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Banks Overlooked Foreclosure Laws

The foreclosure news and the subprime lending debacle continue to make headlines in late 2010. According to Mortgage News Post Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage.   And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.   “I don’t know the ins and outs of the loan,” a Litton employee said in a deposition last year. “I’m not a loan officer.” The default rate on home loans with bad credit has been unusually high over the last five years.

As the furor grows over mortgage lenders’ efforts to sidestep legal rules in their zeal to reclaim homes from delinquent borrowers, these and other banks insist that they have been overwhelmed by the housing collapse.  But interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials. The issue gained new urgency on Wednesday, when all 50 state attorneys general announced that they would investigate foreclosure practices. That news came on the same day that JPMorgan Chase acknowledged that it had not used the nation’s largest electronic mortgage tracking system, MERS, since 2008.

That system has been faulted for losing documents and other sloppy practices.  The root of today’s problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.

Banks spent billions of dollars in the good times to build vast mortgage machines that made new home loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. Even after the housing bubble began to burst, many of these operations languished with inadequate staffing and outmoded technology, despite warnings from regulators.

When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to deal the foreclosure process.  “We waited and waited and waited for wide-scale loan modifications,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, one of the first government officials to call on the industry to take action. “They never owned up to all the problems leading to the mortgage crisis. They have always downplayed it.”

In recent weeks, revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes have caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and Ally Bank, which is owned by GMAC, to halt foreclosures in many states.  Even before the political outcry, many of the banks shifted employees into their mortgage servicing units and beefed up hiring. Wells Fargo, for instance, has nearly doubled the number of workers in its mortgage modification unit over the last year, to about 17,000, while Citigroup added some 2,000 employees since 2007, bringing the total to 5,000.  “We believe we responded appropriately to staff up to meet the increased volume,” said Mark Rodgers, a spokesman for Citigroup.

Some industry executives add that they’re committed to helping homeowners but concede they were slow to ramp up. “In hindsight, we were all slow to jump on the issue,” said Michael J. Heid, co-president of at Wells Fargo Home Mortgage. “When you think about what it costs to add 10,000 people, that is a substantial investment in time and money along with the computers, training and system changes involved.”

Home Foreclosure Rescue Scams Rise

US Administration announced they have raised their efforts to stop predatory mortgage relief companies preying on struggling homeowners looking for companies to help negotiate better mortgage terms that yield a more affordable home loan payment. As the mortgage crisis continues to unfold, the FBI says incidents of suspicious financial activity banks reported to the bureau has skyrocketed, jumping from 28,000 cases in 2005 to 48,000 last year. Among the factors fueling this two-year, 71% increase is a spike in modification and sub-prime loan scams targeting citizens facing foreclosure, one of which is known as the “home foreclosure rescue scam.”

Watch Avoiding Foreclosure Scams Video

It’s a common to hear stories about foreclosure relief fraud, according to state and federal authorities, as well as homeowners interviewed by ABC News. In the scheme, predatory mortgage brokers promise financially distressed homeowners a lifeline, but it’s a ruse. Sometimes they charge a fee and then disappear. And sometimes they push homeowners over the cliff into financial ruin. With more than two million Americans facing the possibility of foreclosure, authorities say so-called home foreclosure prevention scams.

Foreclosure News reported the FBI contends they are presently involved in many of home foreclosure prevention investigations with over 2,100 mortgage fraud cases, which reports suggest is up 400% from the previous five years. U.S. Authorities say con artists are using the Internet, mailings and television to prey on homeowners facing financial ruin in the mortgage crisis. Jackie Felton, chief of the FBI’s Economic Crimes Unit, acknowledges that “everyone wants to be a homeowner,” but that when those homeowners start to fall behind in loan payments, they become vulnerable. “And when these fraudsters come in and they take advantage of those people who are in crisis mode, it’s very disturbing,” she said. “It’s unfortunate at that time when you are in crisis mode, most of us panic and that’s the worst time to actually try to make a decision,” she added.

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Feds Look to Stop Foreclosure Prevention Scams

The Obama administration has already unveiled its plan to reduce the rising home foreclosure rate, but with loan modification scams on the rise, the administration today announced a multi-agency effort to crack down on predatory home foreclosure scams that prey on distressed homeowners. “Just as this administration has intensified our efforts to help American homeowners, those who would seek to prey on the most vulnerable are intensifying their tactics as well, often through predatory loan modifications, mortgage relief scams and foreclosure prevention companies,” Treasury Secretary Tim Geithner said at an announcement in Washington. “These are predatory lending schemes designed to steal Americans of their savings and potentially their houses.” With so many delinquent borrowers, the demand for a low credit score mortgage has increased dramatically over the last few years.

Foreclosure News reported the FBI contends they are presently involved in a huge number of mortgage relief investigations more than 2,100 home loan fraud cases, up 400% from 5 years ago. Joined by state and federal officials, including Attorney General Eric Holder, Geithner unveiled new initiatives to stop these schemes. “We will shut down fraudulent companies more quickly than before,” he said. “We will target companies that otherwise would have gone unnoticed under the radar. And we will aggressively pursue individuals involved in foreclosure prevention scams.” He announced that the Treasury Department’s Financial Crimes Enforcement Network will ratchet up its efforts to identify fraud suspects for civil and criminal investigation and issue an advisory to help financial companies report questionable loss mitigation schemes for law enforcement.

Holder also contended that the FBI has more than doubled the number of agents investigating mortgage fraud cases and created a national mortgage fraud team. “The message is very simple: If you prey on vulnerable homeowners with fraudulent home loan schemes or discriminate against borrowers, we will find you and we will punish you,” he said. Holder noted that the Justice Department is hearing a growing number of concerns about discrimination by loan modification companies. “Discrimination in mortgage lending on the basis of race, national origin or other prohibited factors is destructive, it’s morally repugnant and it is against the law,” he said “If you pay them instead of your home loan company, you will find yourself on the fast track from distress to disaster,” Leibowitz said. “Stay away from anyone who says they will save your home in return for money up front,” said Illinois Attorney General Lisa Madigan.

Despite the announcement being framed as a news conference, the government officials took no questions and departed immediately after a brief series of opening remarks. The announcement was applauded by Neil Barofsky, the special inspector general for the (TARP) Troubled Asset Relief Program, who warned in February that the administration’s loan modification program could be vulnerable to illegal schemes. On Barofsky’s recommendation, the administration issued an anti-fraud release to warn homeowners about fraud and refer them to a national hot line.

Foreclosure Related News talked to several mortgage executives with lending companies and mortgage mitigation law firms. Will the mortgage relief hotlines help? Former Ditech, executive Jeff Morris said, “Well they certainly will make homeowners slow down and think before they engage in a foreclosure prevention transaction from a company that has no ability to provide loss mitigation relief.”

Jason Cardiff, president of an advertising firm that offers direct mail marketing for mortgage companies said, “Homeowners should think twice about giving any money to a loan modification company that is unable to document a solid track record of successful note modifications with the major mortgage servicing companies.” Cardiff continued, “If you need negotiating with your lender, find a law firm that refers you to their clients who have the same mortgage company as you. “Take the time to verify some of their recent modifications because the loss mitigation industry has become vulnerable to scams and predatory lending abuse.”

Shaun Donovan, secretary of the Department of Housing and Urban Development, noted that participating in President Obama’s Making Home Affordable plan is free of charge and urged distressed homeowners to go to the program’s Web site, contact one of the 2,600 HUD-approved mortgage counselors or call the HOPE hot line for help. Even, FHA home loans entered the mortgage modification arena in 2008 with the Hope for Homeowners program offering refinance or foreclosure prevention options for a select group of homeowners.

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Buying Bad Mortgage Assets

Anthony Mason reports, that some investors are buying the toxic mortgage loans that many banking institutes are actively looking to unload. Millions of Americans have been searching for bad credit bank loans in an effort to protect them from foreclosure.

Because the investors are buying the mortgage for 40% of the current market value, they are able to reduce the struggling homeowner’s payments because they are getting just discounted prices. Many real estate evaluators believe that this radical approach may be the best solution to stop the housing crisis and the subprime mortgage mess.

Pennsylvania Court Enables Homeowners and Mortgage Lenders to Negotiate Loan Workouts

A Philadelphia judge continues to aid struggling homeowners by encouraging lenders to strike a deal that will prevent foreclosure. As Michelle Miller reports, every Thursday, Judge Annette Rizzo throws out traditional courthouse rules and encourages lending companies and banks to come together for a compromise. Pennsylvania mortgage lenders have gone to great lengths to help new home buyers and struggling homeowners.


Key Democrats Prevented Mortgage Reform

Clearly the ignoring of mortgage reform in 2001 and the stalemate of 2004 on the mortgage revisions on predatory lending could have helped stem the current housing crisis that has grown into a foreclosure epidemic.


Karl Rove “Chris Dodd & Barney Frank Prevented Mortgage Reform.” They are protecting Dodd and Frank, as they blame Bush. Maxine Waters, Meeks, Schumer and the rest of them are also guilty. Now you know why the left want to silence and censor talk radio and the Internet, they want to prevent the truth from coming out at all costs.

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More Subprime Mortgage Loans Likely to Be Downgraded by Moody

In a recent article, Bloomberg reported that Moody’s Investors Service said it’s reviewing all 2005, 2006 and 2007 bonds on subprime mortgages for credit-rating downgrades, covering debt with $680 billion in original balances. The review reflects an increase in Moody’s expected losses on the underlying loan pools, the New York-based company said in a statement today. Losses for such home mortgage backing 2006 securities will probably reach 28% to 32%, up from a previous projection of 22 %, Moody’s said.

The ratings firm said that it boosted expected losses based on “the continued deterioration in home prices, rising loss severities on liquidated loans, persistent elevated default rates, and progressively diminishing prepayment rates.” Reductions in ratings typically boost the capital needs of holders such as banks and insurers, and force some investors to sell debt. Moody’s and Standard & Poor’s, criticized by Senate Banking Committee Chairman Christopher Dodd and other lawmakers for assigning top grades to home mortgage debt, last year stepped up cuts amid tumbling home prices and soaring defaults. The Obama admistration’s $75 billion mortgage modification plan will have a “mitigating impact” on home loan losses, reflected in its latest estimates, Moody’s said. Losses on sub-prime loans underlying 2006 securities would reach 33% “assuming no government intervention or concerted industry-wide loan modification effort,” according to its statement.

Moody’s last year cut a record 23,713 classes of U.S. dollar-denominated asset-backed securities, mainly subprime and 2nd mortgage bonds, or $1.4 trillion by original balances, compared with a record $99 billion the previous year, according to a January report from the company. It cut a record 18,614 of other U.S. residential-mortgage bonds in 2008, with $576 billion in original balances, compared with a previous record of $10.6 billion in 1994, according to a separate report last month. The asset-backed securities total excludes so-called collateralized debt obligations, including ones composed of mortgage bonds, asset-backed commercial paper and commercial- mortgage bonds, as well as Alt-A and jumbo mortgage debt. On Feb. 6, Moody’s started a review of all securities backed by so-called option adjustable rate mortgage loans issued since 2004. For such loans in 2006 securities, losses will reach 27%, Moody’s said. Option ARMs, included in Moody’s Alt-A category, allow borrowers to pay less than the interest they owe, tacking on the difference to their debt and creating the potential for monthly bills to more than double. Subprime home loans went to borrowers with poor credit or high debt. Read the original article written By Jody Shenn.

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Foreclosure Filings Increase with Little Mortgage Relief in Sight for 2009

U.S. foreclosure filings spiked by more than 81% in 2008, a record, according to a report released Thursday, and they’re up 225% compared with 2006. A total of 861,664 families lost their homes to last year, according to RealtyTrac, which released its year-end report Thursday. There were more than 3.1 million foreclosure filings issued during 2008, which means that one of every 54 households received a notice last year. “Clearly the foreclosure prevention programs implemented to date have not had any real success in slowing down this foreclosure tsunami,” said James Saccacio, CEO of RealtyTrac in a statement. Affordable fixed refinance mortgages are not as accessible for people with poor credit as they were in previous years.

And what’s worse, Sharga thinks that as many as 70% of the bank-owned homes listed on RealtyTrac’s site have not yet been posted on multiple listings services, the industry databases of homes for sale. Those homes are less likely to be sold because most real estate agents won’t know they are available. “Either banks are overwhelmed and can’t get the houses on the MLS quickly, or they’re deliberately slowing down so they don’t have to take markdowns to actual home values on their books,” Sharga said. Either way, it has the effect of underestimating the foreclosure inventory problem.

Banks also seem to be slowing the foreclosure process, according to Sharga. They are not sending out foreclosure filings as quickly when homeowners fall behind on payments. Part of that is because some new state regulations require banks to notify delinquent borrowers of their intent to file notices of default, and to offer help to borrowers who want to get their finances back on track. Banks simply lack the manpower to track down so many delinquent homeowners with the required notifications. This creates a delay between the time that borrowers first miss payments and when they go into foreclosure.

After one such rule took effect in California this past summer, notices of default fell by half, to 21,665 from 44,278. But they jumped back to more than 44,000 again in December, probably because banks caught up on many of the postponed notices. “The recent California law, much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners,” said Saccacio. The loan modification requests in these high foreclosure states, has increased ten-folds.

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Financial Stocks Boosted by Mortgage Deal

Democratic lawmakers reached an agreement with Citigroup on a new loss mitigation plan to let bankruptcy judges alter loans in an effort to prevent borrowers from losing their home to foreclosure. Other mortgage lenders are expected to follow suit. The agreement raised hopes that the steep downturn in the housing market that has badly hurt consumer spending and the overall economy could be halted. Housing stocks rose on the news.

The new deal that could prevent more mortgage foreclosures pulled Wall Street out of a deep early slump and helped pull stocks to a mostly higher close. Modification and home refinance programs are supported under Emergency Loan Modification Act. This foreclosure prevention law was created to help distressed homeowners save their home in times of financial and foreclosure crisis.

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2008 Foreclosures Rates Soared & Home Prices Declined Sharply

In a recent article written by Jason Jacks, he reviews the dismal data for last year with 2008 foreclosure filings, default notices, auction sale notices and bank repossessions all rose 61 % last year from 2007, according to RealtyTrac, a California-based company that monitors the housing market. Get in touch and sign up for Foreclosure Crisis News updates to be delivered to you by email or RSS feeds.

The company said one out of every 54 homes in the country was in some phase of foreclosure in 2008, or about 2.3 million properties. Nevada, Florida and Arizona were tops for foreclosure rates. Virginia was 16th, with 49,000 homes entering foreclosure in 2008, or 1.5 % of all residences. For metropolitan regions, Washington, D.C., ranked 23rd for foreclosures, with about 3 % of all homes receiving at least one foreclosure notice in 2008. Read the original article.

Will Obama Address the Foreclosure Crisis Immediately?

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Mortgage Forgiveness Debt Relief Act of 2007

A few months ago, Congressman Sander Levin spoke on the floor of the United States House of Representatives in support of the Mortgage Forgiveness Debt Relief Act of 2007. 

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through loan modification agreements, mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The tax exclusion does not apply if the discharge is due to services performed for hard-money lenders or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition. More tax rules for foreclosures and debt settlement information, including detailed examples can be found in Publication 4681, Canceled Debts, Home Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

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Foreclosure Crisis Persists as Credit Obstacles Remain

ABC News reported a few months back that mortgage delinquencies among good credit borrowers quadrupled in 2008. The lack of home equity and available refinance programs have played a major role in the fall of the prime credit borrower.

Most real estate and home financing evaluators believe next wave in the foreclosure crisis will continue in 2009 and possibly even 2010.

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Jersey Lawmakers Approve Mortgage Relief to Stop Foreclosures

Legislation to help distressed homeowners refinance their houses or continue to live there as tenants while they reorganize financially has been approved in New Jersey. The Mortgage Stabilization and Relief Act cleared the Assembly and Senate Monday. It now heads to Gov. Jon S. Corzine, who indicated he would quickly sign it into law. The measure dedicates $25 million to mortgage stabilization by providing loans of up to $25,000 to homeowners and lenders willing to extend fixed mortgage refinancing to people in danger of foreclosure.

The bill also creates a $15 million housing recovery program. It helps nonprofits buy dwellings from homeowners who cannot afford their mortgages, then lease the homes back to homeowners for up to seven years while they recover financially. Finally, the legislation puts more on creditors in foreclosure proceedings, making them responsible for code violations if borrowers abandon the property and requiring a six-month hold on foreclosures if the borrower seeks more time to work out a refinancing or short sale. “It would be a failure of leadership to sit idly by and let entire neighborhoods fall overboard,” said Assemblyman Ralph Caputo, a Democrat from Belleville who co-sponsored the bill.

Foreclosures have been rising statewide as the economy stumbles and more people lose their jobs. October saw more foreclosure filings in New Jersey than any single month on record, with more than 5,000 filings recorded. Corzine signed legislation Friday allocating $9.5 million in additional legal aid for people facing foreclosure, bankruptcy and debt collection. The legislation also requires mediation in all contested mortgage foreclosure cases. More and more homeowners are seeking mortgage relief by means of a loan modification in which the lender agrees to lower the monthly payments by reducing the mortgage rate.

The Housing & Community Development Network of New Jersey, a citizen advocacy group, lauded the legislative focus on mortgage aid. “The foreclosure issue has many aspects, and this legislation makes major strides in addressing many of them,” said Diane Sterner, the network’s executive director. The bill creates a housing support fund within the Housing Mortgage and Finance Agency intended to help stabilize neighborhoods hard-hit by foreclosures by helping keep people in their homes.

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Foreclosure Crisis Not Over

While the courts document judicial foreclosures in which the lender files a lawsuit against the borrower, there is no data on non-judicial foreclosures, in which the lender simply posts a legal advertisement and holds a public auction without going through the courts. Realtor Abe Lee estimated that more than 95 % of all foreclosures are non-judicial actions, which makes them hard to quantify until the end of the process, when the home goes on the market as a bank-owned property. Lee and others say it’s difficult to judge whether foreclosures are peaking or if a huge number are still to come. Roberson said her highest number of sales were in 2001, when she sold 416 bank-owned properties. Foreclosure news continues to dominate the news circles with millions of homeowners being reported delinquent by their lenders.

Foreclosure News Hits Home >

To put this year in perspective, to date in 2008 she has closed on 43 homes with an average sales price of $410,000 and a total volume of $17.5 million. She currently has 78 properties either listed or in escrow. Joy has closed 57 bank-owned sales this year, and has 100 other properties in various stages of the process. “It’s been slow for about four or five years and then within the last two years it really went through the roof,” he said. Read the complete story >

Should You Pay Thousands of Dollars to get a Mortgage Rate Modification?

Maybe…You are not required to pay to get a loan work-out but, most mortgage lenders do not require borrowers to pay for a mortgage modification agreement. However, loan modifications can be complicated and most loan work-outs take 3-4 months to complete. Most lenders have not invested the build the staff needed to keep up with the demand of funding loss mitigation departments during this foreclosure crisis. Paying a law office or loan modification company a few thousand dollars to negotiate a new home loan with lowered interest rates that potentially could save you hundreds of dollars is a small price to pay for such a significant financial gain. Read Full Mortgage Relief Article > Loan Modification FAQ

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Paulson Looking for New Ways to Lower Mortgage Rates

Many mortgage insiders hope that the government jumps on board with the mortgage relief that has been promoted by Sheila Bair’s FDIC loan modification plan the renegotiates the mortgage balance to be reduced to 38% of the borrowers income versus the housing expenses. This will help millions of distressed homeowners avoid foreclosure and remain in their homes at monthly mortgage payment that meets their budgets. FHA loan programs rolled out Hope for Homeowners last month, but there have been some obstacles with FHA’s short refinance programs, but HUD maintains their commitment to making the needed changes to help stop the foreclosure crisis.

According to a Reuters article today, U.S. Treasury Secretary Henry Paulson said the Bush administration was looking at ways to lower mortgage rates because it was essential to stem the drop in home prices to foster an economic recovery. ‘I’m the sort of person that’s always looking at new ideas … the key thing to getting through this period is having the decline in housing prices slow down,’ Paulson told CNBC television. ‘And a big part of that is going to be home loan availability and affordability of mortgage rates.’

Yahoo! Buzz reported today, ‘We’re continuing to look at — and we wouldn’t be doing our jobs if we didn’t look at other ideas to reduce mortgage interest rates,’ he said. Paulson added, however, that the Bush administration did not ‘float’ a plan to lower mortgage rates to 4.5 %. ‘We didn’t float any plan, there was a leak about something,’ he said. 

Will the Fed Dropping Key Rates Help Mortgage Rates?  What Are Common Myths Regarding Fed Rate Cutes?

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Home Foreclosure Expert Predicts Jump in Home Sales in 2009

The national foreclosure crisis may finally be simmering , but remember, from 84,534 REO properties in October to 84,291 in November, according to the 2009 outlook from, released Tuesday. While the decline is largely likely an artifact of a growing push to halt pending foreclosures while mortgage lenders and government officials search for solutions to the nation’s housing crisis, Alexis McGee, president at the online foreclosure investing resource says that she sees a significant decline in foreclosures as buyers return in 2009, pushing home prices up and fueling a real estate recovery. “Recovery is underway. Affordability is back in the housing market,” says McGee. “In 2009, housing will not only recover, but we’ll see buyers leap into this market in droves, depleting our housing oversupply, and actually put higher price pressures on the market.”

Foreclosure news continues to shine a light on the millions of homeowners that are delinquent on their first and second mortgages. If many of these distressed borrowers can negotiate affordable loan modifications and the foreclosure prevention preform, then Mr. McGee may be correct. That’s a pretty optimistic take, and one that stands in stark contrast to most assessments, given that well-known and respected economists including Mark Zandi at Moody’s have suggested that the nation’s housing markets won’t be likely to see a bottom until late next year. McGee has been preaching a brighter future for the housing market for well over a year, suggesting that investors start buying foreclosures; a cynic might suggest, of course, that she has strong self-interest in doing so.

In June of 2007, she said “the overall economy is sound, and markets will turn around,” in arguing that investors start to buy foreclosed properties. In February of this year, she suggested that investors shouldn’t “be scared off by the gloom and doom talk swirling around housing markets,” and should buy properties that were, in her eyes, on sale.

Obviously, most investors that bought in February have likely seen their investments lose money, given most regional and national home price trends this year. And as recently as November, McGee was suggesting that a drop in pre-foreclosure notices signaled a real estate bottom, rather than the more likely seasonal effect the trend has since been proven to be.

But regardless of a market that seems stubbornly unwilling to follow her predictions, McGee maintains that now is a great time for investors to buy. Low mortgage rates and the ability to rent out properties for positive cash flow, she says, are strong reasons to invest; of course, she also touts that investors will be able to sell their investments in late 2009 at a large profit.

Which is exactly, in our opinion, what the housing market doesn’t need right now: a swarm of investors with short-term horizons, looking to put properties on the market in late 2009, when most economists are suggesting a more organic bottom for the housing markets.  Read the complete foreclosure article>

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Ocwen Reports Good Load Modification Performance

Florida based Ocwen Financial Corporation said Thursday that it is seeing “solid success” with its own loan modification program. Touting a technology-based, loan-by-loan approach to modification, Ocwen said at the six-month mark, the 60-day delinquency rate on its modified loans stands at 24.6 %.

That’s well below industry data from the Office of the Comptroller of the Currency , which Comptroller John Dugan said earlier this week found a 53 % recidivism rate for modified loans within six months of modification. “The salient issue is not the efficacy of loan modification as a loss mitigation tool, but whether mortgage loan modifications are properly designed,” said Ocwen CEO William Erbey. “Our loan approach achieves the twin objectives of keeping homeowners in their homes and maximizing the net present value of the mortgages to the investors who own the loans.”

Ocwen’s proclamation of success on the performance of its loan modifications comes just one week after the company applied to convert to a bank holding company, according to an American Banker report last week. Ocwen ditched its charter with the Office of Thrift Supervision back in 2005. While the company has not commented on its application, more than a few sources have speculated the large subprime service company is looking to access liquidity via the U.S. Treasury in order to fund its operations and cover servicer advances.

Paul Koches, Ocwen’s general counsel, would only tell American Banker that the company was searching for more “cost-effective” routes to fund operations, in line with comments made by Erbey during a recent analysts’ conference call. Servicers, including Ocwen, are coming under increasing financial pressure surrounding the practice of advancing principal and interest to a particular loan trust; such advances represent a strong pull on liquidity as the number of defaulting borrowers grows. Rob Dubitsky, an analyst with Credit Suisse in New York, has speculated that Ocwen’s push into loan modifications is as much a self-serving program as one designed to help borrowers; he suggested in an October report that he believed the mod push from the subprime loan servicing company coincided with a need to recoup servicing advances. Dubitsky also noted at the time that 70 % of the industry’s principal-reduction modifications have been performed by Ocwen, and that principal-reduction modifications have had the best rate of success of the various forms of modifications a servicer can ostensibly employ.

Ocwen began restructuring loans this past April, and made the news when its spurt in modifications led to several deals serviced by the company experiencing significant interest shortfalls on senior ABS securities in the month of May, angering investors. Since then, master servicers have adjusted how they account for mass modifications, effectively pushing the effect of loan modifications more directly into the laps of junior bondholders; that practice has led to a recent class-action lawsuit by one investment group against Countrywide over its proposed mass loan-modification efforts. See story.

For its part, Ocwen said it believes the re-default problem lies with how some servicers are doing home loan modifications, and not with the concept of modification. “It’s possible to do modifications right. It’s challenging, but we’re doing it — and doing it in a way that’s scalable,” said Erbey. So far this year, Ocwen said it has achieved workouts and modifications that have kept 60,000 troubled mortgage loans performing, and the borrowers in their homes, the company said. Ocwen has been the most aggressive servicer in the nation in modifying loans this year, according to Credit Suisse; the firm increased subprime loan work-outs nearly 500% between Q1 and Q2 of this year. Get the latest foreclosure news online, as it happens. Article was written by Kelly Curran.

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Sheila Bair’s Loan Modification plan

With Treasury Secretary Henry Paulson giving little more than lip service to Bair’s plan, the chairman unveiled its details last month. First, housing payments for delinquent borrowers two months or more would be lowered to 31% of gross monthly income. To get there, mortgage rates could be set as low as 3% for five years, before increasing at an annual rate of 1 percentage point until they hit the prevailing market rate. Home loan terms could be extended to thirty or forty year amortization schedules in an effort to maximize the lowest possible monthly payment for the borrower. Each mortgage loan will be tested to see whether it is more beneficial to modify or to foreclose. Too many borrowers have lost years of appreciating home equity and the time for restructuring mortgages is now. New FHA loan products may help with the FHASecure and the Hope for Homeowners, but clearly these government loans are not the total solution. Not enough homeowners qualify for these FHA home loans, so more home loan modification programs need to be rolled out for those borrowers who don’t qualify for a mortgage solution.

Second, to encourage servicers and investors to participate, the government would share up to 50% of the losses if a borrower who had been helped ended up in default anyway. The risk of re-default had been one obstacle to getting lenders on board with systematic modification plans. This guarantee takes the program a step further than what’s currently being done.

In addition, the FDIC would pay servicers who process mortgages $1,000 for each re-worked loan. At a national housing forum this week, Bair reiterated how important it is to step up the pace of loan modifications. There are likely to be 2.25 million foreclosures by year’s end, Bair said, citing statistics from Federal Reserve Chairman Ben Bernanke. Usually, there are only 800,000 to one million. “We are falling behind the curve,” Bair said. “We are way above where we need to be. There are a lot of unnecessary foreclosures going on that can be prevented through more aggressive loan modifications.” Get foreclosure news quickly as it happens.

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Short Sale May Better for Homeowners Who Can’t Afford Their Home

The New York Times reports that 53% of loan modifications end up with the homeowner back in hot water. I realized long ago, that many folks who purchased a house saddled themselves with more house than they could possibly afford. So now, they face a tough choice… Try to get a mortgage note modification from the lender you are delinquent with, or do a short sale and move out. The loan modification lets them stay in their home so they don’t have to face a gut-wrenching move to a new house or even an apartment. But the loan work-out does not eliminate other unsecured debt.

Many homeowners should consider a short sale and avoid a mortgage modification altogether. They must slash their debt and move to a smaller or cheaper place to live. I sold my house in 2005 even though it wasn’t much fun to all leave the house we had lived in for years. But in my heart I knew that tough times were ahead and that we should rent rather than own. So we up and packed, and moved to a nearby rental. And now, fast forward four years later. I have to move this coming summer because our lease is expiring. I am not looking forward to it but I will have to move again.

If people “own” a house (own is the wrong word if there is no equity) and they can’t afford to stay, then they need to do a short sale, not a loan mod. I don’t believe in restructuring mortgages for people who clearly are going to end up back in trouble again. There are some guidelines to follow, to do loan modifications and if a homeowner fits within the home preservation plan, then likely their mortgage restructuring will succeed. Sign up and get foreclosure news emailed to you as it happens.

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Loan Modification or Bankruptcy to Avoid Foreclosure?

The recent foreclosure epidemic has caused millions of homeowners in the U.S. to scramble for more affordable mortgage terms. Whether it’s a rising variable rates, loss of income, loss of equity or simply a poor decision to borrow money, people need loan revisions and very few people are able to accomplish that with the traditional method of mortgage refinancing. Mortgage loan modifications occur when a mortgage lender agrees to modify terms in accordance with their borrowers request. Most loan modifications happen after a borrower requests a payment reduction and the loss and mitigation department of the lender agree to the terms. Loan modifications have become a critical tool employed to prevent foreclosures.

Bankruptcy is a legal action filed by a consumer who is unable to pay his or her monthly debt payments. Bankruptcy formally stops all civil proceedings against the debtor while in bankruptcy. According to BK law, lenders must suspend their legal actions and this includes foreclosures. However, the lender still has the option of filing for an exception from the automatic stay. If the relief is granted the lending company is authorized to proceed with the foreclosure action. Bankruptcies do not always prevent or delay foreclosure and it does not necessarily enable the homeowner to remain in possession of the home unless the pay the deficiency owed to the lending bank. However, in most cases a bankruptcy will delay the foreclosure.

There has never been a better time to be delinquent on your mortgage. The foreclosure epidemic has created tremendous leverage for homeowners, because lender do not need or want more homes. Liquidity has become a serious issue with banking institutions; therefore they are negotiating and offering home loan modifications with lower payments for homeowners.

Mortgage banker, Bryan Dornan is a respected entrepreneur who has published and copy-written many foreclosure news and real estate related articles online. Dornan suggests reading as much as you can because the market changes so quickly. Visit these websites for home loan relief tips: Loan Modification Outlet and Find Bankruptcy Lawyers. Article Source:

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Modified Mortgage Loans Not Performing

According to a federal regulator more than half of delinquent borrowers who had their bad credit mortgages modified prior in the year to prevent foreclosure were behind on their new home loan payments after just 6 months. John C. Dugan, US comptroller of the currency, announced at a housing forum yesterday that data his agency is collecting indicated the rise in repeat defaults by homeowners is “remarkably high.” “Put simply, it shows that over half of the loan modifications seemed not to be working after six months,” Dugan said.

The findings raise several major questions for government and lending industry executives as they struggle for a fix to the nation’s foreclosure crisis: Are mortgage lenders not doing enough to modify loans so delinquent borrowers can afford them? Or, are too many borrowers just not cut out to be homeowners and shouldn’t be bailed out of their debts? Dugan said his agency is asking lenders and their representatives why these – mortgage rates are so high. But many housing advocates and industry specialists said they already know: Mortgage lenders are failing to give troubled homeowners affordable long-term fixes. In fact, lenders were more likely to offer a modified loan that resulted in a higher, not lower, monthly payment, according to a recent report by analysts at the financial services company Credit Suisse.

Home loan modifications can take several forms. Lenders can either lower the mortgage interest rate, which results in a lower payment; they can write off some of the unpaid principal, which could either lower monthly payments or lower overall debt; or they could postpone some of the debt or extend the life of the loan, which may lower payments in the short term, but drive costs over the life of the loan higher. According to Faith Schwartz, executive director of Hope Now, mortgage modifications can result in an increased payment if home loan lenders roll back into the note unpaid principal, as well as interest and escrowed taxes, “They tried to help them, but they could have foreclosed as the alternative,” Schwartz said. She added mortgage lenders should examine the federal data to see which approach works and which doesn’t. “It doesn’t mean they didn’t get a better interest rate.”

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Loans Re-Default After Mortgage Modifications

Vikas Bajaj uncovers more shocking data in an article that revealed high default numbers involving distressed homeowners whose home mortgages were recently restructured are delinquent again on their mortgage payments, a top banking regulator said on Monday, raising questions about whether policy makers and mortgage lenders can successfully help them stay in their homes. Data from the OCC indicated that more than half of mortgage loans modified during the first three months of the year were delinquent by thirty days just six months after the terms of the home loans were changed, John C. Dugan, the comptroller of the currency, said at a conference in Washington.

After eight months, 58% were delinquent again. The rate at which borrowers become delinquent on mortgage payments again — called the re-default rate — appears to be much higher than what previous studies have found. In October, a Credit Suisse study showed that about 30% of mortgage loans modified at the end of last year were delinquent by sixty days within eight months of the change. The Mortgage Bankers Association said last week that 30% of homeowners who miss one payment end up in foreclosure a few months later. One shocking discovery of data was that in California, 75% of homeowners who missed one payment after a loan modification ended up in foreclosure; in Florida, 65% who miss a payment do. Read the complete post > Delinquency Problems Revisited with Loans Modifications

Negative Amortization Resets Loom Over Foreclosure Crisis

Option ARM homeowners are waiting for Foreclosure. An Option ARM is a Negative Amortization Loan. With these so called Neg-Am mortgages, the borrower owes more at the end of each month if you make the minimum payment. 70 to 80% of people who got one of these loans make only the minimum payment each month. All of this has been reported in the mainstream media and in the blog-o-sphere. Most of these sub-prime mortgage loans were originated in California, Nevada and Florida and most of these adjustable rate loans do not recast until 2010, 2011 and 2012. Will housing crisis bottom out in 2009? How could it? Read the article > Foreclosure Watch 2009 as Option ARM’s Reset

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Foreclosure Preventions with Bankruptcy Judges Given Authority to Modify Home Loans?

House Financial Services Committee Chairman Barney Frank on Monday said that if home foreclosures are not on the decline early next year he expects lawmakers to revive efforts to change bankruptcy law and let judges adjust the terms of mortgages. “If we come back in February and there is frustration that efforts at reducing foreclosure are not working, we can do bankruptcy law changes to get at the problem,” Frank told participants in an Office of Thrift Supervision conference. “Bankruptcy cuts through that.” In September, many Democrats sought unsuccessfully to include bankruptcy law modification as part of the larger $700 billion bank bailout package that passed October 3rd. Should lawmakers consider the measure again, it would give judges the authority to modify mortgage loans such as principal reductions or renegotiated mortgage rates or lengthen the amount of time to pay back the mortgage loan.

Many homeowners from the “Golden State” would welcome California bankruptcy law revisions that gave judges the ability to provide home loan modifications when needed.  California short sales and mortgage foreclosures have become all too common. The foreclosure crisis brings down property values throughout the neighborhoods and has a lasting negative effect for the community.

Frank Says Mortgage Renegotiations ‘a Must’ if Treasury Wants More Bailout Money. Rep. Barney Frank told CNN News Monday that if the Treasury Department wants a second $350 billion installment of financial bailout money, it will have to come up with a foreclosure modification plan; one that must include “principal write-downs” — or reductions in the original amount of the home loans. “I have been insisting that they do a loan work-out plan, but I have not heard yet what they plan to do,” Frank said.

Barney, who is chairman of the House Financial Services Committee, said he would not give a cost estimate for such a plan, but did say it would need to be included if Treasury wants any more bailout money. “They’re not going to get the $350 (billion) unless they get very serious about foreclosure modification and show us that we’re going to get some lending out of the banks,” he added. “They (Treasury) would have to make clear that they are going to do substantial mortgage loan relief and that they have a plan to make the banks lend out money that they’ve already been given through the Capital Purchase (Program).”

Frank also called for principal reductions as part of any foreclosure prevention effort, telling reporters that they would be an essential part of any federal plan. “The more the better,” Frank said. “Principle reduction is a big part of it. When you reduce the principle, you give people an incentive not to re-default, that’s why I think that’s important.” 

Franks also commented that Congress will wait for the Obama administration to be sworn in before taking on any legislation forcing mortgage loan modifications. “How long will I wait, I’ll tell you that that’s a very simple answer – January 21st,” Frank said.  Frank blamed the housing crisis and the lack of foreclosure relief on President Bush.  “I don’t think you need legislation,” Frank said. “There is plenty of legal authority to do loan modifications that could stem foreclosures. — Paulson and Bush won’t use it. There is no need to legislate that.” Get more Foreclosure News as it happens.

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