally, between 2006 and 2014, BB&T’s quality control process did not satisfy certain FHA requirements.  Although loan volume more than doubled from 2006 to 2009, the number of quality control employees remained the same.  The quality control department requested additional employees in 2009, yet new employees were not added until 2013.  Because BB&T’s quality control department did not have adequate staff, it instituted a cap on the number of loans it reviewed.  As a result, between 2009 and 2014, the quality control department did not always review the number of loans necessary to comply with HUD’s loan review sampling requirements.  Additionally, BB&T did not perform reviews of its lender branch offices, as required by HUD, before beginning the reviews again in late 2014.

Finally, since at least 2006, HUD has required self-reporting.  However, despite internal ratings showing that 30 percent or more of the loans underwritten by BB&T between 2007 and 2011 had Serious-Marketability findings, and were thus ineligible for FHA insurance, BB&T did not self-report any loans containing material underwriting defects until 2013.

As a result of BB&T’s conduct and omissions, HUD insured loans endorsed by BB&T that were not eligible for FHA mortgage insurance under the DEL program, and that HUD would not otherwise have insured.  HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

“Lenders are required to apply FHA’s standards to each mortgage loan we insure and to honestly certify to us that they’ve done so,” said Associate General Counsel Dane M. Narode for HUD’s Program Enforcement.  “Today’s settlement reminds all lenders that sound underwriting is the bedrock of a healthy housing market and the financial futures of homeowners we support.”

“Today’s settlement agreement resolves allegations that BB&T, entrusted by American taxpayers to comply with FHA regulations, failed to conform with certain FHA origination, underwriting and quality control requirements,” said Inspector General David A. Montoya for HUD.  “This settlement demonstrates a continued commitment to address the failures and halt the business practices that potentially harm the FHA program and its participants.”

The settlement was the result of a joint investigation conducted by HUD, the HUD Office of Inspector General, the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Georgia.  The claims asserted against BB&T are allegations only, and there has been no determination of liability.

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Insight: Falling home prices drag new buyers under water

Insight: Falling home prices drag new buyers under water

This is a NO SHIT SHERLOCK moment. As this site has said it time after time, it’s a crime to lend money today very well knowing the housing values are depreciating!

FHA caters to first time buyers and this includes no ownership in a principal residence during a 3year period. This also caters mainly to those who don’t have any money… sounds a lot like the subprime market, now doesn’t it?

This is deliberate F R A U D and another bailout coming your way.


More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame.

That figure, provided to Reuters by tracking firm CoreLogic, represents about one out of 10 home loans made during that period.

It is a sobering indication the U.S. housing market remains deeply troubled, with home values still falling in many parts of the country, and raises the question of whether low-down payment loans backed by the FHA are putting another generation of buyers at risk.

As of December 2011, the latest figures available, 31 percent of the U.S. home loans that were in negative equity – in which the outstanding loan balance exceeds the value of the home – were FHA-insured mortgages, according to CoreLogic.


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Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt – JOSHUA ROSNER

Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt – JOSHUA ROSNER

Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt

Joshua Rosner
Graham Fisher & Co.

June 29, 2001

This report assesses the prospects of the U.S. housing/mortgage sector over the next several years. Based on our analysis, we believe there are elements in place for the housing sector to continue to experience growth well above GDP. However, we believe there are risks that can materially distort the growth prospects of the sector. Specifically, it appears that a large portion of the housing sector’s growth in the 1990’s came from the easing of the credit underwriting process. Such easing includes:

* The drastic reduction of minimum down payment levels from 20% to 0%
* A focused effort to target the “low income” borrower
* The reduction in private mortgage insurance requirements on high loan to value mortgages
* The increasing use of software to streamline the origination process and modify/recast delinquent loans in order to keep them classified as “current”
* Changes in the appraisal process which has led to widespread overappraisal/over-valuation problems

If these trends remain in place, it is likely that the home purchase boom of the past decade will continue unabated. Despite the increasingly more difficult economic environment, it may be possible for lenders to further ease credit standards and more fully exploit less penetrated markets. Recently targeted populations that have historically been denied homeownership opportunities have offered the mortgage industry novel hurdles to overcome. Industry participants in combination with eased regulatory standards and the support of the GSEs (Government Sponsored Enterprises) have overcome many of them.

If there is an economic disruption that causes a marked rise in unemployment, the negative impact on the housing market could be quite large. These impacts come in several forms. They include a reduction in the demand for homeownership, a decline in real estate prices and increased foreclosure expenses.

These impacts would be exacerbated by the increasing debt burden of the U.S. consumer and the reduction of home equity available in the home. Although we have yet to see any materially negative consequences of the relaxation of credit standards, we believe the risk of credit relaxation and leverage can’t be ignored. Importantly, a relatively new method of loan forgiveness can temporarily alter the perception of credit health in the housing sector. In an effort to keep homeowners in the home and reduce foreclosure expenses, holders of mortgage assets are currently recasting or modifying troubled loans. Such policy initiatives may for a time distort the relevancy of delinquency and foreclosure statistics. However, a protracted housing slowdown could eventually cause modifications to become uneconomic and, thus, credit quality statistics would likely become relevant once again. The virtuous circle of increasing homeownership due to greater leverage has the potential to become a vicious cycle of lower home prices due to an accelerating rate of foreclosures.

Presented: 2002 Mid-Year Meeting American Real Estate and Urban Economics Association National Association of Home Builders Washington, DC May 28-29, 2002.

[ipaper docId=77849340 access_key=key-a7jp2xnwsvk0bxa0r7r height=600 width=600 /]


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Full Text: 1995’s “National Partners” strategy. A public/private partnership that hurt.

Full Text: 1995’s “National Partners” strategy. A public/private partnership that hurt.

Full text: 1995’s “National Partners in Homeownership” strategy. The public/private partnership that led us here.

 U.S. Department of Housing and Urban Development

MAY 1995

The White House
May 2, 1995

Message from the President

Our nation’s greatest promise has always been the chance to build a better life. For millions of America’s working families throughout our history, owning a home has come to symbolize the realization of the American Dream. Yet sadly, in the 1980s, it became much harder for many young families to buy their first home, and our national homeownership rate declined for the first time in forty-six years. Our Administration is determined to reverse this trend, and we are committed to ensuring that working families can once again discover the joys of owning a home.

This past year, I directed HUD Secretary Henry G. Cisneros to work with leaders in the housing industry, with nonprofit organizations, and with leaders at every level of government to develop a plan to boost homeownership in America to an all-time high by the end of this century. The National Homeownership Strategy: Partners in the American Dream outlines a substantive, detailed plan to reach this goal. This report identifies specific actions that the federal government, its partners in state and local government, the private, nonprofit community, and private industry will take to lower barriers that prevent American families from becoming homeowners. Working together, we can add as many as eight million new families to America’s homeownership rolls by the year 2000.

Expanding homeownership will strengthen our nation’s families and communities, strengthen our economy, and expand this country’s great middle class. Rekindling the dream of homeownership for America’s working families can prepare our nation to embrace the rich possibilities of the twenty-first century.

Bill Clinton

[ipaper docId=77727501 access_key=key-a47jazpzmolbhcarlo0 height=600 width=600 /]

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IMPORTANT HISTORY: 1995’s National Homeownership Strategy: Partners in the American Dream Chapter 4: Financing:

IMPORTANT HISTORY: 1995’s National Homeownership Strategy: Partners in the American Dream Chapter 4: Financing:


The cost, terms, and availability of mortgage financing are of critical importance to the level of homeownership. Indeed, the substantial rise in homeownership rates after World War II can be traced not only to increasing prosperity, but also to the widespread availability of long-term, low- downpayment, fully amortizing first mortgage loans.

America’s current mortgage finance system usually provides a steady and reliable source of market-rate mortgage money, but the transaction costs linked to home purchase and financing remain stubbornly high. In addition, the current housing finance system does not adequately serve all financing needs, especially those characteristic of older, urban neighborhoods, certain rural communities, and low-income borrowers.

There is widespread expectation that the mortgage finance system, and indeed the housing system generally, is on the verge of a period of dramatic change stemming from industry consolidation, redesigned processes, and the application of automation. It is vital that this change in the mortgage finance system be guided by a commitment to increase opportunities for homeownership for more families, particularly for low- and moderate-income and minority families, and to increase the national homeownership rate to an all-time high.

For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership.

The current housing finance system includes a large number of participants: secondary market entities, government and conventional lenders and insurers, for-profit and not-for-profit enterprises, firms with national scope and those with local expertise. Each of these has a contribution to make, and progress requires both appropriate competition and cooperation among these participants. What these participants share is a commitment to extending the benefits of homeownership.

Key Principles

The strategies and actions in this chapter reflect the following principles:

  • No single financing strategy will suffice to increase homeownership rates; the variety in housing markets, homebuyer needs, and property characteristics will necessitate multiple answers to financing issues.
  • Competition among housing and mortgage industry participants is a driving force in reducing financing costs, but competition increasingly must be supplemented with cooperation and collaboration to share ideas and leverage resources.
  • Changes in lending processes designed to reduce financing costs must not compromise consumer or investor protections.
  • The housing finance system must effectively combine national and international capital markets with local housing expertise.
  • Progress in reducing financing costs and increasing the availability of financing must benefit underserved populations, reach diverse property types, and help strengthen communities.
  • New information technologies are creating opportunities to reduce costs by reengineering both the mortgage process and the real estate sales process. Whenever possible, savings should be passed on to consumers through an open, competitive marketplace.


The financing recommendations contained in this chapter are reflected in 23 actions that support three primary strategies. These strategies are based on the following subjects:

  1. Cut transaction costs.
  2. Reduce downpayment and mortgage costs.
  3. Increase availability of financing.

Cut Transaction Costs

STRATEGY: The partnership should support analysis, publication of information, and education regarding the transaction costs associated with homeownership and should support efforts to reduce these costs by retooling the mortgage loan borrowing process.

Issues and Impediments: Transaction costs cover the professional and technical services necessary to complete the purchase of a home. These costs can vary widely among lenders, governmental jurisdictions, and service providers-even within geographic locations. Professional and technical service costs may include fees for the home purchase, attorneys, property appraisals, title review and insurance, loan processing, loan document preparation, and credit reports. The cost of these services is largely paid, directly or indirectly, by the homebuyer.

Transaction costs can add significantly to the upfront cash needed to purchase a home. Moreover, the home purchase process does not contain adequate consumer education and counseling to encourage comparison shopping for professional and technical services, identify less expensive sources for these services, and reduce transaction costs for the homebuyer. Also, purchase of home transaction closing services typically is undertaken by each individual household, precluding cost savings that might accrue from volume purchase of such services. For example, negotiating discounts for bulk purchase of title insurance and property appraisals is not a general practice.

Finally, homebuyers often are unaware, particularly at the early stages of the homebuying process, of the total cash required for the transaction. They tend to focus primarily on downpayment needs and can become disillusioned when they realize that the accompanying closing costs can add thousands of dollars to their upfront cash needs.

Action 29: Alternative Approaches to Homebuying Transactions

The partnership should explore alternative methods of processing title insurance, appraisals and legal services, to reduce transaction costs for the homebuyer without increasing risk to the mortgagee or investor. For example, lenders and secondary market investors are increasingly looking at ways to lower appraisal costs by applying sophisticated decision models to their property databases. To explore such alternatives properly, the partnership should also directly involve representatives of the appraisal and title insurance industries.

Action 30: Technological Improvements in Mortgage Financing

The partnership should initiate industry efforts to develop and use technological and legal infrastructure to streamline and automate origination processes. These efforts include electronic data interchange, a whole loan- book entry system, electronic repositories for property transaction information, and other efforts to reduce the costly, paper intensive, and often duplicative processes currently associated with mortgage loan origination.

Technological advances in recent years designed to automate and streamline loan underwriting can dramatically reengineer the mortgage loan borrowing process. Yet, many lenders are not taking sufficient advantage of computerized loan origination systems to lower costs.

For example, use of automated underwriting services, such as Freddie Mac’s new Loan Prospector and Fannie Mae’s new Desktop Underwriter, can result in significant loan processing improvements. Such improvements include reductions of up to 20 to 30 days in underwriting and processing time, faster loan settlements, less paperwork, greater lender assurances of loan acceptability by the secondary market purchaser, and a less intrusive loan application process. Automation improvements are likely to reduce processing costs to lenders by more than 20 percent.

Freddie Mac’s Loan Prospector is being tested by selected lenders nationwide. Investors Lending, Inc., in Fresno, California, has used this new underwriting system to reduce paperwork and speed loan processing. Investors Lending is able to fax applications to Freddie Mac and fund loans in as little as 8 days.

Secondary market investors are also automating the process for purchasing mortgages from originating lenders. Freddie Mac, for example, offers an electronic mortgage information network that can connect the lender with information regarding current loan pricing and commitments, as well as such third-party services as homeowners insurance and credit bureaus.

Action 31: Lender Processing Time Reductions

Members of the partnership, including organizations representing home mortgage lenders, appraisers, secondary market investors, and government agencies involved in lending, should design procedural and technological improvements to measurably reduce processing times.

Historically the mortgage loan process has taken 30 to 60 days from application receipt to loan approval. The system is dependent upon timely receipt of income, employment, credit, and downpayment verifications; property value determinations; and other loan requirements. For the lender loan processing can be time consuming and staff intensive. For the consumer long loan processing intervals can cause uncertainty and risk associated with fluctuations in interest rates. Shortening the processing time from application to closing will reduce hedging costs for secondary market participants and funding uncertainty for portfolio lenders. Long processing timeframes inevitably add to the costs of obtaining a mortgage for the homebuyer.

For its part FHA should continue to streamline its single-family home mortgage insurance program by emphasizing product competitiveness and incorporating operational changes that reduce processing times. Shorter loan- processing times can lower costs generally borne by home purchasers.

Action 32: Standardize Homebuying Settlement Procedures

The partnership should support standardization of settlement closing instructions. This standardization can eliminate much confusion, delay, and expense in communication between settlement agents and lenders, which should benefit homeowners.

Under the current system, every lender communicates unique requirements, forms, certifications, funds, handling mandates, and other documentation needs through closing instruction letters. Each of these letters addresses the same sets of topics, but in its own unique format and language. If such letters were standardized in format and language, settlement agents could more efficiently and effectively find and understand the information most pertinent to each aspect of the home purchase transaction.

Action 33: Bulk Purchase of Homebuying Settlement Services

While remaining mindful of the Federal Government’s Real Estate Settlement Procedures Act (RESPA) regulations, the partnership should investigate the feasibility of bulk purchase of settlement services such as title insurance, appraisals, and legal work to reduce acquisition costs for homebuyers.

Purchasing any good or service on a volume basis typically results in a lower per-unit cost. Bulk purchase of settlement services might be coordinated by employers, labor unions, nonprofit housing developers, neighborhood associations, or other groups with an interest in promoting homeownership for particular households and properties.

ReMax Beach Cities (RBC) in Redondo Beach, California, has negotiated volume discounts with several loan employers in exchange for employee referrals. RBC works with its subsidiaries, Coastal Financial Mortgage, Beach Cities Escrow, and First American Title Company of Los Angeles to provide a 25-percent discount on real estate sales commissions, standard escrow fees, and standard title fees. RBC also discounts loan origination fees by 1/2 percent.

RBC’s program works for all involved: employers provide a benefit to employees at no cost to the company, employees receive a total reduction in fees of approximately 1 percent of the home purchase price, and RBC increases its volume of business. In the 4 1/2 years that RBC has been working with TRW Space and Electronics Division, it has provided nearly $4 million in discounts to TRW employees.

Action 34: Local Government Development Fees and Homeownership Trust Funds

The partnership should encourage State and local governments to develop affordable housing trust funds using dedicated revenue sources. These trust funds would be specifically for affordable homeownership purposes. The partnership should also encourage State and local governments to waive or reduce development fees on homes purchased in certain neighborhoods or by underserved populations.

In Greensboro, North Carolina, one penny of the city’s ad valorem tax is allocated to the Greensboro Housing Partnership Trust Fund for the exclusive use of affordable housing initiatives. In 5 years, the one-penny tax has generated over $4.5 million and has been used to leverage $37 million. The trust fund has been invested in new or rehabilitated housing for residents earning 30-50 percent of the area’s median income.

Reduce Downpayment and Mortgage Costs

STRATEGY: The partnership should support initiatives to reduce downpayment requirements, to encourage savings for downpayments by first-time homebuyers, and to reform the basic contract between borrowers and lenders to reduce interest costs.

Issues and Impediments: Low- and moderate-income families often cannot become homeowners because they are unable to come up with the required downpayment and closing costs. In many instances, these prospective first-time homebuyers find that developing the proper savings patterns to accumulate sufficient cash for the downpayment is difficult.

In addition, the amount of money necessary for a downpayment continues to vary greatly from lender to lender based on many factors, including lender criteria, secondary market investor requirements, and mortgage insurer guidelines. Although the variety in loan products available to the borrower is commendable, it can prove confusing to a first-time homebuyer. Also, some lenders are not flexible about other forms of downpayment assistance such as public subsidies or unsecured loans that might supplement the homebuyer’s savings. Nevertheless, great strides have been made by the lending community in recent years to reduce downpayment requirements, particularly for low- and moderate-income homebuyers. This trend is encouraging and should be continued with support from the partnership.

The monthly costs associated with owning a home also remain an obstacle for many potential homebuyers. The most significant monthly housing cost for most new homeowners is the monthly mortgage cost. The mortgage loan factor that most dramatically affects long-term mortgage affordability is the interest rate charged to the borrower. When mortgage rates are high, many households are precluded, at least for a while, from the opportunity to own a home.

Low mortgage interest rates sustained over an extended period of time can have a compelling, beneficial impact on mortgage affordability and the rate of homeownership in America. Although interest costs are largely a function of external economic factors that cannot be controlled by members of the partnership, to a lesser extent mortgage interest rates also are affected by factors such as the likelihood of mortgage prepayment by the homeowner, loan assumability by future homebuyers, mortgage insurance, loan risk, and other elements.

Action 35: Home Mortgage Loan-to-Value Flexibility

Lending institutions, secondary market investors, mortgage insurers, and other members of the partnership should work collaboratively to reduce homebuyer downpayment requirements. Mortgage financing with high loan-to- value ratios should generally be associated with enhanced homebuyer counseling and, where available, supplemental sources of downpayment assistance.

The amount of borrower equity is an important factor in assessing mortgage loan quality. However, many low-income families do not have access to sufficient funds for a downpayment. While members of the partnership have already made significant strides in reducing this barrier to home purchase, more must be done. In 1989 only 7 percent of home mortgages were made with less than 10 percent downpayment. By August 1994, low downpayment mortgage loans had increased to 29 percent.

The New Jersey Housing and Mortgage Finance Agency administers its no- downpayment 100 Percent Mortgage Financing Program to encourage homeownership among lower income households. In 1993 52 percent of the households using the program were single-parent families, and 73 percent were minority households.

  • Many local lending institutions in recent years have developed innovative low-downpayment programs for first-time homebuyers.
  • Private mortgage insurers generally provide coverage up to 95 percent of home value, and in some instances even higher loan-to-value ratios are permitted.
  • Fannie Mae and Freddie Mac have instituted affordable loan products for home purchase that require only 3 percent from the purchaser when an additional 2 percent is available from other funding sources, including gifts, unsecured loans, and government aid. In addition, Fannie Mae recently announced a 97-percent first mortgage requiring only a 3-percent downpayment.
  • The Federal Government offers assistance to help homebuyers obtain very low downpayment mortgages. FHA mortgage insurance facilitates the purchase of homes with downpayments of less than 3 percent, and VA provides guarantees for no-downpayment mortgage loans to qualified households.
  • State and local housing finance agencies offer taxable and tax-exempt mortgage financing products with competitive rates and flexible loan-to- value requirements.

As members of the partnership explore creative means of providing low-downpayment financing to potential homebuyers, a concerted effort should be made to share success stories and to learn what set of factors generates high loan volume and solid payment histories.

Action 36: Subsidies to Reduce Downpayment and Mortgage Costs

The partnership should support continued Federal and State funding of targeted homeownership subsidies for households that would not otherwise be able to purchase homes.

Notwithstanding the growing number of high loan-to-value mortgage products available today, many households, particularly low- and moderate- income families, will need subsidies to supplement downpayment and closing funds or to reduce the monthly obligation on a home purchase mortgage. Subsidy funding can be provided by many sources, including State and local governments, foundations, private sector donations, religious organizations, employers, and others. Historically, the Federal Government, through HUD, has been the most prominent provider of subsidies for this purpose.

Federal sources of subsidy dollars for homeownership should be made as flexible as possible. As HUD moves to a block grant performance-based approach to fund affordable housing needs at the State and local level, it is important that maximum discretion be provided to State and local agencies and that a process is established to ensure that the successes achieved through HUD’s Community Development Block Grants (CDBG), the HOME program, and the HOPE 3 program are not lost in the HUD transition.

The West Virginia Housing Development Fund uses HOME program funds to provide 20-year, fixed-rate loans to help very low-income families build and purchase their homes. Of the families assisted, 95 percent have incomes below 50 percent of the area median. As a result of the additional housing units created under this program, a new tax base is being established and jobs are being created.

State governments, operating through community development and housing finance agencies, will continue to be very important funding sources for homeownership subsidies. State affordable housing trust funds, mortgage revenue bonds, and mortgage credit certificate programs should continue to help address homeownership needs, particularly as Federal housing and community development funding discretion increases. State agencies should be encouraged to ensure that sufficient funding is set aside from their overall budget resources for low-income homeownership downpayment and mortgage subsidies.

Action 37: IRAs and 401(k)s for Homeownership Downpayments

The partnership should support legislation that removes negative tax consequences for early withdrawal of money from tax-deferred individual retirement accounts when the money is used for downpayment assistance by first-time homebuyers. The legislation also should permit the so-called “back- end account” of non-tax-deductible contributions, which would allow taxpayers to withdraw funds for a first-time home purchase after 5 years without penalty or taxes on earnings. HUD analysis indicates that at least 600,000 households in the next 5 years would benefit from withdrawing funds from their retirement accounts for a first-time downpayment option.

Members of the partnership also should identify existing household assets that may be converted to downpayment assistance, subject to income tax and other considerations. For example, many households now participate in tax-advantaged savings vehicles (such as 401(k) plans), which historically have not been available for downpayment on a home.

Action 38: Savings Plans for Homeownership

The partnership should identify and promote effective methods of saving for homeownership. Such methods may include use of household homeownership accounts and savings clubs, whereby savings are dedicated specifically for downpayments and closing costs. The family budgeting discipline from these programs can also improve the potential for stretching mortgage loan underwriting ratios. Members of the partnership also should support homeownership education and counseling efforts that assist households to save for home purchase.

The Federal Home Loan Bank of New York has used its Affordable Housing Program (AHP) to assist lower income first-time homebuyers through the First Home Club program. Eligible families open a First Home Club savings account at a local financial institution and systematically deposit funds to cover downpayment costs and closing fees. Upon completion of a required homeownership counseling course, a family’s savings are matched on a 3-to-1 basis, up to a maximum of $5,000, with funds from the AHP.

Saving for a downpayment represents a significant challenge for a large number of households. Many households pay so much for rental housing and other existing monthly obligations that accruing adequate funds for the downpayment and closing costs has not been feasible.

Examples of homeownership accounts might include:

  • Lease-purchase programs where a portion of the household’s rent payment accrues toward the downpayment.
  • Employer-assisted homebuyer savings plans, sometimes including incentive-based employer contributions or loan features using pre-tax savings.
  • Lender-initiated savings plans, whereby the lender provides enhanced savings rates or preferred customer mortgage terms to encourage homeownership.
  • Formal and informal “homebuyers clubs,” which generate savings through the reinforcement of group participation.
  • Nontraditional savings such as the “sou-sou” approach, whereby individual households contribute a fixed amount of money periodically to a third party, who holds the funds and distributes the money to members of the group on a rotation basis. Depository institutions should consider how they can add certainty to these revolving funds without undermining the group savings incentive.


Homeward Bound, Inc., of Phoenix, Arizona, operates a lease-purchase program for formerly homeless families. Unlike traditional lease-purchase programs, Homeward Bound does not collect rent and hold it in escrow for future home purchase. Rather, residents pay minimal rent (enough to cover taxes, insurance, and administrative costs) and work closely with a case manager to develop their own savings plan. Residents must resolve personal debt and acquire savings for downpayment within 2 years. This method of savings is a greater challenge to residents–building long-term responsibility and teaching self-sufficiency. In its first 2 years, Homeward Bound has helped 28 families to purchase homes.

Action 39: Mortgage Options and Homebuyer Education

The partnership should consider methods of itemizing the cost of mortgage terms to help the homebuyer weigh mortgage options and their associated costs. Furthermore, any options in the terms of the mortgage contract ought to be clearly disclose to consumers to encourage the best choice.

In today’s mortgage market, the costs of mortgage money reflects a sophisticated, capital markets valuation, based on the terms of the contract between borrower and lender. The interest rate charged to the homebuyer will directly reflect the terms such as loan assumability and the right of prepayment. Most prospective home purchasers do not realize that the inclusion or exclusion of such loan conditions can affect the interest rate on their mortgage.

Action 40: Home Mortgage Foreclosure Requirements

The partnership should analyze existing State foreclosure laws and support future efforts to implement streamlined foreclosure procedures that are more consistent from State to State.

The cost of mortgage money reflects, in part, the investor’s estimate of credit costs. These credit costs are, in turn, affected by State laws concerning foreclosure. State laws vary considerably in the rights and obligations of the lender and the homeowner in the foreclosure process. Notwithstanding the benefits of establishing a more systematic foreclosure process, no such changes should be supported by the partnership if the rights and interests of the homeowner are unduly jeopardized.

Increase Availability of Financing

STRATEGY: There is a vital need to increase the availability of financing for forms of homeownership that the current mortgage finance system does not address effectively. The partnership should seek to identify the expertise required for such financing, provide assistance to enable potential homebuyers to afford such financing, standardize loan features to permit streamlining, and broaden the secondary market for such loans.

Issues and Impediments: Mortgage financing is readily available in the United States, due to a competitive market place, stable home values, and a sophisticated capital market infrastructure. Nevertheless, some forms of homeownership financing are not sufficiently available in all markets. There have historically been inadequate levels of mortgage financing for combining the purchase and rehabilitation of single-family homes, owner-occupied small rental properties (two- to four-unit structures), manufactured housing, cooperative housing, rural housing, and Native American housing. Mortgage financing is not always adequately available in certain neighborhoods or areas experiencing an economic downturn.

Financing for the combined purchase and rehabilitation of single-family housing is not widely available on a national scale, due in large part to: (1) the perceived risk by conventional lenders associated with the timely and satisfactory completion of the rehabilitation, (2) the lack of experience in this form of financing among lenders, mortgage insurers, and secondary market investors, and (3) inadequate coordination at the local level among lending institutions, real estate professionals, government agencies, and nonprofit organizations. As a result, housing in substandard condition that might be available at affordable prices for low- and moderate-income households cannot be financed at all or must be financed in stages-first by a purchase mortgage and subsequently by a rehabilitation loan.

In some sections of the United States, two-, three-, or four-unit properties are a prevalent part of the housing stock. These properties are ideal for low- and moderate-income homebuyers that can use the income from the rental units to supplement other sources of income to meet monthly homeownership expenses. However, mortgage financing for such structures is sometimes difficult to obtain.

To achieve all-time-high levels of homeownership by the end of the century, a greater percentage of lower income households must find ways to become owners. Less expensive housing, including manufactured homes, cooperative and mutual housing, and community land trust housing are possible solutions, but mortgage financing must become more readily available for these alternatives to succeed.

Finally, obtaining sufficient funds to purchase a home for many low- and moderate-income American households will require government and nonprofit financial support. Public subsidy programs can help fill the gap between mortgage lender availability and homebuyer affordability. Yet, despite many years of public-private sector experiments-including many notable success stories-there continues to be a lack of consistency in the way local governments and nonprofit housing organizations use subsidy dollars to leverage private mortgage money to support affordable homeownership. In the future, as State and local government discretion in the use of Federal housing funds increases, greater information sharing among States and localities as to what works will become increasingly essential.

Action 41: Home Purchase and Rehabilitation Financing With FHA 203(k)

The partnership, in collaboration with HUD, should seek to expand the number of conventional lending institutions and other FHA-approved lenders actively participating in the FHA 203(k) program. Partnership efforts also should include increasing risk-sharing opportunities and more fully developing the secondary market for this product.

The Columbus Housing Partnership (CHP) is a nonprofit organization in Columbus, Ohio, that uses the 203(k) Dreambuilder Mortgage to finance home rehabilitation. CHP uses 203(k) in two ways:

  • CHP purchases HUD-foreclosed homes and rehabilitates them using bank-provided 203(k) loans. Low-income homebuyers secure financing to buy out CHP’s 203(k) loans.
  • Homebuyers locate homes that need rehabilitation. They secure 203(k) financing from a HUD-certified lender and hire CHP as their general contractor. CHP rehabilitates the homes with no loan risk and very low contracting fees.


The FHA 203(k) program provides government-backed insurance for purchase and rehabilitation financing. In the past, many lenders considered the 203(k) program administratively cumbersome and expensive to implement. However, significant improvements have been made in the past 2 years. In fact, HUD expects to double its business in 203(k) loans in fiscal year 1995.

Action 42: Conventional Financing for Home Purchase and Rehabilitation

The partners should work to increase the availability of conventional financing for home purchase and rehabilitation. Efforts should include establishing partnerships between lenders and entities with rehabilitation experience.

Purchase and rehabilitation lending should not become the exclusive preserve of FHA or other public financing mechanisms. Local partnerships involving lending institutions, real estate professionals, and nonprofit organizations, with support from national secondary market investors and private mortgage insurance companies, can use their expertise to dramatically increase the volume of purchase-rehabilitation lending.

The Joint Ministries Project, a group of inner-city Minneapolis churches and community organizations, set out to make Minneapolis a “city of homeowners”. The organization’s housing development arm, Damascus Development Corporation, secured a revolving line of credit with TCF Bank to purchase and rehabilitate up to 50 HUD-owned vacant and boarded-up properties. For rehabilitation, Damascus contracts with a development company that uses subcontractors from the local area. Residents lease the rehabilitated homes from Damascus, with a portion of their rent escrowed and held for future purchase of the property. Fannie Mae purchases mortgages upon completion of rehabilitation and GE Capital provided needed mortgage insurance.

Local partnerships composed of lenders and local government or nonprofit housing providers should be established. Local mortgage lenders can underwrite loans, but typically do not have the staff or experience to oversee the rehabilitation process, although local government housing agencies and many nonprofit housing providers specialize in managing home rehabilitation. In some instances, the collaborative effort of the lender and local agency might also include public subsidies to: (1) reduce borrowed amounts so that financing costs do not exceed postrehabilitation property values, and (2) establish short-term credit enhancements, such as guarantees, to cover a portion of the risk associated with home rehabilitation.

To establish a broad-based conventional market for home purchase and rehabilitation lending, members of the partnership also should identify and share existing purchase and rehabilitation models. These models should be replicated on a larger scale.

Action 43: Home Rehabilitation Financing

Members of the partnership, particularly lender organizations and secondary market investors, should work to expand financing opportunities for home rehabilitation needs. In addition, HUD, in collaboration with other partners, should seek to improve the use of the FHA Title I Home Improvement Program as a viable form of rehabilitation financing for lower income homeowners.

Currently many homeowners face home improvement needs that are difficult to finance from conventional financing sources, due to property value limitations or owner credit and total debt-to-income problems. Without the availability of rehabilitation financing, properties will continue to deteriorate, further deflating home values and homeowner motivation.

Action 44: Flexible Mortgage Underwriting Criteria

The partnership should support efforts to increase local lender awareness and use of the flexible underwriting criteria established by the secondary market, FHA, and VA.

In recent years many mortgagees have increased underwriting flexibility. This increased flexibility is due, at least in part, to local lender community reinvestment strategies and liberalized affordable housing underwriting criteria established by secondary market investors such as Fannie Mae and Freddie Mac. Yet, many prospective homebuyers still cannot qualify for a conventional mortgage.

Some of these homebuyers cannot qualify without intensive counseling or subsidies. However, many households may qualify if local lenders are encouraged to use compensating factors in underwriting loans or more flexibly interpret secondary market purchase requirements. For example, Freddie Mac last year initiated Underwriting Barriers Outreach Groups, which brings lending industry and community groups together to review Freddie Mac guidelines. These meetings have led to clarification of many Freddie Mac loan purchasing requirements. Freddie Mac is publicizing these clarifications to inform participating lenders of existing underwriting flexibility and that the “cookie cutter” approach to lending may unintentionally exclude good borrowers from obtaining mortgage financing.

In Connecticut, People’s Bank and the Commonwealth Mortgage Assurance Corporation (CMAC), a private mortgage insurance company, have developed the Risk Share Program to allow conventional financing for low-income homebuyers. Under Risk Share, homebuyers may use medical, utility, and landlord payments as credit references. The program allows for nontraditional employment histories, employment histories with gaps, short-term employment, and frequent job changes. The loans are insured by CMAC based on a layering of risk. CMAC assumes the first layer of risk; People’s Bank assumes the second. Risk Share has closed $1.4 million in loans with no delinquencies to date.

Similarly, Fannie Mae is increasingly looking at compensating factors to traditional underwriting criteria for establishing credit and income stability. The firm’s actions include establishing a loan review board to review the affordable housing loans sold to the company that underwriters believe do not meet Fannie Mae guidelines and a “flexibility hotline” that lenders can call for answers to underwriting questions.

Action 45: Public-Private Leveraging for Affordable Home Financing

The partnership should support development of a comprehensive, nationwide analysis of local public-private homebuyer programs to ascertain which elements are indicators of long-term leveraging success. In addition, the partnership should sponsor interactive forums, training or other technical assistance efforts for local partners to promote replication of proven approaches.

Many would-be homebuyers, especially low- and moderate-income households, cannot rely solely on conventional mortgage financing to obtain a home. In these instances, government agencies and nonprofit organizations must use their flexible resources to the maximum extent possible to leverage private financing-in effect serving as a catalyst to make deals work that would otherwise prove infeasible.

There are hundreds of examples of successful local government and nonprofit leveraging programs throughout the United States-in urban and rural settings, operating on a large scale, and neighborhood-based-involving one lender or through statewide consortia with many lenders. The flexibility provided in HUD’s CDBG and HOME programs has made this leveraging possible in many instances.

There is, however, no national information exchange or compendium of program models which local lenders, nonprofit groups, or local government agencies can use for guidance on how to establish successful public-private initiatives.

To assist low- and moderate-income homebuyers, Wisconsin’s lending industry joined forces and created the Closing Cost Assistance Program (C-CAP). C- CAP merges a 3-percent buyer downpayment with a secondary loan to finance transaction costs. Funds are provided by the Federal Home Loan Bank of Chicago and the State of Wisconsin Division of Housing and backed by a purchase agreement with Fannie Mae. C-CAP reduces risk by pooling loans from lenders throughout the State. A revolving fund ensures that assistance is extended to future homebuyers.

Action 46: Reinventing FHA Single-Family Home Mortgage Insurance

HUD and other members of the partnership should work together to reinvent the FHA single-family home mortgage insurance program. FHA single family insurance has been instrumental in helping millions of homebuyers to obtain mortgage financing. In fact in fiscal year 1994, FHA endorsed over 1.3 million single-family loans-43 percent more than in the previous year. Over two-thirds of these loans assisted first-time homebuyers. Yet to remain an essential, integral part of the mortgage financing system that functions efficiently in a rapidly changing capital market, FHA must become more entrepreneurial and more responsible to its customers.

In the short run, FHA has already made significant improvements in its mortgage underwriting criteria, including the following:

  • Recognizing additional income sources, including overtime, bonuses, and part-time income.
  • Considering long-term obligations to include only debt extending 10 or more months and eliminating child care as a recurring debt.
  • Allowing use of cash saved at home or in private savings clubs.
  • Increasing flexibility in qualifying ratios and compensating factors.

Over the long run, more must be done. The Clinton Administration proposes reinventing FHA as a wholly owned government corporation, which can more quickly and entrepreneurially enter into creative partnerships with the public and private sectors. These partnerships would utilize FHA’s current “full faith and credit” for individual loans and pool loan insurance, reinsurance, risk-sharing, securitization, and other forms of credit enhancement. The new FHA, working with diverse partners, will expand the reach of the private sector to families, communities, and markets historically underserved by the private mortgage market.

Action 47: Native American Home Financing Needs

To promote homeownership for Native Americans, Federal and State partners should expand policies and programs that empower tribes to design homeownership models that meet their cultural, spiritual, and functional needs. Insured mortgage financing should continue to be available on reservations, and funding should continue for the HUD Section 184 loan guarantee program and the VA Native American Direct Loan Program. Native American homeownership needs also should be considered in the establishment of HUD’s Affordable Housing Fund. Furthermore, members of the partnership, including HUD, VA, the U.S. Department of Agriculture (USDA), the private lending community, and organizations representing Native American tribal interests, should engage in discussions with the Bureau of Indian Affairs to increase the timeliness of title searches and approval of loan documents.

Mortgage financing for Native American households, particularly on tribal lands, is not readily available. This is due to many factors, including the poor economic conditions on many reservations, the existence of trust land that cannot be used as collateral for financing, and the predominance of public housing.

In recent years, HUD and other Federal agencies have made significant strides in delegating funding decisions to tribal governments and Indian housing authorities. Newer Federal initiatives such as the Indian HOME program and Section 184 loan guarantees, increasing State focus on tribal housing needs, and greater secondary market investor involvement are beginning to make a difference in helping Native American families become homeowners.

Action 48: Small Rental Properties to Support Affordable Homeownership

Members of the partnership should provide opportunities for low- income homebuyers to purchase owner-occupied, small rental properties. The partners’ efforts should include exploring the development of alternative lending approaches; seeking creative uses of public and nonprofit resources in conjunction with conventional first mortgages; and streamlining the appraisal process. As discussed more fully in Chapter 7, Homeownership Education and Counseling, homebuyers of small rental properties should also obtain training in the management of rental properties prior to home purchase.

Schenectady Federal Savings and Loan Association of Schenectady, New York, is using a $375,000 direct subsidy from the Federal Home Loan Bank of New York to assist in the acquisition and rehabilitation of 30 duplexes. The homes will have one owner-occupied unit and one rental unit. The homes will either be purchased from HUD’s foreclosed inventory or donated by the city of Schenectady. Financing from additional Federal sources as well as from a local lending consortium is also being used.

Owner-occupied small rental properties, which are typically two- to four-unit dwellings, are a critical component of the affordable housing stock in many communities. These properties are often sought by low- and moderate- income homebuyers who need the rental income to help meet their home mortgage payments. In many markets, however, mortgage financing for these properties is not readily available for a number of reasons, including the risk associated with homebuyer inexperience in managing rental property, the risk of unexpected rental vacancies, the cost of emergency repairs, and the problem of missed or late rental payments.

Action 49: Continuation of the Mortgage Revenue Bond Program and Mortgage Credit Certificates

The partnership should promote the continuation of the Mortgage Revenue Bond (MRB) program. Mortgage Revenue Bonds receive a Federal tax exemption, enabling moderate-income homebuyers to obtain mortgages at below-market interest rates or with low downpayments. State and local government housing finance agencies operate the MRB program, which has helped more than 1.6 million American families buy their first homes. Most of these purchasers have incomes significantly below their State’s or metropolitan area’s median income.

Under its First Home program, the Indiana Housing Finance Authority uses Federal Mortgage Revenue Bonds and HUD’s HOME program to offer a no- downpayment mortgage for first-time homebuyers with incomes equal or less than 80 percent of the area median. The MRB program is used to finance below-market interest rate first mortgages for 80 percent of the property’s value. A second mortgage for the rest of the property’s value is provided at no interest with funds from the HOME program. Georgia, Kansas, Louisiana, Michigan, North Carolina, and many other States operate similar programs.

In addition, the partnership should promote continuation of Mortgage Credit Certificates, which make homeownership more affordable for lower income homebuyers by reducing their Federal tax liability. Maintaining adequately funded MRB and Mortgage Credit Certificate programs can directly and immediately increase homeownership among low- and moderate-income families that partners have targeted.

Action 50: Energy Efficiency and Home Mortgage Underwriting

The partnership should encourage consideration of changes in secondary market and conventional lender qualification systems for borrowers and in the property appraisal process to incorporate considerations of energy efficiency. Federal agencies should promote new qualification systems and study the energy efficiency impacts on current FHA, VA, and USDA home financing programs.

High energy costs can substantially increase a homeowner’s monthly housing costs. This may come as a hardship, especially to homeowners who do not anticipate these costs. Increasing a home’s energy efficiency not only improves homeownership affordability, but also increases the property value of the home and promotes a cleaner environment.

Action 51: Cooperative Homeownership

The partnership should seek to increase the availability of financing for cooperative housing both through the development of new cooperative housing and the conversion of existing rental housing to cooperative resident ownership.

Renters often become more involved in the quality and long-term viability of their homes when they become members of a cooperative. Although cooperative housing does not provide all of the ownership advantages available through fee-simple ownership, households can exercise much greater control over their living conditions than they can as tenants. Yet, lack of adequate public and private financing for cooperatives is a major impediment. In addition, enhanced awareness of the benefits of cooperative housing, particularly for low- and moderate-income households who cannot afford the costs associated with fee-simple ownership, must also be addressed before cooperative home ownership can be significantly increased.

source: hud.gov

H/T Josh Rosner

Full text: 1995’s “National Partners in Homeownership” strategy. The public/private partnership that led us here.

[ipaper docId=77727501 access_key=key-a47jazpzmolbhcarlo0 height=600 width=600 /]


© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

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FHA Bailout Coming, Faces $50 Billion in Loses – WE WERE ALWAYS RIGHT!

FHA Bailout Coming, Faces $50 Billion in Loses – WE WERE ALWAYS RIGHT!

We always knew this was coming, They always knew this was coming and they always knew the taxpayers were going to pick up yet another Ponzi Tab to another brilliant sub-prime cover up!


We said it was the Federal Housing Administration, which sells lenders a 100% guarantee against defaults on home mortgages typically for lower income people. FHA has seen defaults skyrocket on these loans.

But the Federal Housing Administration fought us vigorously on our story. So did liberal economic research groups.

Turns out they were wrong.

As the FHA is now set to soon release its annual report, the University of Pennsylvania’s Wharton School estimates that the FHA faces around $50 billion in losses in coming years.

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

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Banks could face new source of mortgage losses

Banks could face new source of mortgage losses

Lies, bogus claims catching up…a bit too late

(Reuters) –

A federal housing insurance program may be forced to deny bank claims for money lost in home loan foreclosures, costing them another $13.5 billion in mortgage-related losses, according to a report on Monday from bank analyst Paul Miller of FBR Capital Markets.

Bank of America Corp, JPMorgan Chase & Co and Wells Fargo, three of the four largest U.S. banks, are at risk for the biggest losses, the analyst estimated.

The Federal Housing Authority, which insures …


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At FHA, Odd Accounting Burnished Stevens’ Image

At FHA, Odd Accounting Burnished Stevens’ Image

An “unprecedented crackdown.” That’s how Commissioner David Stevens described a get-tough program that took place under him at the Federal Housing Administration from mid-2009 until April of this year. As part of the push, the FHA’s Mortgage Review Board issued more administrative actions against lenders in Stevens’ first year than it had in the prior eight years combined.


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Obama administration to solicit bids to rent out foreclosed properties held by Fannie, Freddie, FHA

Obama administration to solicit bids to rent out foreclosed properties held by Fannie, Freddie, FHA

Mark my words this is yet another DISASTER waiting to happen. Taxpayers will be on the hook for this … wait and see if this plays out.

Anything to slow the process down to see what profits can be diverted to the mega rich! After all Fannie Mae Sells Homes For $200 To Investors, Driving Property Values WAY Down, so who cares anyway.


The Obama administration will announce plans Wednesday to seek investors’ ideas for turning thousands of foreclosed properties owned by government-backed entities into rental homes, according to administration officials.

The move is intended to put a floor under declining home prices by creating a way to deal with hundreds of thousands of potential foreclosures in coming years.

Mortgage giants Fannie Mae and Freddie Mac sold a record 100,000 homes during the second quarter. Together with the Federal Housing Administration, the entities owned about 250,000 homes at the end of June, or around half of all unsold, repossessed properties. Another 830,000 homes …


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MBA head David Stevens “Cozy” with Banks While at the FHA

MBA head David Stevens “Cozy” with Banks While at the FHA

The American Banker

David Stevens arrived as a commissioner at the Federal Housing Administration in 2009 vowing to restore financial discipline to a government housing body facing the stresses of a post-crash world. A former mortgage banker himself, Stevens, now 54, bolstered the agency’s finances and pursued alleged wrongdoing at nonbank lenders including Berkshire Hathaway and Goldman Sachs & Co. affiliates.

One group the FHA did not feud with during Stevens’ tenure: top industry players, such as Bank of America Corp. and Wells Fargo & Co. A collection of emails between Stevens and the Mortgage Bankers Association may help explain why.


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READ LETTER | MBA Asks HUD to Permit E-Signatures on FHA Loans

READ LETTER | MBA Asks HUD to Permit E-Signatures on FHA Loans

We all know where very similar words got MERS…

“E-signatures will reduce the volume of lost paperwork, reduce signature fraud, reduce the time required to close a loan, and may lead to lower borrower costs.”

MERS cannot even keep track of who owns what loan and with all the alleged fraudulent signatures originating from it’s certifying officers signing virtually any number of documents to land records… special caution to permit e-signatures that can easily be cut and pasted.

What if this ever gets “hacked”… nothing is bullet proof.

Read the letter below…

[ipaper docId=57025234 access_key=key-145ld1yf6pkpn8zowucm height=600 width=600 /]

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Buyers’ Market? Stressed Sellers Say Not So Fast

Buyers’ Market? Stressed Sellers Say Not So Fast

WSJ- Nick Timiraos

Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market.

Blame the nearly five-year slide of home prices. Those declines, which accelerated over the past two quarters, have left many sellers unable or unwilling to lower their prices. Meanwhile, buyers remain gun shy about agreeing to any purchase without getting a deep discount.

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MA Court Certifies ECOA, FHA Class Action Against H&R BLOCK, OPTION ONE

MA Court Certifies ECOA, FHA Class Action Against H&R BLOCK, OPTION ONE


Civil Action No. 08-10157-RWZ.

United States District Court, D. Massachusetts.

March 21, 2011.


RYA W. ZOBEL, District Judge.

Now pending before the court is Plaintiffs’ motion for class certification. Plaintiffs are African-American homeowners who bring suit on behalf of themselves and similarly situated homeowners against H&R Block, Inc. (“H&R Block”), and its wholly-owned subsidiaries, San Canyon Corp., f/k/a Option One Mortgage Corporation (“Option One”) and Ada Services Corporation, f/k/a H&R Block Mortgage Corporation (“H&R Block Mortgage”) (collectively, “Option One” or “Defendants”).[2]

The gravamen of Plaintiffs’ complaint is that H&R Block and Option One violated the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f (“ECOA”), and the Fair Housing Act, 42 U.S.C. §§ 3601-3619 (“FHA”),[3] by giving its authorized brokers discretion to impose additional charges to the borrower’s wholesale mortgage loans unrelated to a borrower’s creditworthiness, a policy that had a disparate impact on African-American borrowers in that it resulted in their being charged higher rates than similarly situated whites.[4]

Plaintiffs now move to certify a class of “[a]ll African-American borrowers who obtained a mortgage loan from one of the Defendants between January 1, 2001 and the [d]ate of [j]udgment” under Federal Rule of Civil Procedure 23(b)(3). See Docket # 74, Pl.’s Mem. in Support of Mot. for Class Certification at 17.

I. Background

Plaintiffs Cecil and Cynthia Barrett (“the Barretts”) purchased their home in 2004 for approximately $277,000. See Second Am. Compl. ¶ 76. They refinanced the mortgage on their home in Mattapan, Massachusetts, in 2005, taking out a $416,000 loan with a 30-year term and a disclosed Annual Percentage Rate, or “APR,” of 8.653 percent. Id. at ¶¶ 77-78. The Barretts were assisted by Money-Wise Solutions, a mortgage broker authorized to originate loans with Option One. Id. at ¶ 79. On April 6, 2006, they again refinanced. Id. at ¶ 81. That loan, also with Option One, was for $500,000, and had an adjustable rate with a balloon feature, providing for a final payment of $344,113.90. Id. at ¶ 82. The APR on the second loan was 10.536%. Id. The remaining plaintiffs similarly used brokers to obtain wholesale mortgage loans from Option One and allege that they were charged a higher APR than similarly-situated whites.

H&R Block made home mortgage loans to consumers through its subsidiaries, H&R Block Mortgage and Option One. See Second Am. Compl. ¶¶ 23, 49. Option One was primarily a wholesale mortgage lender and offered its services through its branches and a national network of mortgage brokers. Id. at ¶ 22.

In the wholesale mortgage lender market, independent mortgage brokers act as intermediaries between borrowers and lenders like Option One. A broker identifies prospective borrowers, facilitates the loan origination process, and transmits prospective borrowers’ respective applications to lenders for a determination of whether or not to grant the loan. This reliance on brokers enabled Option One to fund mortgages in areas where it had not established any retail presence of its own. Option One worked with numerous authorized brokers when it was in the wholesale mortgage business, which it abandoned in late 2007. Between 2001 and 2007, H&R Block Mortgage’s subprime retail originations represented approximately 10% of Option One’s overall loan origination volume.

The pricing of Option One’s mortgage loans was comprised of an objective and a subjective component. According to Plaintiffs, when a proposed borrower applied for a loan, Option One first computed a risk-based financing rate (the “Par Rate”) based on objective criteria of creditworthiness, such as FICO score, property value, and loan-to-value ratio to determine credit parameters, and set prices for its loan products. This information was communicated to brokers on a rate sheet listing Option One’s “par” interest rate, which did not result in any broker compensation. That objective component of loan pricing is not at issue here.

Option One also authorized a subjective component in its credit pricing system (the “Discretionary Pricing Policy”), which governed brokers’ compensation for their services. This is the policy at issue. Under this policy, brokers were permitted to set interest rates higher than the par rate, as well as to charge loan origination and processing fees. Option One paid brokers a “yield spread premium” or “rebate” when they did so. Brokers were paid more for loans that cost the borrower more, though their total compensation was capped at 5 percent of the loan amount. As the name implies, there were no objective criteria for the imposition of these higher rates and fees, which were set by the brokers in their discretion. These discretionary charges were negotiated between the broker and borrower as part of the total finance charge (the “Contract APR”), without specific disclosure that a portion of the Contract APR was a non-risk related charge.

Option One, along with H&R Block and H&R Block Mortgage, jointly established the Discretionary Pricing Policy and participated in the decisions to grant credit to borrowers. (Id. ¶¶ 53-54.) Option One monitored the fees charged by its brokers to ensure they complied with its policies.

Plaintiffs allege that “by design,” the Discretionary Pricing Policy “caused persons with identical or similar credit scores to pay different amounts for the cost of credit.” (Id. ¶ 68.) Although facially neutral, the policy had an adverse effect on African-Americans in that they paid higher discretionary charges on their home loans than did similarly situated white borrowers. Plaintiffs bring these claims under a disparate impact theory, challenging “practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity.” Int’l Bhd. of Teamsters v. United States, 431 U.S. 324, 335 n. 15 (1977).

II. Legal Standard

To obtain class certification, plaintiffs must satisfy four requirements of Federal Rule of Civil Procedure 23(a) as well as one of several requirements of Rule 23(b). Smilow v. Southwestern Bell Mobile Systems, Inc., 323 F.3d 32, 38 (1st Cir. 2003).

Rule 23(a) provides that a class may be certified only if “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a). Courts have characterized this rule to require plaintiffs to satisfy the requirements of numerosity, commonality, typicality, and adequacy. See Smilow, 323 F.3d at 38.

Rule 23(b) allows for several different types of class actions. Plaintiffs seek to certify the class under Rule 23(b)(3) which requires a showing “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b).

Before certifying a class, courts are required to engage in “a rigorous analysis of the prerequisites established by Rule 23.” In re New Motor Vehicles Canadian Export Antitrust Litigation, 522 F.3d 6, 17 (1st Cir. 2008). Accordingly, when considering disputed issues for class certification, a district court may “probe behind the pleadings to formulate some prediction as to how specific issues will play out.” DeRosa v. Massachusetts Bay Commuter Rail Co., 694 F. Supp. 2d 87, 95 (D. Mass. 2010) (citations omitted). However, the court may not consider whether the party seeking class certification has stated a cause of action or is likely to prevail on the merits. See In re Initial Public Offering Securities Litigation, 471 F.3d 24, 36-37 (2d Cir. 2006). A district court must certify a class if it concludes that the moving party has met its burden of proof on each element.

III. Analysis

A. Rule 23(a)

1. Numerosity

Under Rule 23(a)(1), the numerosity requirement is met if “the class is so numerous that joinder of all members is impracticable.”

From 2001 through 2007, Option One made at least 130,000 wholesale and retail loans to African-American borrowers located across the United States. Defendants do not dispute that the numerosity requirement has been met.

2. Commonality

To demonstrate commonality under Rule 23(a)(2), Plaintiffs must establish “common questions of law and fact.” Fed. R. Civ. P. 23(a)(2). It is not necessary that members of the proposed class share every fact in common or present identical legal issues. See In re Transkaryotic Therapies, Inc. Securities Litig., 03-cv-10165-RWZ, 2005 WL 3178162, at *2 (D. Mass. Nov. 28, 2005) (internal quotations omitted). Rather, the rule requires “a sufficient constellation of common issues [that] binds class members together.” Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 296 (1st Cir. 2000). In actions based on disparate impact, commonality is satisfied if the lawsuit “tend[s] to show the existence of a class of persons affected by a company-wide policy or practice of discrimination.” Attenborough v. Const. and General Bldg. Laborers’ Local 79, 238 F.R.D. 82, 95 (S.D.N.Y. 2006). Individual factual differences among the putative class members will not preclude a finding of commonality. See Armstrong v. Davis, 275 F.3d 849, 868 (9th Cir. 2001).

To make out a prima facie case of discrimination under the disparate impact theory, a plaintiff must (1) identify the specific practice being challenged; and (2) show that it effected different results in different populations. See Watson v. Ft. Worth Bank and Trust, 487 U.S. 977, 994-995 (1988). “[I]t is not enough to simply allege that there is a disparate impact on workers, or point to a generalized policy that leads to such an impact. Rather, the [plaintiff] is responsible for isolating and identifying the specific … practices that are allegedly responsible for any observed statistical disparities.” See Smith v. City of Jackson, 544 U.S. 228, 241 (2005) (internal quotations omitted). Moreover, “[p]roof of disparate impact is based not on an examination of individual claims, but on a statistical analysis of the class as a whole.” In re Wells Fargo Residential Mortg. Lending Discrimination Litigation, 08-md-01930, 2010 WL 4791687, *2 (N.D. Cal. 2010) (internal citations omitted).

Once the plaintiff has established a prima facie case of disparate impact, the burden of proof shifts to the defendant, who may either discredit the plaintiff’s statistics or proffer its own computations to demonstrate that no disparity exists. See Watson, 487 U.S. at 996-97.

First, Option One argues that the named Plaintiffs cannot satisfy the requirement of commonality because the results of an aggregated statistical regression cannot supply classwide proof of discrimination, particularly where individual Plaintiffs did receive a lower APR.[5] It relies on its studies that the majority of putative class members paid an amount that was statistically the same as they would have paid had they been white, and that another 2.6% of class members paid an amount less than predicted. Defendants contend that such disparities as existed are explainable not by race but by factors such as geography and the individual broker. Second, Defendants contend that individualized pricing, changes in policy, and other practices preclude classwide adjudication of Plaintiffs’ claims.

Plaintiffs demonstrate common questions of fact and law through the expert report of Yale Law School Professor Dr. Ian Ayres (“Professor Ayres”), whose analysis of Option One’s mortgage data leads him to conclude that the Discretionary Pricing Policy did have a disparate impact on minority borrowers because “African Americans paid more for Option One mortgage loans than whites with similar risk-characteristics.” Docket # 89-3, Report of Professor Ayres (“Ayres Report”) at 6, ¶ 10. In his study, Professor Ayres compares the annual percentage rate, or “APR,” paid by white and minority borrowers for Option One wholesale loans originated from 2001 to 2007. He finds that the mean APR for African-Americans was 9.876%, as compared with a mean APR of 9.415% for whites, a difference of 0.461%. See Ayres Report at 7, ¶ 10.

To compare similarly situated whites and minorities, Professor Ayres also performed regression analysis, a statistical method that allows him to control for legitimate risk factors that may affect the cost of a loan. Controlling for such risk factors, he concluded that the APRs of African-Americans are 0.086% higher than those of similarly situated whites, resulting in an average payment of $134 more per year for each of the former group’s loans. Professor Ayres’ study relies entirely on evidence common to the class and does not require any individualized inquiry.

The central question of fact and law is common to the class. Plaintiffs assert that the discretionary pricing strategy they challenge was executed uniformly, and its adverse effects were felt in the same way by Plaintiffs and all class members. Therefore, common questions include whether Option One’s policy resulted in a pricing disparity between white and minority borrowers and whether those disparities are justified by legitimate risk factors.

Defendants dispute commonality through their own expert, Dr. Darius Palia (“Dr. Palia”), Professor of Finance and Economics at Rutgers Business School, who asserts that there is no evidence that there was “a commonly applied `Discretionary Pricing Policy’ that was the cause of a class-wide disparate impact on African-American borrowers.” See Docket # 89-1 (Rebuttal Report of Dr. Palia dated May 4, 2010, hereinafter “Palia Report”).

Using Professor Ayres’ numbers, Dr. Palia replicated Professor Ayres’ exact regression analysis to highlight alleged errors. Dr. Palia points to two major flaws in Professor Ayres’ analysis. First, he argues that the Ayres regression model was improperly applied to the aggregate, and not separately to the individual mortgage brokers that used the so-called “Discretionary Pricing Policy.” If such a policy had, in fact, been applied, “the disparate impact caused by the policy should be observed consistently across the various brokers that applied it”; if not, “that would suggest that loan pricing is the result of individualized decision-making rather than the result of a common policy.” Second, Dr. Palia contends that Professor Ayres’ failure to apply his regression model separately to local geographic markets in which borrowers applied for and obtained their mortgage loans renders his conclusions inaccurate. After completing his own analysis, Dr. Palia concluded: “(1) the statistical evidence does not show any common pattern of disparate impact against African-American borrowers either across the brokers that originated the loans or across the geographic markets in which the largest numbers of loans were originated; (2) even among the minority of brokers and geographic markets in which African-Americans experienced statistically higher APRs than similarly-situated whites, there is no common cause of such pricing differences; and (3) nine of ten loans extended to named plaintiffs had APRs that were not statistically different from the APR that would have been predicted had the borrowers been white.”

Although Defendants hotly dispute the merits of Professor Ayres’ analysis, it has long been the rule that disputes about the respective experts’ statistics are tantamount to disputes about the parties’ proof of the merits and are not grounds for denying class certification. See In re Initial Public Offerings Securities Litigation, 471 F.3d 24, 35 (2d Cir. 2006)[6] Plaintiffs have satisfied the commonality requirement. (experts’ disagreement on whether a discriminatory impact could be shown is a disagreement as to the merits, and is not a valid basis for denying class certification). Statistical disputes in civil rights cases “encompass the basic merits inquiry and need not be proved to raise common questions and demonstrate the appropriateness of class resolution.” Id. at 594.

3. Typicality

A plaintiff may represent a class only if his or her claims are “typical” of those of the putative class. See Fed. R. Civ. P. 23(a)(3). In general, a plaintiff’s claim is typical if it “arises from the same event or practice or course of conduct that gives rise to the claims of other class members, and if his or her claims are based on the same legal theory.” In re Pharm. Indus. Average Wholesale Price Litig., 230 F.R.D. 61, 78 (D. Mass. 2005). Where, however, “a named plaintiff may be subject to unique defenses that would divert attention from the common claims of the class, that plaintiff cannot be considered typical of the class.” In re Bank of Boston Corp. Securities Litigation, 762 F.Supp. 1525, 1532 (D. Mass. 1991). While commonality “examines the relationship of facts and legal issues common to class members,” typicality “focuses on the relationship of facts and issues between the class and its representatives.” Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 613 n. 37 (9th Cir. 2010) (en banc).

Here, Plaintiffs contend that their claims are typical because Option One made loans to each Plaintiff under the same subjective Discretionary Pricing Policy to which the class was subjected.

Option One counters that the named Plaintiffs are not typical for two reasons: (1) some have suffered no injury in connection with their loans and therefore lack standing; and (2) individualized defenses demonstrate that there is no “typical” named plaintiff.

i. Standing

Defendants assert that certain Plaintiffs were not injured because they received loans that were priced more favorably than similarly situated white borrowers. Further they argue that Plaintiffs’ reliance on Dr. Ayres’ conclusions of disadvantage to African-American borrowers as a group does not support the inference that the named Plaintiffs were so disadvantaged. Absent such individualized evidence, the named Plaintiffs are not typical of the class they represent, and thus lack standing.

Plaintiffs have alleged that the disparate impact was the result of the Discretionary Pricing Policy, a common practice that governed the pricing of all class members’ mortgages. The named Plaintiffs were subject to that policy, and have advanced a viable theory showing that it produced harm. That is sufficient to satisfy the typicality requirement.

ii. Individualized Defenses

Next, Defendants contend that the individual circumstances surrounding each named Plaintiff’s loans expose each to individual defenses which defeat typicality. In particular, Defendants contend that several Plaintiffs submitted loan applications which contained false information, subjecting them to a defense of unclean hands. This argument is unavailing. The U.S. Supreme Court has held that because the purpose of the ECOA is to eradicate discrimination, the unclean hands defense is not available to question liability. See McKennon v. Nashville Banner Publishing Co., 513 U.S. 352, 356-57, 360 (1995) (holding that the unclean hands defense “has not been applied where Congress authorizes broad equitable relief to serve important national policies” including civil rights statutes such as the ADEA); see also Moore v. U.S. Department of Agriculture, 55 F.3d 991, 995-96 (5th Cir. 1995) (holding that an unclean hands defense did not defeat liability under the ECOA).

Finally, Defendants say that the necessity for an individualized statute of limitations defense determination defeats typicality. This, too, is without merit. First, this court has already ruled against Defendant’s statute of limitations defense with respect to the named Plaintiffs when it denied their motion to dismiss. Second, all named Plaintiffs but one filed within the requisite time. Third, at the class certification stage, a court’s analysis of unique defenses focuses on whether those defenses will “unacceptably detract from the focus of the litigation to the detriment of absent class members.” Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 59 (2d Cir. 2000). Here, any statute of limitations defense will not do so.

4. Adequacy

Rule 23(a)(4) requires that the proposed class representatives “fairly and adequately protect the interests of the class.” This requirement has two parts. Plaintiffs must first demonstrate that “the interests of the representative party will not conflict with the interests of any of the class members,” and second, that “counsel chosen by the representative party is qualified, experienced and able to vigorously conduct the proposed litigation.” In re M3 Power Razor System Marketing & Sales Practice Litigation, 270 F.R.D. 45, 55 (D. Mass. 2010) (citing Andrews v. Bechtel Power Corp., 780 F.2d 124, 130 (1st Cir. 1985)).

Option One does not dispute the adequacy of these class representatives, and the court discerns no conflicts between Plaintiffs and any members of the class. Accordingly, all four requirements of Rule 23(a) have been met.

B. Rule 23(b)(3)

As they request certification under Rule 23(b)(3), Plaintiffs must present evidence showing the predominance of common issues and the superiority of a class action. The court now turns to these two requirements.

1. Predominance

Rule 23(b)(3) requires the court to find “that the questions of law or fact common to class members predominate over any questions affecting only individual members.” This predominance requirement “tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation” and is a “far more demanding” standard than Rule 23(a)’s commonality requirement. Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 623-24 (1997). The Rule is intended to ensure “that common issues predominate, not that all issues be common to the class.” In re Transkaryotic Therapies, Inc. Securities Litigation, 2005 WL 3178162, *2 (D. Mass. 2005) (citations omitted).

Option One disputes predominance by reiterating its arguments against commonality. The disparity in APR is explained not by race, Option One argues, but by other legitimate variables.

The key question again is whether Option One’s Discretionary Pricing Policy had a disparate impact, that is, whether it fell “more harshly on one group than another and cannot be justified by business necessity.” Int’l Bhd. of Teamsters v. United States, 431 U.S. 324, 335 n. 15 (1977). Since the claim is disparate impact, the relevant evidence will focus on “statistical disparities, rather than specific incidents, and on competing explanations for those disparities.” Watson v. Ft. Worth Bank & Trust, 487 U.S. 977, 987 (1988).

Professor Ayres’ analysis provides evidence of the disparate impact on a class-wide basis. Competing explanations for those disparities are examined by way of regression analyses that assess the effect of competing variables. Option One can defend against Plaintiffs’ case either by demonstrating that its discretionary policy had a valid business justification, or by challenging the statistical basis for Plaintiffs’ claim. In either case, the legal contention applies across the class. Thus, Plaintiffs have carried their burden of showing the predominance of common questions.

2. Superiority

The final requirement for class certification is “that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The pertinent factors in assessing superiority are “the class members’ interests in individually controlling the prosecution or defense of separate actions” and “the likely difficulties in managing a class action.” Id. Superiority exists where “there is a real question whether the putative class members could sensibly litigate on their own for these amounts of damages, especially with the prospect of expert testimony required.” Gintis v. Bouchard Transp. Co., Inc., 596 F.3d 64, 68 (1st Cir. 2010).

It would be neither economically feasible nor efficient for class members to pursue these claims against Option One individually. The amounts recoverable for individual class members are too low for class members to bring individual claims. The class action is manageable because liability will be determined based on statistical proof, and remedies can be calculated on a class-wide basis. A class is therefore superior to other methods for adjudicating these claims.

C. Class Period

While the result on the merits is by no means certain, the proposed class satisfies the requirements of Rule 23, and class certification is appropriate. However, several questions remain unresolved. Most notably, the proposed dates of the beginning and end of the class period are left singularly unsubstantiated. Moreover, it is unclear how and when Option One began to identify loan applicants by race.

D. Rule 23(g)

Since the court has determined that Plaintiffs have met Rule 23’s requirements for class certification, the court must appoint class counsel. See Fed. R. Civ. P. 23(g). On or before April 11, 2011, any counsel who wishes to serve as class counsel shall file the requisite motions and documentation to support his/her request.

IV. Conclusion

Plaintiffs’ motion for class certification (Docket # 72) is ALLOWED, subject to limitation by time. A class of “[a]ll African-American borrowers who obtained a mortgage loan from one of the Defendants” is hereby certified.

[1] H&R Block Bank, a Federal Savings Bank, Member FDIC, was named as a defendant but has since been voluntarily dismissed from the action. H&R Block, Inc. was dismissed for lack of personal jurisdiction. The only defendants remaining are Option One Mortgage Corporation and Option One Mortgage Services, Inc., which became the new name of H&R Mortgage Services in July 2007.

[2] Plaintiffs are Cecil Barrett, Jr., Cynthia Barrett, Jean Blanco Guerrier, Angelique M. Bastien, Jacqueline Grissett, Craig Grissett, Steven Parham, Betty and Edward Hoffman, Doris Murray, Joslyn Day and Keisha Chavers (collectively “Plaintiffs”),

[3] The ECOA provides that it is unlawful “for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction-(1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract).” 15 U.S.C. § 1691(a). Similarly, the FHA makes it unlawful “for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.” 42 U.S.C. § 3605(a).

[4] This court previously concluded that disparate impact claims are cognizable under both the FHA and ECOA. See Order Denying Mot. to Dismiss (Docket # 45) at 3-5; see also Langlois v. Abington Hous. Auth., 207 F.3d, 43, 49 (1st Cir. 2000) (disparate impact claims allowable under FHA); and Miller v. Countrywide Bank, N.A., 571 F. Supp. 2d 251, 256-257 (D. Mass. 2008) (disparate impact claims allowable under ECOA).

[5] Citing Stastny v. Southern Bell Tel. & Tel. Co., 628 F.2d 267 (4th Cir. 1980), Defendants further contend that delegation of discretion cannot, as a matter of law, form the policy required to make out a claim of disparate impact discrimination. This argument is unavailing. It is not the delegation of discretion that constitutes the policy, but rather the existence of a commonly applied practice that satisfies the requirement. See Watson v. Fort Worth Bank, 487 U.S. 977 (1988) (policies which designate discretionary authority to individual actors are actionable if they have a verifiable discriminatory impact on a protected class); see also Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 612 (9th Cir. 2010) (en banc) (same).

Moreover, this court previously held that Plaintiffs adequately identified the practice at issue, namely “establishing a par rate keyed to objective indicators of creditworthiness while simultaneously authorizing additional charges keyed to factors unrelated to those criteria.” Barrett v. H & R Block, 08-cv-10157-RWZ (Docket # 45) at 7.

[6] Defendants contend that arguments that one party’s statistics are “unreliable or based on an unaccepted method” must be resolved at the certification stage. See Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 591-592 (9th Cir. 2010) (en banc). Here, however, Defendants do not contend that the statistical analysis was based on an unaccepted method. Rather, they contend that Dr. Ayres’ model produces results which do not prove a disparate impact caused by any policy.

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BLOOMBERG | Outgoing FHA Commissioner Will Head Mortgage Bankers Group

BLOOMBERG | Outgoing FHA Commissioner Will Head Mortgage Bankers Group

Federal Housing Administration Commissioner David H. Stevens will become head of the Mortgage Bankers Association after he leaves his government post this month, the trade group said.

Stevens last week announced his intention to resign from the housing agency. He will join the Washington-based bankers group in May.

Michael D. Berman, chairman of the bankers group, called Stevens “uniquely qualified” for the job.

“He has had a tremendous impact at FHA,” Berman said in a statement today.

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FHA Commissioner David H. Stevens Expected To Resign

FHA Commissioner David H. Stevens Expected To Resign

Via Wall Street Journal:

David H. Stevens, the commissioner of the Federal Housing Administration who steered the agency through a critical stretch of the housing downturn, is expected to leave his post this spring, according to people familiar with the matter.

Officials wouldn’t confirm or deny the pending departure. Mr. Stevens declined to comment.

Mr. Stevens has played key roles shaping the Obama administration’s housing policies at the FHA, an agency that has occupied a vital role in healing housing markets by continuing to make low-down-payment mortgages available. He took the helm of the government loan insurer in July 2009 at a time that it faced rapidly rising losses from mortgage defaults and dwindling reserves, raising the prospect of a taxpayer rescue.

Continue reading WSJ

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NYTIMES | A Coming Nightmare of Homeownership?

NYTIMES | A Coming Nightmare of Homeownership?

Published: October 3, 2004

IT is literally a trillion-dollar question: What will a humbled, reined-in Fannie Mae, the nation’s biggest mortgage provider, mean to the economy, the financial markets, interest rates and housing in America?

Since regulators disclosed evidence of widespread accounting improprieties at the company, which carries almost $1 trillion in mortgages on its books, the response from the financial markets has been surprisingly muted. To be sure, Fannie Mae’s stock has lost 14 percent of its value, but its debt securities have held fairly steady and the pools of mortgages it sells to investors have continued to attract buyers.

Even if Fannie Mae’s troubles are eventually worked out, there may be other, potentially nasty reverberations from the company’s weakened position. These include a possible hit to the dollar if foreign investors, who have bought so much of the company’s debt, become alarmed by the accounting problems and sell.

James A. Bianco of Bianco Research in Chicago, said he thinks foreigners might well cut back on their Fannie Mae debt holdings, as they seem to have done when Freddie Mac, another government-sponsored enterprise in the mortgage business, had its own accounting problems last year. ”If Freddie spooked foreigners, the Fannie scandal will exacerbate the trend,” he said.

In addition, Fannie Mae’s woes could work against the Federal Reserve Board as it moves to keep inflation in check by raising interest rates. If the company, under heightened scrutiny, decides that it must manage its interest rate risk more aggressively, it would have to buy huge amounts of Treasury securities. Doing so would push rates down further, creating a vicious cycle in which more homeowners refinance their mortgages, leaving Fannie Mae with a larger mismatch between the longer-term debt they have issued to buy the mortgages and the shorter-lived mortgages themselves.

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FLORENCE R. LACY-MCKINNEY, Appellant-Defendant,

No. 71A03-0912-CV-587.

Court of Appeals of Indiana.

November 19, 2010.

JOSEPH F. ZIELINSKI Indiana Legal Services, Inc. South Bend, Indiana, ATTORNEY FOR APPELLANT.



KIRSCH, Judge.

Florence R. Lacy-McKinney (“Lacy-McKinney”) appeals the trial court`s entry of summary judgment in favor of Taylor, Bean & Whitaker Mortgage Corp. (“Taylor-Bean”) on Taylor-Bean`s action to foreclose on Lacy-McKinney`s mortgage that was insured by the Federal Housing Administration (“FHA”).[1] On appeal, Lacy-McKinney raises two issues that we restate as:

I. Whether a mortgagee`s compliance with federal mortgage servicing responsibilities is a condition precedent that may be raised as an affirmative defense to the foreclosure of an FHA-insured mortgage; and

II. Whether the trial court erred when it entered summary judgment in favor of Taylor-Bean on its mortgage foreclosure action against Lacy-McKinney.

We reverse and remand.

At the time Taylor-Bean filed its complaint, the security interest in the subject mortgage was in the name of Mortgage Electronic Registration Systems, Inc. (“MERS”) “(solely as nominee for [Taylor-Bean] . . . and [Taylor-Bean`s] successors and assigns).” Appellant’s App. at 8. After MERS assigned the security interest to Taylor-Bean, Taylor-Bean filed an amended complaint. Lacy-McKinney initially argued that summary judgment in favor of Taylor-Bean must fail because Taylor-Bean had no interest in the Property at the time the original complaint was filed. Id. at 102-03. Lacy-McKinney does not raise this issue on appeal.

continue below…

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Bank of America Exits First Mortgage Wholesale Channel

Bank of America Exits First Mortgage Wholesale Channel

Strategic Move Will Build Upon Leadership Positions in Retail, Correspondent and Warehouse Lending

CALABASAS, Calif., Oct 05, 2010 (BUSINESS WIRE) —

Bank of America Home Loans will exit the first mortgage wholesale channel to focus more operational resources toward fulfillment capacity for its leading direct-to-consumer retail channel, helping existing and new customers obtain mortgage financing. Bank of America will also devote additional resources toward enhancing its leadership positions in correspondent and warehouse lending. The exit will be completed following an orderly transition of loans currently in process.

“By exiting the first mortgage wholesale channel, we can redirect critical operational resources to further enhance our capabilities in direct-to-consumer channels,” said Barbara Desoer, president of Bank of America Home Loans. “This is an investment in strengthening our competitive position by delivering on the services our mortgage customers expect from Bank of America.”

Bank of America holds a prominent share in retail mortgage originations, with 22 percent of the retail market in 2009, according to Inside Mortgage Finance (IMF). Bank of America’s share of the first mortgage wholesale channel was 8 percent in 2009. Conversely, Bank of America was the leading participant in the correspondent mortgage channel, with nearly 26 percent market share, according to IMF.

“Bank of America remains committed to purchasing and financing loans from Correspondent Lending clients, including those approved to originate loans from mortgage brokers,” said Doug Jones, president of Bank of America Institutional Mortgage Services. “We intend to build upon our leadership position in that market to provide enhanced liquidity to the smaller financial institutions and independent mortgage companies that supply mortgages as our correspondent clients.”

Associates impacted by the exit from the first mortgage wholesale channel will have the opportunity for redeployment to other Bank of America Home Loans units, including direct-to-consumer operational units that are helping Bank of America customers take advantage of historically low rates to purchase new homes or refinance existing homes. Associates will also have the opportunity to transfer to other Bank of America Home Loans units, including Correspondent and Warehouse Lending, Retail Sales and teams serving the needs of distressed borrowers.

Bank of America will work closely with its first mortgage wholesale clients to ensure that loans currently in the pipeline are fulfilled and processed for consumers.

Bank of America

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with 5,900 retail banking offices, more than 18,000 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.


SOURCE: Bank of America

Reporters May Contact:
Dan Frahm, Jumana Bauwens or Rick Simon, 1.800.796.8448
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Fannie Mae, Freddie Mac losing political support as U.S. reshapes housing finance system

Fannie Mae, Freddie Mac losing political support as U.S. reshapes housing finance system

Washington Post Staff Writer
Saturday, August 7, 2010

For several decades, whenever a question of housing policy came up in Washington, two companies dominated. Fannie Mae and Freddie Mac marshaled armies of lobbyists, deep political connections and millions of dollars in contributions to get their way.

But now Fannie Mae and Freddie Mac, titans of the mortgage finance industry, are wards of the state, bailed out by Washington to the tune of $160 billion and banned from political activity. As the Obama administration and Congress prepare to take up overhauling the $12 trillion U.S. mortgage market, new interests are shaping the debate like never before.

Among those influencing many Democrats are affordable housing advocates and liberal think tanks that want the government to do less to foster homeownership and more to support rental housing for low-income people. Those influencing Republicans favor sharply reducing all federal support for housing.

In the past, Fannie and Freddie found backers on both sides of the political aisle. Key Democrats in Congress and in the Clinton administration were their most ardent supporters. President George W. Bush touted an “ownership society,” relying on Fannie and Freddie to help low-income people buy homes.

Officials from both parties now agree that the housing finance system is unsustainable; virtually all new home loans are guaranteed by Fannie, Freddie or the Federal Housing Administration, putting taxpayers on the line. Administration officials say they still believe in a significant government role in promoting home ownership, but one less expansive than under previous presidents. Republicans, who have introduced legislation to get rid of Fannie and Freddie altogether, might not vote for an overhaul that retains any government role in housing.

On Aug. 17, the Treasury Department is hosting a conference of financial companies, housing advocates, academics and other interested parties to begin discussing how to design a new system that doesn’t rely as much on taxpayers. The Obama administration is required to make a proposal by January under the bill recently passed by Congress to reshape financial regulation.

Continue Reading…Washington Post

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MERS comments on the Commission’s Proposed Rule for Asset-Backed w/ Referrals

MERS comments on the Commission’s Proposed Rule for Asset-Backed w/ Referrals


MERS was created in 1995 under the auspices of the Mortgage Bankers Association (MBA), as the mortgage industry’s utility, to streamline the mortgage process by using electronic commerce to eliminate paper. Our Board of Directors and shareholders are comprised of representatives from the MBA, Fannie Mae, Freddie Mac, large and small mortgage companies, the American Land Title Association (ALTA), the CRE Finance Council, title underwriters, and mortgage insurance companies.

Our initial focus was to eliminate the need to prepare and record assignments when trading mortgage loans. Our members make MERS the mortgagee and their nominee on the security instruments they record in the county land records. Then they register their loans on the MERS® System so they can electronically track changes in ownership over the life of the loans. This process eliminates the need to record assignments every time the loans are traded. Over 3000 MERS members have registered more than 65 million loans on the MERS® System, saving the mortgage industry hundreds of millions of dollars in the process. The Federal Housing Administration (FHA) and Veterans Administration (VA) approved MERS for government loans because they recognized the value to consumers. On table-funded loans, MERS eliminates the cost to the consumer of the mortgage assignment ($30 – $150). In addition, the MERS process ensures that lien releases are not delayed by eliminating potential breaks in the chain of title. Similar to the residential product, we also addressed the assignment problem in the commercial market with MERS® Commercial, on which is registered over $110 billion in Commercial Mortgage-Backed Securities (CMBS) loans.

More than 60 percent of existing mortgages have an assigned MIN, making a total of 65,000,000 loans registered since the inception of the system in 1997. The corresponding data for these mortgages is tracked on the MERS® System from origination through sale and until payoff. MERS therefore offers a substantial base of historical data about existing loans that can be harnessed to bring transparency to existing MBS products. Attached are letters from the MBA, FHA, Fannie Mae and Freddie Mac on this point.

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MERS May NOT Foreclose for Fannie Mae effective 5/1/2010


Fannie Mae’s Announcing Miscellaneous Servicing Policy Changes

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Posted in bank of america, chain in title, fannie mae, foreclosure, foreclosures, Freddie Mac, mbs, MERS, MERSCORP, Mortgage Bankers Association, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., Notary, R.K. Arnold, Real Estate, robo signers, S.E.C., securitization, STOP FORECLOSURE FRAUD, title company, Wall StreetComments (2)

Holding Bankers’ Feet to the Fire | GRETCHEN MORGENSON

Holding Bankers’ Feet to the Fire | GRETCHEN MORGENSON

By GRETCHEN MORGENSON Published: July 16, 2010

KUDOS to the Federal Housing Finance Agency, overseer of Fannie Mae and Freddie Mac, the crippled mortgage finance giants. While some in Washington have continued to coddle the big banks even after they drove our economy into the ditch, this agency seems serious about recovering money for taxpayers by holding bad financial actors to account.

The agency announced last Monday that it had issued 64 subpoenas to a throng of unidentified financial services institutions, seeking documents related to mortgage securities that Fannie and Freddie bought from Wall Street during the boom years.

The subpoenas are designed to tell the agency what many of us want to know: How did Wall Street package and sell private-label mortgage securities to investors, even though the nature and quality of some of the loans crammed inside those tidy little packages were, at best, suspect?

Once that question has been answered, Fannie and Freddie can force the institutions that sold the securities to repurchase the improper loans, allowing taxpayers to recover some of the losses they’ve swallowed on Fannie’s and Freddie’s federal bailout.

Investigating this aspect of the mortgage mess seems a pretty logical step for a regulator. But in the topsy-turvy world of Washington, the housing finance agency’s move is unusually aggressive. Edward J. DeMarco, its acting director, seems to be that rarity — a regulator who not only talks about looking out for the taxpayer, but actually does something about it.

The subpoenas went to companies that act as trustees for mortgage pools or that service the loans in them. The housing finance agency wants to see loan files and transaction documents related to those pools, including mortgage applications and property appraisals. Recipients of the subpoenas have 30 days to produce the requested documents. Additional subpoenas may follow, it said.

The agency had to resort to subpoenas, it said, because when it asked the institutions for the records it got nowhere for many months. “Difficulty in obtaining the loan documents has presented a challenge to the enterprises’ efforts” to ascertain whether losses at the companies are the responsibility of others, its press release said.

Fannie and Freddie bought only the highest-rated pieces of these deals, but they bought buckets of them. During 2006-7, these entities bought $294 billion of so-called private-label securities. Not all of these purchases are under scrutiny, the agency said.

It is clearly turning up the heat on the major players in mortgage servicing and securitization. Among the bigger trustees in the business are Deutsche Bank and the Bank of New York, while loan servicers include Bank of America and many more. None of the banks would confirm if they had received subpoenas.

Continue reading…The New York Times

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

Posted in bank of america, bank of new york, deutsche bank, fannie mae, Freddie Mac, mbs, mortgage, STOP FORECLOSURE FRAUDComments (0)




In the Master Packet above go to Page 7

Below is from an ad in Trulia

fannie mae owned.bank property. property is vacant.all offers requiring financing must have preapproval letter.all cash offer require proof of fund(see attachement).this property is eligible for home path renovation mortgage-as little as 3% down.buyer must close with seller closing agent(david j. stern law offices,p.a).investors not eligible for first 15days.*for showing instr please read broker remarks* note:offers must be submitted using attachment.close by 30 june and receive extra 3.5% in closing cost

Looking further into this I noticed the following:

  • Still in the name of the owner
  • NOT named under any REO
  • Home last sold for 245K
  • Now listed at 120K

Here is the BIGGEST:

I found a Bank-owned packet for this “SPECIALLY SELECTED” Agent/BROKER in many other REO’s and in this package it states the following: (SEE ABOVE LINK PACKET)

9) Which title companies are the sellers and who do I make out the earnest money deposit to once offer is verbally accepted?

i. David Stern, P.A.
ii. Marshall C. Watson, P.A.
iii. Smith, Hiatt, & Diaz, P.A.
iv. Butler & Hosch, P.A.
v. Shapiro & Fishman, P.A.
vi. Spear & Hoffman, P.A.
vii. Adorno & Yoss, P.A.
viii. Watson Title

ix. New House Title (This is registered with FDLG address 9119 CORPORATE LAKE DRIVE, SUITE 300 TAMPA FL 33634)

10) Can the buyer use their own title company or must they use the title company selected by seller?

a. The buyer MUST HOLD ESCROW with Fannie Mae Title Company as stated on MLX.

NOW are we unleashing another dimension to this never ending SAGA?

We recently found out about WTF!!! DJSP Enterprises, Inc. Announces Agreement to Acquire Timios, Inc., Expand Presence Into 38 States , so is this a way for the Mills to Monopolize on the sales of these properties??

HERE IS same Agent/Broker for a FLORIDA DEFAULT LAW GROUP property:


Here is another same Agent/Broker for MARSHALL C. WATSON property:


Does the JUNE 30th Closing Day have any significance??

MAYBE it’s because of this? MERS May NOT Foreclose for Fannie Mae effective 5/1/2010I am just trying to make sense of this…Is there a grace period that followed?

  • What “if” the BUYER selects their own Title company? Does this eliminate their chances of ever even being considered as a buyer?
  • Why even bother to state this?
  • Is this a way for the selected Agent/ Broker to find the buyer and discourage other agents or buyers from viewing?
  • Was this at all even necessary to state?
  • Is this verbiage to coerce agents to get a higher commission rather than pass down the incentive of 3.5% towards closing cost “if” under contract by 6/30?
  • Why do investors have to refrain from buying for the first 15 days?

Coercion (pronounced /ko???r??n/) is the practice of forcing another party to behave in an involuntary manner (whether through action or inaction) by use of threats, intimidation, trickery, or some other form of pressure or force. Such actions are used as leverage, to force the victim to act in the desired way. Coercion may involve the actual infliction of physical pain/injury or psychological harm in order to enhance the credibility of a threat. The threat of further harm may lead to the cooperation or obedience of the person being coerced. Torture is one of the most extreme examples of coercion i.e. severe pain is inflicted until the victim provides the desired information.


LENDER PROCESSING SERVICES (LPS) BUYING UP HOMES AT AUCTIONS? Take a look to see if this address is on your documents!

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

Posted in butler & hosch pa, conspiracy, djsp enterprises, fannie mae, FDLG, florida default law group, foreclosure, foreclosure fraud, foreclosure mills, hiatt & diaz PA, insider, investigation, Law Offices Of David J. Stern P.A., law offices of Marshall C. Watson pa, marshall watson, MERS, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., Mortgage Foreclosure Fraud, new house title llc, Real Estate, REO, securitization, shapiro & fishman pa, short sale, spear & hoffmanComments (5)

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