Tag Archive | "HUD"



HUD No. 12-036
Shantae Goodloe
(202) 708-0685
February 27, 2012


Bank of America allegedly applied discriminatory lending requirements for borrowers with disabilities

WASHINGTON–The U.S. Department of Housing and Urban Development (HUD) today announced that it is charging Bank of America with discriminating against homebuyers with disabilities. HUD alleges that Bank of America imposed unnecessary and burdensome requirements on borrowers who relied on disability income to qualify for their home loans and required some disabled borrowers to provide physician statements to qualify for home mortgage loans.

The Fair Housing Act makes it illegal to discriminate in the terms and conditions of a loan to an individual based on a disability, including imposing different application or qualification criteria, and makes it illegal to inquire about the nature or severity of a disability except in limited circumstances not applicable here.

“Holding homebuyers with disabilities to a higher standard just because they rely on disability payments as a source of income is against the law,” said John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “Mortgage companies may verify income and have eligibility standards but they may not single out homebuyers with disabilities to delay or deny financing when they are otherwise eligible.”

HUD’s charge is based on a “Secretary-initiated investigation,” and the investigation of complaints filed by two individual borrowers in Michigan and one borrower in Wisconsin who claimed that Bank of America required them to provide personal medical information and documentation regarding their disability and proof of continuance of their Social Security payment in order to qualify for a home mortgage loan. The charge is also being issued as part of the work being conducted by the Federal Financial Fraud Enforcement Task Force’s non-discrimination working group.

According to HUD’s charge, Bank of America allegedly asked some borrowers for proof of their disabilities and sought evidence of the continuation of their Social Security income before approving loans, after first denying them. The matter will now be handled by the Department of Justice.

FHEO and its partners in the Fair Housing Assistance Program investigate approximately 10,000 housing discrimination complaints annually. People who believe they are the victims of housing discrimination should contact HUD at 1-800-669-9777 (voice), (800) 927-9275 (TTY).


HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.
HUD is working to
strengthen the housing market to bolster the economy and protect consumers; meet the
need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build
inclusive and sustainable communities free from discrimination; and transform the way HUD does business.
More information about HUD and its programs is available on the Internet at and
. You can also follow HUD on twitter @HUDnews, on facebook at, or sign up for news alerts on HUD’s News Listserv.


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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.

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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

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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.


H/T Josh Rosner

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

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BofA May Face HUD Fraud Claims for Soured Loans, Read REPORT

BofA May Face HUD Fraud Claims for Soured Loans, Read REPORT

What will happen to Angelo Mozilo?

AG’s have no idea what they are allowing to proceed in the courts, I urge them to Halt, Seize, Stop these illegal foreclosures. Bank of America is in a mad rush to get these through the court systems. Pages are missing from the filed documents to further hide the endorsed pages.

Whistle-blowers best you blow the “whistle” now!


Bank of America Corp. (BAC) should face fraud proceedings after its Countrywide unit submitted faulty data to back up claims for reimbursement on federally insured mortgages, according to an audit by a U.S. watchdog.

Half of 14 loans reviewed had “material underwriting deficiencies” concerning borrowers that resulted in more than $720,000 in losses, according to a Sept. 30 report from the Department of Housing and Urban Development’s inspector general. Kelly Anderson, a HUD regional inspector general, recommended the agency pursue legal remedies against Charlotte, North Carolina-based Bank of America, the biggest U.S. lender.

“Countrywide did not properly verify, analyze, or support borrowers’ employment and income, source of funds to close, liabilities and credit information,” Kelly wrote in the audit. “This noncompliance occurred because Countrywide’s underwriters did not exercise due diligence in underwriting the loans.”

The Federal Housing Administration, run by HUD, insures mortgages on loans to borrowers who can’t find traditional financing, such as those with low incomes. Lenders can ask the FHA to cover losses if borrowers default. The agency has stepped up scrutiny of those claims, and denials could be the next wave of expenses tied to faulty mortgages for lenders including Bank of America, FBR Capital Markets Corp. said on Oct. 3






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Banks Took $6B in Reinsurance Kickbacks, Investigators Say

Banks Took $6B in Reinsurance Kickbacks, Investigators Say

This is a must read. There is no end to this mess. ENJOY!

American Banker-

Many of the country’s largest banks received $6 billion in kickbacks from mortgage insurers over the course of a decade, according to a previously undisclosed investigation by the Inspector General of the Department of Housing and Urban Development.

The allegations, since referred to the Department of Justice, stem from lenders’ demand that insurers cut them in on the lucrative business of insuring the mortgages they produced during the housing boom.

In exchange for the their business, companies such as Citigroup Inc, Wells Fargo & Co, SunTrust Banks Inc. and Countrywide allegedly required reinsurance partnerships on generous terms that violated the Real Estate Settlement Procedures Act, a 1974 law prohibiting abusive home sales practices.


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FHFA, Treasury, HUD Seek Input on Disposition of Real Estate Owned Properties

FHFA, Treasury, HUD Seek Input on Disposition of Real Estate Owned Properties

For Immediate Release
August 10, 2011

FHFA, Treasury, HUD Seek Input on Disposition of Real Estate Owned Properties
Range of Ideas Sought, Including Transition to Rental

Washington, DC — The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and Department of Housing and Urban Development (HUD), has announced a Request For Information (RFI), seeking input on new options for selling single-family real estate owned (REO) properties held by Fannie Mae and Freddie Mac (the Enterprises), and the Federal Housing Administration (FHA).

The RFI’s objective is to help address current and future REO inventory. It will explore alternatives for maximizing value to taxpayers and increasing private investment in the housing market, including approaches that support rental and affordable housing needs.

“While the Enterprises will continue to market individual REO properties for sale, FHFA and the Enterprises seek input on possible pooling of REO properties in situations where such pooling, combined with private management, may reduce Enterprise credit losses and help stabilize neighborhoods and home values,” said FHFA Acting Director Edward J. DeMarco. “Partnerships involving Enterprise properties may reduce taxpayer losses and meet the Enterprises’ responsibility to bring stability and liquidity to housing markets. We seek input on these important questions.”

“As we continue moving forward on housing finance reform, it’s critical that we support the process of repair and recovery in the housing market,” said Treasury Secretary Tim Geithner. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhood and home price stability.”

“Millions of families nationwide have seen their home values impacted as their neighbors’ homes fall into foreclosure or become abandoned,” said HUD Secretary Shaun Donovan. “At the same time, with half of all renters spending more than a third of their income on housing and a quarter spending more than half, we have to find and promote new ways to alleviate the strain on the affordable rental market. Taking steps to encourage private investment in REO properties and transition them into productive use will help stabilize neighborhoods and home values at a critical time for our economy.”

The RFI calls for approaches that achieve the following objectives:

  • reduce the REO portfolios of the Enterprises and FHA in a cost-effective manner;
  • reduce average loan loss severities to the Enterprises and FHA relative to individual distressed property sales;
  • address property repair and rehabilitation needs;
  • respond to economic and real estate conditions in specific geographies;
  • assist in neighborhood and home price stabilization efforts; and
  • suggest analytic approaches to determine the appropriate disposition strategy for individual properties, whether sale, rental, or, in certain instances, demolition.
  • FHFA, Treasury and HUD anticipate respondents may best address these objectives through REO to rental structures, but respondents are encouraged to propose strategies they believe best accomplish the RFI’s objectives. Proposed strategies, transactions, and venture structures may also include:
  • programs for previous homeowners to rent properties or for current renters to become owners (“lease-to-own”);
  • strategies through which REO assets could be used to support markets with a strong demand for rental units and a substantial volume of REO;
  • a mechanism for private owners of REO inventory to eventually participate in the transactions; and
  • support for affordable housing.

Link to RFI


Media Contacts:
FHFA Corinne Russell (202) 414-6921
HUD Tiffany Thomas Smith (202) 708-0980
TSY Matt Anderson (202) 622-0631

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California lender to pay $3.1 million and dissolve sham joint ventures

WASHINGTON, DC – July 13, 2011 — The U.S. Department of Housing and Urban Development (HUD) today announced an agreement with Prospect Mortgage, LLC (Prospect) to settle allegations the California-based mortgage lender created sham affiliated business arrangements for the purpose of paying improper kickbacks or referral fees in violation of Federal Housing Administration (FHA) guidelines and the Real Estate Settlement Procedures Act (RESPA).  Prospect agreed to dissolve these sham joint ventures and pay $3.1 million to resolve the complaint.

HUD claimed Prospect operated as a “series limited liability company,” a business structure unauthorized by FHA, and that Prospect used this business structure to create hundreds of sham joint ventures with real estate brokers, mortgage brokers, mortgage lenders, servicers and other settlement service providers and to share profits for the referral of real estate settlement services.  Through these affiliated business arrangements, Prospect allowed non-approved branch offices to originate FHA-insured mortgages in violation of FHA’s guidelines.  Read the full text of the agreement announced today.

“The real test for any bona fide affiliate business arrangement is whether the affiliate has sufficient capital and employees to stand on its own two feet,” said Acting FHA Commissioner Carol Galante.  “In this case, it was clear that these sham companies had neither and were merely sharing profits for the referral of business.”

HUD alleges that Prospect entered into “series” or “subscription agreements” with real estate brokers, agents, banks, mortgage servicers and others to give the appearance that it was creating legitimate joint ventures to provide real and compensable services.  HUD discovered these sham businesses had little or no employees, capital and/or offices; that all core mortgage origination services were performed by Prospect itself; and that Prospect had allowed these affiliated businesses to participate in the origination of FHA-insured loans out of branch offices registered with FHA as exclusive to Prospect.  In return for the referral of business, Prospect shared 50 percent of its profits with these entities which HUD determined were not bona fide affiliated businesses, and many of which were not FHA-approved lenders.

RESPA was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees in the homebuying process. Section 8(a) of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business and Section 8(b) prohibits unearned fees.


HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business. More information about HUD and its programs is available on the Internet at and

Brian Sullivan
202) 708-0980

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HUD No. 11-142
Brian Sullivan
202) 708-0980
July 11, 2011


Title company to pay $4.5 million and cease paying brokers referral fees

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today announced an agreement with Fidelity National Financial, Inc. (FNF) to settle allegations the title company paid real estate brokers and other settlement service providers improper kickbacks or referral fees in violation of the Real Estate Settlement Procedures Act (RESPA). Read the full text of the agreement announced today.

HUD claimed FNF and its affiliates and subsidiaries engaged in a widespread and years-long campaign to pay real estate brokers kickbacks for the referral of real estate settlement services, including home warranties and title insurance.FNF agreed to cease this practice and pay HUD $4.5 million to resolve the complaint.

“RESPA is very clear that paying fees or providing anything of value for the simple act of referring business is a violation of law,” said Acting FHA Commissioner Robert Ryan. “This agreement should be a signal to others that these business practices won’t be tolerated.”

HUD alleges that FNF, through its subsidiaries, paid fees for the referral of settlement service business in violation of Section 8 of RESPA. To facilitate these payments, real estate brokerages entered into “Application Service Provider Agreements” which provided the real estate brokerages access to TransactionPoint, a web-based platform that automates the real estate transaction from listing to closing. This online system also allows the brokers to select real estate settlement providers for a particular real estate transaction. The real estate brokerages, in turn, entered into Sub-License Agreements with subsidiaries of FNF to enable FNF’s subsidiaries to be listed in TransactionPoint as a provider of settlement services. As part of the Sub-Licensee Agreement, HUD alleges that FNF’s subsidiaries paid the real estate brokerages a fee for each referral of real estate settlement services.

RESPA was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees in the homebuying process. Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business.


HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business. More information about HUD and its programs is available on the Internet at and

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Foreclosure Soup Kitchen For Unemployed – Up to $50K Zero Interest Loans

Foreclosure Soup Kitchen For Unemployed – Up to $50K Zero Interest Loans

Meanwhile all the Kings Men and 2 King Wives continue to feast extremely well via bailouts… Some of you (not all) have a slight chance… or is it?…

Who do you think this is benefiting?

From the Wall Street Journal – Foreclosure relief finally kicks off

The Obama administration is finally launching a long-awaited $1 billion program designed to provide the unemployed with loans to help them avoid foreclosure.

But there’s a catch: Homeowners will have only a month to apply.

Continue reading [WSJ]

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LETTER | Senators Urge OCC to Work with State AG’s, DOJ, and HUD to Hold Mortgage Servicers Accountable and Prevent Future Abuse

LETTER | Senators Urge OCC to Work with State AG’s, DOJ, and HUD to Hold Mortgage Servicers Accountable and Prevent Future Abuse

WASHINGTON, DC — Today, a dozen U.S. Senators sent a letter to the Office of the Comptroller of the Currency (OCC) urging the agency to work with State Attorneys General, the U.S. Department of Justice (DOJ), and the U.S. Department of Housing and Urban Development (HUD) to hold mortgage servicers accountable for deficient servicing procedures and improperly foreclosing on homeowners and to develop a comprehensive solution to fix the broken foreclosure process.

Senators Jack Reed (D-RI), Richard Blumenthal (D-CT), Banking Committee Chairman Tim Johnson (D-SD), Judiciary Committee Chairman Patrick Leahy (D-VT), Sheldon Whitehouse (D-RI), Bob Menendez (D-NJ), Daniel Akaka (D-HI), Chuck Schumer (D-NY), Sherrod Brown (D-OH), Dick Durbin (D-IL), Al Franken (D-MN), and Jeff Merkley (D-OR) are calling for the OCC to use the full extent of its significant authority to ensure that the banks and mortgage servicers which created the foreclosure mess help clean it up.

The Senators wrote to John Walsh, the acting head of the OCC: “we urge you to take every opportunity to ensure that servicers not only account for past harms, but also take steps to prevent future servicing deficiencies so that homeowners going forward are treated fairly.”

After several federal agencies and State Attorneys General opened investigations into unscrupulous mortgage practices by major banks, including the use of improperly prepared legal documents and “robo-signers” to sign hundreds of unread foreclosure documents a day, the OCC entered into consent orders with several large banks outlining the widespread problems in mortgage servicing and requiring the servicers to take steps to address those problems.

Yesterday, the OCC announced that at the request of DOJ and to allow coordination of actions with other agencies at the state and federal level, it was giving banks an additional 30 days to file “Action Plans” for how they will comply with the new foreclosure requirements laid out in the OCC’s consent orders.

Because the consent orders announced by the OCC on April 13th did not preclude State Attorneys General from aggressively pursuing a comprehensive solution against banks and mortgage servicers that wrongly foreclosed upon homeowners, the Senators are urging the OCC to work with the State Attorneys General and other regulators to arrive at a comprehensive and robust solution.


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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…

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WHOA! MERS Ruling Forces HUD to Reforeclose on Michigan REO

WHOA! MERS Ruling Forces HUD to Reforeclose on Michigan REO

What about those already sold?

Mortgage National News-

The Department of Housing and Urban Development will re-foreclose on all its REO properties in Michigan where the original foreclosure was conducted in the name of MERS using the state’s nonjudicial process.

read the ruling below…

Michigan Court Of Appeals Rules, Consolidates (2) Cases MERS “STRAWMAN” Has No Authority To Foreclose

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OH Appeals Court Affirms Trial Court Decision For Not Complying With HUD Regulations WELLS FARGO v. PHILLABAUM

OH Appeals Court Affirms Trial Court Decision For Not Complying With HUD Regulations WELLS FARGO v. PHILLABAUM




{¶ 10} The acceleration clause of the note that the appellee executed states, inter alia, as follows:

“If [b]orrower defaults by failing to pay in full any monthly payment, then
[l]ender may, except as limited by regulations of the Secretary in the case of
payment defaults, require immediate payment in full of the principal balance
remaining due and all accrued interest.” (Emphasis added.)2

{¶ 11} Both parties agree that the pertinent federal regulation at issue is set out in Section
203.604(b), Title 24, C.F.R., and requires a “face-to-face” interview between a mortgagor and
mortgagee before three full monthly installments on the mortgage are unpaid. Here, there is no
dispute that the Bank did not conduct such a meeting. Instead, the Bank argues that it falls
under an exception to that requirement because the “mortgaged property is not within 200 miles
of the mortgagee, its servicer, or a branch office of either[.]” (Emphasis added.) Id at (c).
However, appellee’s affidavit in support of his cross-motion for summary judgment states that
“Wells Fargo has at least one branch office within 200 miles of my home” and goes on to explain
that he visited that office on at least one prior occasion. This is sufficient for appellee to carry
his initial Civ.R. 56(C) burden and, thus, the burden shifted to the Bank to provide rebuttal

continue below…

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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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AARP Sues HUD For Illegal Reverse Mortgage Foreclosures

AARP Sues HUD For Illegal Reverse Mortgage Foreclosures

from AARP’s Press Release:

The plaintiffs, from Indiana, New York, and Maryland, are represented by AARP Foundation Litigation and the Washington, DC law firm of Mehri & Skalet, PLLC.  The lawsuit, filed in U.S. District Court for the District of Columbia, seeks an injunction prohibiting HUD from abandoning long-standing rules and from illegally foreclosing on surviving spouses.  These arbitrary changes allow lenders to initiate foreclosure and eviction actions against the plaintiffs.

The case will have broad national implications, because the outcome will determine whether spouses will be able to stay in homes that are now “underwater” as a result of the housing downturn, a possibility that reverse mortgage borrowers have always paid insurance premiums to protect against.

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

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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

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

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NALTEA | Restoring Integrity to the Land Title Records – A Commentary on MERS

NALTEA | Restoring Integrity to the Land Title Records – A Commentary on MERS

National Association of Land Title Examiners and Abstractors
7490 Eagle Road
Waite Hill, OH 44094

February 10, 2011

Restoring Integrity to the Land Title Records – A Commentary on MERS

As the faults in the MERS system of mortgage tracking become ever more apparent, so do the consequences begin to take shape. And, as high profile cases of abuse of process rapidly hit the mainstream press, as details continue to emerge, we can see with ever increasing clarity the problems caused by the systematic omission of mortgage
assignments from the public land records.

Continue below…

[ipaper docId=49861745 access_key=key-2b5lkrxox5o0hu6fqilz height=600 width=600 /]

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

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Let’s Set the Record Straight on Bank of America, Part 2: Eliminating Foreclosure Fraud

Let’s Set the Record Straight on Bank of America, Part 2: Eliminating Foreclosure Fraud

William K. Black and L. Randall Wray

Posted: November 5, 2010 01:23 PM

This is the second installment of a two-part series. Read the first here.

We have explained in prior posts and interviews that there are two foreclosure-related crises. Our first twopart post called on the U.S. to begin “foreclosing on the foreclosure fraudsters.” We concentrated on how the underlying epidemic of mortgage fraud by lenders inevitably produced endemic foreclosure fraud. We wrote to urge government policymakers to get Bank of America and other lenders and servicers to clean up the massive fraud. We obviously cannot on rely solely on Bank of America assessing its own culpability.

Note also that while we have supported a moratorium on foreclosures, this is only to stop the foreclosure frauds — the illegal seizure of homes by fraudulent means. We do not suppose that financial institutions can afford to maintain toxic assets on their books. The experience of the thrift crisis of the 1980s demonstrates the inherent problems created by forbearance in the case of institutions that are run as control frauds. All of the incentives of a control fraud bank are worsened with forbearance. Our posts on the Prompt Corrective Action (PCA) law (which mandates that the regulators place insolvent banks in receivership) have focused on the banks’ failure to foreclose as a deliberate strategy to avoid recognizing their massive losses in order to escape receivership and to allow their managers to further loot the banks through huge bonuses based on fictional income (which ignores real losses). We have previously noted the massive rise in the “shadow inventory” of loans that have received no payments for years, yet have not led to foreclosure:

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

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Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership

Foreclose on the Foreclosure Fraudsters, Part 1: Put Bank of America in Receivership

Posted: October 22, 2010 02:08 PM

After a quick review of its procedures, Bank of America this week announced that it will resume its foreclosures in 23 lucky states next Monday. While the evidence is overwhelming that the entire foreclosure process is riddled with fraud, President Obama refuses to support a national moratorium. Indeed, his spokesmen on the issue told reporters three key things. As the Los Angeles Times reported:

A government review of botched foreclosure paperwork so far has found that the problems do not pose a “systemic” threat to the financial system, a top Obama administration official said Wednesday.

Yes, that’s right. HUD reviewed the “paperwork” problem to see whether it threatened the banks — not the homeowners who were the victims of foreclosure fraud. But it got worse, for the second point was how the government would respond to the epidemic of foreclosure fraud.

The Justice Department is leading an investigation of possible crimes involving mortgage fraud.

That language was carefully chosen to sound reassuring. But the fact is that despite our pleas the FBI has continued its “partnership” with the Mortgage Bankers Association (MBA). The MBA is the trade association of the “perps.” It created a ridiculous on its face definition of “mortgage fraud.” Under that definition the lenders — who led the mortgage frauds — are the victims. The FBI still parrots this long discredited “definition.” That is one of the primary reasons why — in complete contrast to prior financial crises — the Justice Department has not convicted a single senior officer of the large nonprime lenders who directed, committed, and profited enormously from the frauds.

Note that the Justice Department is not investigating foreclosure fraud. HUD Secretary Donovan’s statement shows why:

“We will not tolerate business as usual in the mortgage market,” he said. “Where there have been mistakes made or errors, we will hold those entities, those institutions, accountable to stop those processes, review them and fix them as quickly as possible.”

Note the language: “mistakes”, “errors”, “processes” (following the initial use of “paperwork”). No mention of “fraud”, “felony”, “criminal investigations”, or “prosecutions” for the tens of thousands of felonies that representatives of the entities foreclosing on homes have admitted that they committed. Note that Donovan does not even demand that the felons remedy the harm caused by their past fraudulent foreclosures. Donovan wants them to “fix” “processes” — not repair the harm their frauds caused to their victims.

The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers’ trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce. The FASB’s new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional “income” and “capital” at the banks. The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks.


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

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INSIDE CHASE and the Perfect Foreclosure

INSIDE CHASE and the Perfect Foreclosure

“JPMorgan CHASE is in the foreclosure business, not the modification business’.”  That, according to Jerad Bausch, who until quite recently was an employee of CHASE’s mortgage servicing division working in the foreclosure department in Rancho Bernardo, California.

I was recently introduced to Jerad and he agreed to an interview.  (Christmas came early this year.)  His answers to my questions provided me with a window into how servicers think and operate.  And some of the things he said confirmed my fears about mortgage servicers… their interests and ours are anything but aligned.

Today, Jerad Bausch is 25 years old, but with a wife and two young children, he communicates like someone ten years older.  He had been selling cars for about three and a half years and was just 22 years old when he applied for a job at JPMorgan CHASE.  He ended up working in the mega-bank’s mortgage servicing area… the foreclosure department, to be precise.  He had absolutely no prior experience with mortgages or in real estate, but then… why would that be important?

“The car business is great in terms of bring home a good size paycheck, but to make the money you have to work all the time, 60-70 hours a week.  When our second child arrived, that schedule just wasn’t going to work.  I thought CHASE would be kind of a cushy office job that would offer some stability,” Jerad explained.

That didn’t exactly turn out to be the case.  Eighteen months after CHASE hired Jared, with numerous investors having filed for bankruptcy protection as a result of the housing meltdown, he was laid off.  The “investors” in this case are the entities that own the loans that Chase services.  When an investor files bankruptcy the loan files go to CHASE’S bankruptcy department, presumably to be liquidated by the trustee in order to satisfy the claims of creditors.

The interview process included a “panel” of CHASE executives asking Jared a variety of questions primarily in two areas.  They asked if he was the type of person that could handle working with people that were emotional and in foreclosure, and if his computer skills were up to snuff.  They asked him nothing about real estate or mortgages, or car sales for that matter.

The training program at CHASE turned out to be almost exclusively about the critical importance of documenting the files that he would be pushing through the foreclosure process and ultimately to the REO department, where they would be put back on the market and hopefully sold.  Documenting the files with everything that transpired was the single most important aspect of Jared’s job at CHASE, in fact, it was what his bonus was based on, along with the pace at which the foreclosures he processed were completed.

“A perfect foreclosure was supposed to take 120 days,” Jared explains, “and the closer you came to that benchmark, the better your numbers looked and higher your bonus would be.”

CHASE started Jared at an annual salary of $30,000, but he very quickly became a “Tier One” employee, so he earned a monthly bonus of $1,000 because he documented everything accurately and because he always processed foreclosures at as close to a “perfect” pace as possible.

“Bonuses were based on accurate and complete documentation, and on how quickly you were able to foreclosure on someone,” Jerad says.  “They rate you as Tier One, Two or Three… and if you’re Tier One, which is the top tier, then you’d get a thousand dollars a month bonus.  So, from $30,000 you went to $42,000.  Of course, if your documentation was off, or you took too long to foreclose, you wouldn’t get the bonus.”

Day-to-day, Jerad’s job was primarily to contact paralegals at the law firms used by CHASE to file foreclosures, publish sale dates, and myriad other tasks required to effectuate a foreclosure in a given state.

“It was our responsibility to stay on top of and when necessary push the lawyers to make sure things done in a timely fashion, so that foreclosures would move along in compliance with Fannie’s guidelines,” Jerad explained.  “And we documented what went on with each file so that if the investor came in to audit the files, everything would be accurate in terms of what had transpired and in what time frame.  It was all about being able to show that foreclosures were being processed as efficiently as possible.”

When a homeowner applies for a loan modification, Jerad would receive an email from the modification team telling him to put a file on hold awaiting decision on modification.  This wouldn’t count against his bonus, because Fannie Mae guidelines allow for modifications to be considered, but investors would see what was done as related to the modification, so everything had to be thoroughly documented.

“Seemed like more than 95% of the time, the instruction came back ‘proceed with foreclosure,’ according to Jerad.  “Files would be on hold pending modification, but still accruing fees and interest.  Any time a servicer does anything to a file, they’re charging people for it,” Jerad says.

I was fascinated to learn that investors do actually visit servicers and audit files to make sure things are being handled properly and homes are being foreclosed on efficiently, or modified, should that be in their best interest.  As Jerad explained, “Investors know that Polling & Servicing Agreements (“PSAs”) don’t protect them, they protect servicers, so they want to come in and audit files themselves.”

“Foreclosures are a no lose proposition for a servicer,” Jerad told me during the interview.  “The servicer gets paid more to service a delinquent loan, but they also get to tack on a whole bunch of extra fees and charges.  If the borrower reinstates the loan, which is rare, then the borrower pays those extra fees.  If the borrower loses the house, then the investor pays them.  Either way, the servicer gets their money.”

Jerad went on to say: “Our attitude at CHASE was to process everything as quickly as possible, so we can foreclose and take the house to sale.  That’s how we made our money.”

“Servicers want to show investors that they did their due diligence on a loan modification, but that in the end they just couldn’t find a way to modify.  They’re whole focus is to foreclose, not to modify.  They put the borrower through every hoop and obstacle they can, so that when something fails to get done on time, or whatever, they can deny it and proceed with the foreclosure.  Like, ‘Hey we tried, but the borrower didn’t get this one document in on time.’  That sure is what it seemed like to me, anyway.”

According to Jerad, JPMorgan CHASE in Rancho Bernardo, services foreclosures in all 50 states.  During the 18 months that he worked there, his foreclosure department of 15 people would receive 30-40 borrower files a day just from California, so each person would get two to three foreclosure a day to process just from California alone.  He also said that in Rancho Bernardo, there were no more than 5-7 people in the loan modification department, but in loss mitigation there were 30 people who processed forbearances, short sales, and other alternatives to foreclosure.  The REO department was made up of fewer than five people.

Jerad often took a smoke break with some of the guys handing loan modifications.  “They were always complaining that their supervisors weren’t approving modifications,” Jerad said.  “There was always something else they wanted that prevented the modification from being approved.  They got their bonus based on modifying loans, along with accurate documentation just like us, but it seemed like the supervisors got penalized for modifying loans, because they were all about finding a way to turn them down.”

“There’s no question about it,” Jerad said in closing, “CHASE is in the foreclosure business, not the modification business.”

Well, now… that certainly was satisfying for me.   Was it good for you too? I mean, since, as a taxpayer who bailed out CHASE and so many others, to know that they couldn’t care less about what it says in the HAMP guidelines, or what the President of the United States has said, or about our nation’s economy, or our communities… … or… well, about anything but “the perfect foreclosure,” I feel like I’ve been royally screwed, so it seemed like the appropriate question to ask.

Now I understand why servicers want foreclosures.  It’s the extra fees they can charge either the borrower or the investor related to foreclosure… it’s sort of license to steal, isn’t it?  I mean, no one questions those fees and charges, so I’m sure they’re not designed to be low margin fees and charges.  They’re certainly not subject to the forces of competition.  I wonder if they’re even regulated in any way… in fact, I’d bet they’re not.

And I also now understand why so many times it seems like they’re trying to come up with a reason to NOT modify, as opposed to modify and therefore stop a foreclosure. In fact, many of the modifications I’ve heard from homeowners about have requirements that sound like they’re straight off of “The Amazing Race” reality television show.

“You have exactly 11 hours to sign this form, have it notarized, and then deliver three copies of the document by hand to this address in one of three major U.S. cities.  The catch is you can’t drive or take a cab to get there… you must arrive by elephant.  When you arrive a small Asian man wearing one red shoe will give you your next clue.  You have exactly $265 to complete this leg of THE AMAZING CHASE!”

And, now we know why.  They’re not trying to figure out how to modify, they’re looking for a reason to foreclose and sell the house.

But, although I’m just learning how all this works, Treasury Secretary Geithner had to have known in advance what would go on inside a mortgage servicer.  And so must FDIC Chair Sheila Bair have known.  And so must a whole lot of others in Washington D.C. too, right?  After all, Jerad is a bright young man, to be sure, but if he came to understand how things worked inside a servicver in just 18 months, then I have to believe that many thousands of others know these things as well.

So, why do so many of our elected representatives continue to stand around looking surprised and even dumbfounded at HAMP not working as it was supposed to… as the president said it would?

Oh, wait a minute… that’s right… they don’t actually do that, do they?  In fact, our elected representatives don’t look surprised at all, come to think of it.  They’re not surprised because they knew about the problems.  It’s not often “in the news,” because it’s not “news” to them.

I think I’ve uncovered something, but really they already know, and they’re just having a little laugh at our collective expense… is that about right?  Is this funny to someone in Washington, or anyone anywhere for that matter?

Well, at least we found out before the elections in November.  There’s still time to send more than a few incumbents home for at least the next couple of years.

I’m not kidding about that.  Someone needs to be punished for this.  We need to send a message.

Mandelman out.


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

Posted in chase, concealment, conspiracy, corruption, foreclosure, foreclosure fraud, foreclosures, geithner, hamp, jpmorgan chase, Wall StreetComments (1)

Mortgage Modifications: Why a Third Are Canceled

Mortgage Modifications: Why a Third Are Canceled

By Bendix Anderson Jun 29th 2010 @ 1:13PM

The federal government says foreclosure prevention has helped millions of people. But sometimes it seems hard to find a pundit or news story that mentions foreclosure prevention program without using the word “failed,” often in the headline.

Whom should you believe?

Government officials say 2.8 million homeowners at risk of foreclosure have had their home mortgages modified, lowering monthly payment by an average of about $500 since April 2009. But critics point out that not all of those modifications have lasted.

For example, of the 1.2 million trial modification started so far through the Home Affordable Modification Program (HAMP), about a third, or 429,696, have been canceled, according to the latest reports. Many skeptics worry that foreclosure prevention has merely delayed foreclosure for millions of homeowners who are still likely to eventually lose their homes.
First, let’s look at the big number: the 2.8 million modifications claimed by the government. That includes the 1.2 million HAMP trial modifications, 400,000 modifications through the Federal Housing Administration, and another 1.2 million loan modifications negotiated by HOPE NOW, a national coalition including government-approved loan counselors, mortgage companies and investors.

Based partly on these modifications, officials are taking credit for stabilizing a collapsing housing market. “We already know that due to the Obama administration’s efforts, the housing market is significantly better than anyone predicted a year ago,” said Housing and Urban Development Secretary Shaun Donovan.

But that still leaves the question of the what happened to the close to half-a-million people who had their trial modifications canceled. They were kicked out of the program for a range of reasons: Some had mortgage payments already less than 31 percent of their income, missed trial payments or had incomplete or unverifiable documentation, according to Treasury officials.

According to a January statement by JPMorgan Chase, for every 100 trial modifications begun through the fall of 2009, a quarter had not paid as agreed. Another 29 borrowers did not submit all the required documents. “Many borrowers return forms missing key information (signatures, Social Security numbers, etc.) or do not return one of four required documents,” according to a statement from Chase. Another 13 out of a 100 borrowers are not eligible for HAMP but will qualify for another type of loan modification and 33 out of 100 borrowers are able to be underwritten for permanent HAMP modifications.

What happened to these people? How were they “helped?”

It now appears that about half of the borrowers that didn’t qualify for HAMP had their loans permanently modified anyway by their loan servicers under alternative programs, according to a survey of the eight biggest loan companies in the HAMP program. Another quarter of the canceled modifications were still awaiting action by the lenders, according to the survey. The remaining quarter of the canceled modifications ended in a variety of ways, ranging from a payment plan, a loan payoff, a bankruptcy filing to knock out heavy credit card debts, or a short sale. Only 7 percent had gone to foreclosure by the end of May.

And here’s another unexpected thing — 10 percent of the loans that had their modifications canceled are now current. The borrowers got out of foreclosure and kept their homes without any help from the program. It’s not clear from the report where these borrowers got the money to get up to date on their loans. Some may have had the money all along. Others borrowers who had lost income may have found new employment.

The survey results are a surprise for all the pundits, myself included, who thought loans that had their trial modifications canceled would be headed straight to foreclosure.

Of course, the future is still unclear for many borrowers who entered foreclosure-prevention programs. More than 400,000 borrowers still have unresolved HAMP trial modifications. Researchers and officials have also begun to track the hundreds of thousands of borrowers with permanent modifications, to see how many slip back into foreclosure, according The Associated Press.

Whatever you think of the federal plan to stop foreclosures, the last page of the latest government-issued Housing Scorecard report has some important numbers. In addition to the tally of temporary and permanent modifications, there’s the number of borrowers who are “underwater,” meaning they owe a larger balance on their home mortgage than the home is now worth: 11.3 million, according to First American CoreLogic. These people might not all give up their homes to foreclosure, but they are vulnerable to new economic shocks. The report also counts 2.4 million seriously delinquent loans, according to LPS-McDash and HUD. Finally, officials count 3.6 million vacant homes held off the market, according to the Census Bureau. Those homes will eventually have to be sold.

So, no matter what you think federal foreclosure prevention effort — and I think the feds are doing better than anyone gives them credit for — the housing market still faces huge challenges that won’t go away soon.
Source: Housing Watch

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

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