Lenders’ data mining goes deep

Mortgage makers are going beyond tax returns and bank statements to determine whether you’re a good risk. They’re checking such things as where you have pizza delivered and where you shop online.

By DinSFLA

What does Car Insurance and Credit Scores have in common? DISCRIMINATION!

If the government does not step up with a plan to make sure this does not continue, other crisis will begin to brew.

AMERICA will take the roads uninsured because they cannot afford the rates and they still need to get to work and shop for food!

Once our survival instincts kick in nothing else matters but food, clothes and shelter. Get my point?

So this being said and with the high rate of foreclosures out there. Who is going to have stellar credit for car insurance?

The same goes with Employers and Home Insurance!

Enough is Enough…We are suppose to be the Land of The Free not The Controlled and Abused!

THIS NEEDS TO BE EVALUATED IMMEDIATELY! THIS AFFECTS EVERYONE!

Arkansas and Oregon Lead the Way

The attorneys general of Arkansas and Oregon have both filed suits against a leading car insurance company for failing to disclose “adverse actions” taken against customers based on their credit. Five other states have joined them in seeking national clarification on the matter. But this begs the question, “Why would car insurance companies not tell you that your credit was impacting your rates?”

The answer is simple: Every car insurance company treats its customers’ credit differently. A study by Consumer Reports showed a nearly forty percent difference between how two car insurance companies viewed the same bad-credit customer. And that’s two car insurance companies that actually use credit reports – some don’t. In that case, you could save up to forty-seven percent on your car insurance rates!

Again, make certain you research your documents and include everyone and anyone you may think should be named creditor!

Financially struggling homeowners say they’re just being shrewd when they file for Chapter 7 to escape a mortgage

Cash-strapped, jobless and denied a loan modification, Del Phillips faced the same straits as millions of homeowners who risk losing their homes to mortgage lenders.

Some have struggled unsuccessfully to keep their homes, and others have just walked away. Phillips decided he wanted revenge and was willing to ruin his credit record for it.

When a short sale didn’t work out as planned, the 32-year-old Chicagoan opted for Chapter 7 bankruptcy liquidation, a move that will leave Phillips with little except for the scant possessions in his one-bedroom condo. It also will leave his lender, Chase, with little except for, eventually, a condo that has lost value. Meanwhile, Phillips continues to live there, mortgage-free.

“I don’t feel shameful for what I’ve done,” Phillips said. “I’ve gotten past being shameful.”

Phillips’ move may seem an extreme riff on the difficult decisions homeowners make to unburden themselves of debt owed on properties that have lost substantial value. Lawyers and housing counselors say, however, that personal bankruptcy filings are becoming more commonplace as debt-holders seek sums due them, particularly on second “piggyback” mortgages used to buy homes.

“It’s a big trend,” said Dan Lindsey, a supervisory attorney at the Legal Assistance Foundation of Metropolitan Chicago. “Banks are having a hard enough time dealing with the first mortgages. The second (mortgages), there’s no equity there to collect so they’re being charged off and sold to debt buyers and rearing their ugly heads later. It’s a drastic last resort to file Chapter 7, but in some cases it’s appropriate.”

Phillips bought the one-bedroom condo, tucked into a Lakeview courtyard building, in May 2007 for $212,500, securing a first mortgage of $159,375 and a $53,125 second note, both from Chase Bank, according to county records. In January 2009, he lost his public affairs job, began drawing on his savings and, in April 2009, after the government began its Home Affordable Modification Program, applied for a mortgage loan modification from Chase.

Customer service representatives with Chase, he said, told him to keep paying the monthly mortgage of about $1,400 while he awaited a decision on his application. In September, the still-unemployed Phillips was turned down for a modification because, as the letter stated, his hardship “is not of a permanent nature.”

Phillips decided to stop paying the mortgage and try to sell his condo in a short sale, in which a homeowner sells the property, with the lender’s approval, for less than the amount owed on the mortgage. A short sale typically does not tarnish an individual’s credit history as much as a foreclosure.

Short sales have been portrayed as a salve in the housing crisis, although lenders have been slow to approve them. In Phillips’ case, though, an approval for the offer on his condo came with a catch. Chase notified Phillips that it would still have the legal right to pursue him at a later date for the approximately $54,000 owed on the second mortgage.

“A short sale may satisfy the first lien, but the customer could still be responsible for the second lien,” said a spokesman for Chase, while declining to discuss Phillips specifically.

Phillips sought help from Neighborhood Housing Services of Chicago Inc., a federal government-approved counseling agency, which broached the idea of filing personal bankruptcy.

“(Phillips) did everything right. He had good credit, and then he lost his job,” said Michael van Zalingen, director of homeownership services for Neighborhood Housing Services. “If your lender isn’t interested in helping you, or the only thing you qualify for hurts your household, I don’t think you have any moral obligation to stay bound in that mortgage or paying to that company when it no longer makes economic sense for you.”

Phillips bristled at the bankruptcy suggestion, but after consulting with an attorney, in late February he filed for Chapter 7 bankruptcy, not the Chapter 13 that would have negotiated his debts, including those with Chase.

“My other option was to say I’ll roll the dice with the bank,” Phillips said. “Will they really come after me? I wouldn’t put it past the bank industry to do that. It’s going to kill me to pay a bank for a house I no longer owned. I was, like, there’s no way I’m going to pay the bank another dime.”

Lawyers say they are hearing about more instances of mortgage lenders selling the delinquent second loans used to buy homes during the industry’s heyday to third parties that are then pursuing debtors.

“He’s not outside the norm,” said Stephen Cleary, a Chicago attorney and board member of the Northwest Side Housing Center. “He can now sleep at night. The mental anguish has been relieved.”

For the year ended March 31, personal bankruptcy filings nationwide rose 28 percent, to almost 1.5 million cases, according to the administrative office of the U.S. Courts.

Still unemployed, Phillips says he wishes he had back the more than $12,000 he paid toward his mortgage while he sought a loan modification that never materialized. For now, he’s using part of his jobless benefits to pay his condo association fees while he looks for a job and considers moving out of state. Late last month he was served with a loan default notice by Chase, and Phillips estimates he’ll be able to stay in his condo seven more months while the foreclosure action works its way through the courts.

“I’m not a deadbeat,” Phillips said. “I’ve had to be very shrewd, like most business people. … I’m looking out for my best interests, and this is my best interests.”

mepodmolik@tribune.com

Senate finds Massive FRAUD in SHam-MU! WaMu has allegedly defrauded hundreds of thousands of homeowners with unfair, deceptive and perhaps illegal lending policies and practices. Many of these homeowners are now facing the possibility of or are in foreclosure.

666 Pages with “Private” emails you’d like to read. Please be patient to upload.

[scribd id=31356428 key=key-2ds6hgs6mi4aixhlw07z mode=list]

This in combination with A.K. Barnett-Hart’s Thesis make’s one hell of a Discovery.

 
LEGAL AND ECONOMIC ISSUES IN
SUBPRIME LITIGATION

Jennifer E. Bethel*
Allen Ferrell**
Gang Hu***

Discussion Paper No. 612

03/2008

Harvard Law School Cambridge, MA 02138

This paper explores the economic and legal causes and consequences of recent difficulties in the subprime mortgage market. We provide basic descriptive statistics and institutional details on the mortgage origination process, mortgage-backed securities (MBS), and collateralized debt obligations (CDOs). We examine a number of aspects of these markets, including the identity of MBS and CDO sponsors, CDO trustees, CDO liquidations, MBS insured and registered amounts, the evolution of MBS tranche structure over time, mortgage originations, underwriting quality of mortgage originations, and write-downs of investment banks. In light of this discussion, the paper then addresses questions as to how these difficulties might have not been foreseen, and some of the main legal issues that will play an important role in the extensive subprime litigation (summarized in the paper) that is underway, including the Rule 10b-5 class actions that have already been filed against the investment banks, pending ERISA litigation, the causes-of-action available to MBS and CDO purchasers, and litigation against the rating agencies. In the course of this discussion, the paper highlights three distinctions that will likely prove central in the resolution of this litigation: The distinction between reasonable ex ante expectations and the occurrence of ex post losses; the distinction between the transparency of the quality of the underlying assets being securitized and the transparency as to which market participants are exposed to subprime losses; and, finally, the distinction between what investors and market participants knew versus what individual entities in the structured finance process knew, particularly as to macroeconomic issues such as the state of the national housing market. ex ante expectations and the occurrence of ex post losses; the distinction between the transparency of the quality of the underlying assets being securitized and the transparency as to which market participants are exposed to subprime losses; and, finally, the distinction between what investors and market participants knew versus what individual entities in the structured finance process knew, particularly as to macroeconomic issues such as the state of the national housing market. 

My Comment: If one is not being foreclosed on by the Entity who holds your note why should your credit be affected in the first place? If you raise this issue to the credit agencies I wonder if they will begin to wonder themselves. To be frank the way the future is going WHO WILL WANT CREDIT or NEED ANY CREDIT SCORE! …statement not a question.

Even High-Score Borrowers at Risk of Mortgage Default

By BOB TEDESCHI

Published: March 10, 2010

A HIGH credit score won’t necessarily insulate borrowers from the home-foreclosure crisis, according to a new study from FICO, which creates the credit-scoring formula used by most lenders.

In fact, the report, which was released in late February, suggests that these premium borrowers might be more likely to default on their mortgages than their credit card debt should they encounter financial difficulties.

From May through October 2009, the mortgage default rate for borrowers with credit scores of 760 to 850 was 0.32 percent, versus 0.12 percent for credit cards, according to the report. (FICO considers loans 90 days or more past due to be in default.)

Of course, that mortgage-default level is still far lower than the 4.5 percent rate for all mortgage borrowers during this period, according to FICO, which is based in Minneapolis. But the numbers are nonetheless worrisome, said Rachel Bell, a director of analytics in FICO’s global scoring solutions business, because they mark the first time the mortgage default rate for this category of borrowers exceeded credit card defaults.

In 2007, the mortgage default rate for high-scoring borrowers was 0.08 percent, versus 0.10 percent for bank cards.

Housing counselors offer at least one possible explanation for the shift: some people with financial reversals who are in danger of losing their homes anyway might be more likely to pay back their credit cards, because they still need them to buy groceries and other essential items.

Ms. Bell declined to speculate about the motivations of borrowers. Because the FICO analysis did not look at specific households, she said she could not determine whether a particular family carried both a mortgage and credit cards, and defaulted on one before the other.

But she did say that the growing mortgage problem among households with high FICO scores might be linked to two areas of increasing trouble in the mortgage industry — namely, defaults on vacation homes, and so-called strategic defaults, in which owners abandon homes that are worth less than the mortgage.

The Mortgage Bankers Association, which closely tracks foreclosures and defaults, says it does not track such statistics for vacation homes. But Walter Molony, a spokesman for the National Association of Realtors, said that if foreclosures had risen among vacation homes, their owners would most likely have bought the properties recently and for investment purposes.

The more value a home loses, the more likely an owner will be to consider a strategic default. A study in late 2009 by three university researchers — from the European University Institute, Northwestern University and the University of Chicago — found that when the mortgage exceeds the home’s value by less than 10 percent, homeowners rarely consider a strategic default. But if the value was just half the mortgage amount, 17 percent would abandon the house, and the loan.

FICO did not break out its recent data by state, but its regional data suggest that those with high credit scores in the Northeast were faring better than such people elsewhere. In the Northeast, borrowers with high FICO scores were still twice as likely to default on their credit cards as their mortgages. In 2005, they were four times as likely to default on their credit cards as their mortgages.

Borrowers with FICO scores of 760 and higher generally qualify for a bank’s best mortgage rate, as long as the down payment and monthly income also fall within the bank’s limits. A score of 720 is considered “prime,” and is usually the lowest rate that will allow borrowers to secure the most widely advertised mortgage rates.

FICO does not publish an average FICO score, but the company said the median score was about 720. And for the high FICO borrowers who default, even 720 is a dream score. One default drops such people into the mid-600 range, at best.