On November 2, 2010, the Audit Committee of the Board of Directors of DJSP Enterprises , Inc. (the “Company” or the “Registrant” ) appointed Jewett, Schwartz, Wolfe & Associates (“Jewett”) as the Company’s independent registered public accounting firm, effective immediately. Jewett served as the independent registered public accounting firm of Chardan 2008 China Acquisition Corp. (“Chardan”) for the periods prior to the closing on the Business Combination (as defined below). Chardan changed its name to DJSP Enterprises, Inc. on January 15, 2010 in connection with the closing of the Business Combination.
On October 27 , 2010, the Company was notified that effective October 27 , 2010, McGladrey & Pullen, LLP, the Company’s independent registered public accounting firm (“McGladrey”), resigned as the independent registered public accounting firm for the Company.
The terminations come two days after mortgage giants Fannie Mae and Freddie Mac severed ties with the firm. “There’s been a substantial reduction in staff, it started happening over the past few weeks and many employees received notice today,” said Jeffrey Tew, a lawyer representing the Stern firm.
This is why you need a FORENSIC AUDIT…Find the missing pieces of possible violations! DEMAND IT!
By Tami Luhby, senior writer May 14, 2010: 3:58 AM ET
NEW YORK (CNNMoney.com) — Pressure is mounting on loan servicers and investors to reduce troubled homeowners’ loan balances…but the two largest owners of mortgages aren’t getting the message.
Fannie Mae and Freddie Mac, which are controlled by the federal government, do not lower the principal on the loans they back, instead opting for interest rate reductions and term extensions when modifying loans.
But their stance is out of synch with the Obama administration, which is seeking to expand the use of principal writedowns. In late March, it announced servicers will be required to consider lowering balances in loan modifications.
And just who would tell Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) to start allowing principal reductions? The Obama administration.
Asked whether they will implement balance reductions, the companies and their regulator declined to comment. The Treasury Department also declined to comment.
What’s holding them back is the companies’ mandate to conserve their assets and limit their need for taxpayer-funded cash infusions, experts said. If Fannie and Freddie lower homeowners’ loan balances, they are locking in losses because they have to write down the value of those mortgages. Essentially, that means using tax dollars to pay people’s mortgages.
The housing crisis has already wreaked havoc on the pair’s balance sheets. Between them, they have received $127 billion — and recently requested another $19 billion — from the Treasury Department since they were placed into conservatorship in September 2008, at the height of the financial crisis.
Housing experts, however, say it’s time for Fannie and Freddie to start reducing principal. Treasury and the companies have already set aside $75 billion for foreclosure prevention, which can be spent on interest-rate reductions or principal write downs.
“Treasury has to bite the bullet and get Fannie and Freddie to participate,” said Alan White, a law professor at Valparaiso University. “It’s all Treasury money one way or the other.”
Though servicers are loathe to lower loan balances, a growing chorus of experts and advocates say it’s the best way to stem the foreclosure crisis. Homeowners are more likely to walk away if they owe far more than the home is worth, regardless of whether the monthly payment is affordable. Nearly one in four borrowers in the U.S. are currently underwater.
“Principal reduction in the long run will lower the risk of redefault,” said Vishwanath Tirupattur, a Morgan Stanley managing director and co-author of the firm’s monthly report on the U.S. housing market. “It’s the right thing to do.”
Meanwhile, a growing number of loans backed by Fannie and Freddie are falling into default. Their delinquency rates are rising even faster than those of subprime mortgages as the weak economy takes its toll on more credit-worthy homeowners. Fannie’s default rate jumped to 5.47% at the end of March, up from 3.15% a year earlier, while Freddie’s rose to 4.13%, up from 2.41%.
On top of that, the redefault rates on their modified loans are far worse than on those held by banks, according to federal regulators.
Some 59.5% of Fannie’s loans and 57.3% of Freddie’s loans were in default a year after modification, compared to 40% of bank-portfolio mortgages, according to a joint report from the Office of Thrift Supervision and Office of the Comptroller of the Currency. This is part because banks are reducing the principal on their own loans, experts said.
So, advocates argue, lowering loan balances now can actually save the companies — and taxpayers — money later.
“It can be a financial benefit to Fannie Mae and Freddie Mac and the taxpayer,” said Edward Pinto, who was chief credit officer for Fannie in the late 1980s.
What might force the companies’ hand is another Obama administration foreclosure prevention plan called the Hardest Hit Fund, which has charged 10 states to come up with innovative ways to help the unemployed and underwater.
Four states have proposed using their share of the $2.1 billion fund to pay off up to $50,000 of underwater homeowners’ balances, but only if loan servicers and investors — including Fannie and Freddie — agree to match the writedowns. State officials are currently in negotiations with the pair.
“We remain optimistic that we can get a commitment from Fannie, Freddie and the banks to contribute to this strategy,” said David Westcott, director of homeownership programs for the Florida Housing Finance Corp., which is spearheading the state’s proposal.
I believe Mr. Churchill miss this one LPS Auction Solutions is uniquely positioned to sell and close foreclosed properties. View bank foreclosed home auctions, buy foreclosed properties online. lpsauction.com
A few weeks ago I posted an article on this blog in which I expressed concern about deductions that could occur from real estate agent commissions because of the language in the new HAFA short sale guidelines that are about to go into effect. That language states that agent commissions are protected up to six percent of the transaction unless the servicer chooses to retain “a vendor to assist the listing broker with the sale” and if a vendor is retained, “this vendor must be paid ___% (or $___) from the commission.”
In essence, I predicted that a new industry of short sale vendors would spring up, not really to assist the broker, but to do the servicer’s job at the real estate agent’s expense, resulting in smaller commissions than were being paid even a few years ago when servicers were routinely reducing commissions as a condition of short sale approval. I noted at the time that some agents were already running into some of these vendors in their short sale transactions.
With the effective date of HAFA only ten days away, these short sale vendor companies are starting to appear like weeds. Here are excerpts from three press releases I have seen in just the last few days:
March 16, 2010 — Lender Processing Services, Inc. (LPS), a leading provider of integrated technology and services to the mortgage and real estate industries, is pleased to announce the launch of its professional short-sale service. Offered through LPS Asset Managements Solutions, LPS short-sale solution helps servicers respond more quickly to short sale offers and close more transactions. http://www.lpsvcs.com/NewsRoom/Pages/20100316.aspx
March 18, 2010 — Scottsdale, Ariz.-based Loan Resolution Corp., a provider of short sale services, plans to add 100 positions this month to meet demand for the government’s new Home Affordable Foreclosure Alternaltives program. http://www.mortgageorb.com/e107_plugins/content/content.php?content.5487
Notice how the press releases proclaim these companies are creating these divisions to help the servicers comply with HAFA. I guess they didn’t read that it was supposed be the agents they were assisting. I hope that they do make the short sale process easier, but the drafters of the HAFA program (with recommendations from the servicers) shouldn’t have tried to be cute with their wording in HAFA by guaranteeing a 6% commission unless a vendor is hired to assist the broker.
The implication is that the vendors will make an agent’s job so much easier, that the agent doesn’t really deserve a full commission on the transaction. After all, now all the agent will have to do is work with the seller, list the property, qualify the seller for HAFA, market the property, deal with buyers with low ball offers, negotiate with unrepresented buyers, negotiate with selling agents, get a contract signed, send it to the servicer or vendor for approval, guide it through closing, appear at closing and deal with all the other usual issues in a transaction.
In other words, HAFA listing agents will not only be doing everything they would do in any other transaction, but will also now have to deal with the HAFA process. HAFA’s drafters should have just honestly stated in the guidelies that: Real estate agents are going to give up one quarter of their commission so that the servicers can hire somebody to do the servicer’s job.
All the complaining aside, the HAFA program is what it is unless NAR can lobby the Treasury Department and get this provision changed. Hopefully, when Freddie and Fannie come out with their own HAFA compliant guidelines in the near future, they will strike this provision. After all, both Fannie and Freddie within the past year changed their loss mitigation policies to protect 6% commissions for agents.
I think a real effect of this provision is that it will result in many selling agents avoiding HAFA short sales which will ultimately affect the success of the HAFA program. One of the primary reasons that the investors/owners of loans listed as short sales started paying 6% commissions, was they realized that in today’s difficult real estate market, some selling agents with solid buyers were avoiding short sale properties that only paid a two or two and one half percent commission to the selling agent. With all the short sales on the market, there were plenty of properties to show their buyers that paid a full commission. If this happens, the lenders and servicers greed will have caused them to once again shoot themselves in the foot.
In the next installment on the new HAFA program taking effect on April 5, 2010, I will discuss some of the pros and cons of participating in the HAFA program along with some of HAFA’s flaws that may cause it a lot of problems as it is implemented. In the meantime, for more education on the HAFA program, check out our free video series at www.hafaprogram.com or our in depth course at www.2010shortsaleplaybook.com.
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