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Wednesday, April 6, 2011
Friday, February 18, 2011
Mortgage Servicing Industry
Loan Mod Program Left Homeowner's Fate in Hands of Dysfunctional Industry
by Olga pierce and Paul Kiel - ProPublica
Last February, with 6 million homeowners in danger of losing their homes, the mortgage industry was assembled at a luxury hotel in San Diego applauding themselves—literally.“As a group, we owe ourselves a round of applause,” said Yvette Gilmore, vice president of loss mitigation at Freddie Mac, citing the industry’s efforts to avoid foreclosures, garnering loud clapping from the ballroom full of bank executives, lawyers and others in the industry.
. . . .
Over the past year, ProPublica has been exploring why the government’s program has helped so few homeowners. So far, we have detailed the Treasury department’s weak oversight [1], and how the administration quietly retreated [5] from a plan to get tough on banks. In part 3, we will discuss reforms that could lead to more help for homeowners.The stories are based on newly disclosed data, lobbying disclosures, dozens of interviews with insiders, members of Congress, and others. Today we tell the inside story of what happened when the fate of struggling homeowners was placed in the hands of the industry little incentive to help: the mortgage servicing industry.
On paper, the government’s Home Affordable Modification Program, or HAMP, was supposed to address one of the main roadblocks to modifying loans: The banks handling most mortgages often have little incentive to avoid a home going into foreclosure since they don’t actually lose money when that happens.
That’s because mortgage servicers, the largest of which are the nation’s largest banks, don’t own the vast majority of the loans they handle. So, they don’t bear the loss if the loan goes to foreclosure. In fact, servicers often make money from foreclosure fees.
“Foreclosure is the path of least resistance inside a servicing shop, because once it goes into that mode, all of the costs are essentially borne by third parties,” said Horne.
But when it comes to making modifications, servicers have to make big investments in staff and infrastructure to work effectively with homeowners. HAMP sought to defray some of those costs by paying servicers $1,000 per modification and up to $3,000 more over time if it was successful.
Before the foreclosure crisis, mortgage servicing was a highly profitable business for large banks. They were paid a flat percentage that more than covered the cost of cashing checks from homeowners. Servicing a typical loan cost the servicer about $48 a year, according to a new Federal Housing Finance Agency analysis, while for a typical $250,000 mortgage, the servicer’s annual fee would be about $625 a year. Given the huge number of mortgages they handled, servicers made tens of billions of dollars in the years leading up to the crisis.
Ideally, “in good times, servicers are using some of the residual income to build out systems and procedures to handle the pressures that come with worse times,” said Fed Governor Raskin. “Unfortunately, as we have seen, this has not happened.”
Instead of investing in technology upgrades or employee training, banks pocketed the profits.
When the default rate tripled, servicers floundered, and almost as soon as HAMP launched it became apparent they weren’t up to the job.
Read the entire article here
Saturday, January 15, 2011
A Look Back
Tuesday, January 4, 2011
The New Year Will Be Grim For Many
My position wasjust the opposite. The real and published unemployment rate is still as high and housing prices are still falling. Not so says my friend. Where I am, he says, real estate values have leveled, there is an increase in spending and there seems to be a recovery.
Well, that may be so where you are (West Palm Beach, Florida) but it is not the case just south of you in the greater Ft. Lauderdale and Miami areas. It is certainly not the case up here in Tampa Bay where unemployment is well over 12% and real estate values in many areas have declined well over 50% with no leveling in sight.
However, my friend did concede that nationwide, real estate values would not level until the job market improves and unemployment decreases. Exactly said I, that is what I have been saying all along. We can't have any kind of real recovery until the housing market improves, foreclosures decrease substantially and the unemployment - and underemployment - situation decreases substantially.
We have, I fear, a second economic disaster looming in the "cloud" (yes, I am not sure what a "cloud" is either but it is used daily in the IT world as a place where stuff is stored...I think).
Yes, a second wave (like in a tsunami) of financial disturbances for the average person in this country and more good deals and profits for our large (too big to exist) corporations.
Of course, all of the conversation I had with my friend was only my opinion and who am I in terms of expertise on the subject (I am just one small victim of the Great Recession which in reality was and still is a Depression). As a famous political science comedian always says after his rant..."I could be wrong".
However, someone at the New York Times feels much the way I do and the New York Times itself feels it newsworthy to publish this opinion.
When people say that the recovery does not feel like a recovery, they are describing reality. The economy is growing, but for many Americans life is not getting better. Unemployment remains high. Home values are depressed. And state budgets are in deep trouble, presaging more layoffs, service cuts and tax increases.The Times editorial echoes much of my conversation with my friend which also echoes much of my opinion - if not all of it.
So, my friend (I hope you still follow my blogs), do you really think things (the economy and people's lives) are going to be better in 2011? To view another opinion please read The Economy in 2011 in the New York Times on line...click here.
One last word of advice to those of you who represent us in the House of Representatives and the Senate (notice that the House is the House of REPRESENTATIVES). Begin your new term by truly representing the people not your own agendas be they Democrat or Republican. Leave your personal agendas and partisan politics at the front steps of the building you work in 9you know, the one with the large dome on top). This is no time to commit yourselves to defeating the other party at all costs. All Costs - in this case - means all the people of this country, especially those in the middle and lower classes you commonly refer to as the 'MAJORITY".
Of course this is just my opinion again. I could be wrong.
Thursday, December 23, 2010
Residential Mortgage Rules
The following information by Stephane is excerpted from FedUpUSA
Congressmen Joining Fight To Stop Mortgage Servicer Fraud
Congressman Brad Miller is sending the following letter to the financial regulators, and is currently rounding up additional signatories:
The Honorable Timothy Geithner Secretary of the Treasury Department of the Treasury 1500 Pennsylvania Avenue, N.W. Washington, D.C.
The Honorable Edward DeMarco Director (Acting) Federal Housing Finance Agency (FHFA) 1700 G Street, N.W. 4th Floor Washington, DC 20552
The Honorable Sheila Bair Chairman Federal Deposit Insurance Corporation 550 17th Street N.W. Washington D.C., DC 20006
The Honorable Ben S. Bernanke Chairman Board of Governors of the Federal Reserve System 20th Street and Constitution Avenue N.W. Washington, DC
The Honorable Mary L. Schapiro Chairman Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549
The Honorable John Walsh Comptroller of the Currency (Acting) Administrator of National Banks 250 E Street, S.W. Washington, DC 20219
Dear Secretary Geithner, Chairman Bair, Chairman Shapiro, Acting Director DeMarco, Chairman Bernanke and Controller Walsh:
We are writing to urge that any exception to the credit risk retention requirements of section 941 of the Dodd-Frank Act include rigorous requirements for servicing securitized residential mortgages.
The Act requires that securitizers retain five percent of the credit risk on mortgage-backed securities. The requirement is the subject of a study by Christopher M. James published by the Federal Reserve Bank of San Francisco dated December 13, 2010, and entitled “Mortgage-Backed Securities: How Important Is ‘Skin in the Game’?”, which finds that the requirement will have the intended effect of reducing “moral hazard” and significantly reducing the loss ratios on mortgage-backed securities.
The Act provides for an exception, however, for “qualified residential mortgages” and for other “exemptions, exceptions, and adjustments” to the risk-retention requirement. We strongly urge that you use great care in allowing any exception to the risk retention requirement, and that you be vigilant in assuring that any exception not defeat the purpose of the requirement. Recent experience in financial regulation has been that seemingly modest, reasonable exceptions have swallowed the rules and allowed abusive practices to continue unabated. In considering any requested exception under section 941, please remember that the advocates for rule-swallowing exceptions to other financial regulation have not been entirely candid with regulators or legislators on the likely effect of those exceptions.
The rules adopted pursuant to section 941 must, of course, require rigorous underwriting standards for “qualified residential mortgages” or any other mortgages excepted from the risk retention requirement, but underwriting requirements are not enough. The rules must also address the servicing of securitized mortgages. Much of the turmoil in the housing market, which is largely responsible for the painfully slow recovery, is the result not just of poorly underwritten mortgages, but of conduct by mortgage servicers.
We direct your attention to the “Open Letter to U.S. Regulators Regarding National Loan Servicing Standards” dated December 21, 2010, and signed by 51 people with extensive knowledge of mortgage servicing (the “Rosner-Whalen letter”). We strongly urge that you consider closely the recommendations included in that letter.
The Rosner-Whalen letter makes sensible recommendations regarding the treatment of payments by homeowners, “perverse incentives” in servicer compensation, mortgage documentation, and foreclosure forbearance during mortgage modification efforts.
We especially urge that any exception require that servicers modify mortgages pursuant to established criteria to avoid foreclosure where possible. The statute governing “Farmer Mac” mortgages provides a useful example of such criteria. See 12 U.S.C. 2202a (“Restructuring Distressed Loans”). Foreclosures are catastrophic for homeowners, holders of mortgage-backed securities, the housing market, and the economy as a whole.
The conduct of servicers is largely responsible for much unnecessary hardship. A requirement that servicers modify mortgage according to established criteria to avoid foreclosure can avoid that hardship in the future. Neutral, established criteria will also avoid “tranche warfare” between classes of investors.
We also especially urge that any rule for securitized mortgages require that servicers not be affiliated with the securitizer. There are obvious potential conflicts of interest, and no apparent countervailing justification. At a recent hearing of the House Financial Services Committee, several witnesses from major servicers were unable to offer any advantage in being affiliated with securitizers, other than to offer “full service” to customers. That justification is entirely unpersuasive. Homeowners may select the bank with which they have a credit card or a checking account, but they have no say in who services their mortgage.
In fact, community banks and credit unions have been reluctant to sell the mortgages that they originate to “private-label securitizers” for fear that the mortgages will be serviced by an affiliate of a bank, and the servicer will use that relationship to “cross market” other banking services to the homeowner. Requiring that servicers be independent of banks, therefore, would advance the goal of increasing the availability of credit on reasonable terms to consumers.
The Dodd-Frank Actives provides you ample authority to reform servicing practices, and regulation of mortgage securitization will be ineffective without such reform.
Sincerely,
Rep. Brad Miller [and others]
See the article and letters here
Saturday, November 13, 2010
William Black takes on Andrew Kahr on Sub-Prime Lending
Here's an excerpt from The Huffington Post:
Lender's Put the Lies in Liar's LoansThe remainder of this article can be read here
by William K. Black - The Huffington Post
I have noted before a family maximm -- one cannot compete with unintended self-parody. Andrew Kahr has recently written a column in the American Banker entitled "Spread the Word: Lying to Banks is Illegal." Mr. Kahr is one of the architects of subprime lending. He warns:Federal law provides that anyone who knowingly makes a false statement to a[n] ... insured institution ... shall be fined not more than $1,000,000 or imprisoned for not more than thirty years, or both.
To say the least, this criminal law, intended to protect banks and hence the deposit insurance fund, is very, very rarely enforced against consumers. Why?How is a U.S. attorney to know that a customer has defrauded a bank by giving false information, unless the case is referred to him or her by the bank? And we're not doing that, at least not for mortgages, credit cards or other everyday consumer lending.
Hence, the plethora of consumers giving willfully and materially false information to banks on applications and during loan servicing has mushroomed. With "liar's loans," this went from a cottage industry to an epidemic.
Mr. Kahr neglects to mention that "insured institution[s]" are required to file Suspicious Activity Reports (SARs) (criminal referrals). As the FDIC explains:
The U.S. Department of the Treasury's financial recordkeeping regulations (31 CFR 103.18) require federally supervised banking organizations to file a SAR when they detect a known or suspected violation of federal law meeting applicable reporting criteria.Collectively, banks make massive numbers of SARS filings with regard to mortgage fraud, over 67,000 annually, but a mere 10 institutions file 72% of those referrals. The typical nonprime lender deliberately violates its legal requirement to file a criminal referral when it discovers mortgage fraud even though that practice would be irrational for an honest lender. The federal regulatory agencies have not taken any effective action against these pervasive violation of their rules despite an "epidemic" of mortgage fraud that drove the ongoing financial crises.
Part II of this article can be read here
Tuesday, November 9, 2010
The Wall Street Conspiracy...As broadcast on TruTV's "Conspiracy Theory"
This is a MUST SEE program.
Jesse Ventura, former Governor of Minnesota and host of TruTV's program Conspiracy Theory exposes the scam that brought the country into financial ruin. He exposes - through interviews with Wall Street insiders such as Nomi Prins, former Goldman Executive turned whistleblower and Matt Taibbi reporter for Rolling Stone and author of the "Giant Vampire Squid" label he placed on Goldman. Also interviewed such people as Rep. Ron Paul in reference to the Federal Reserve offering some very important information which some of us already know but all need to know.
This program exposes the criminal activities, the fraud and the cover ups that lead to the Great Recession we are still in the midst of.
This is a must see program already viewed by thousands but should be viewed by all Americans. We Americans have been "had". We have been "duped". We have been and robbed. In fact, we are still being robbed. As I have been saying, a systematic program of stripping Americans of all their assets - money, property, jobs and entitlements - leaving us totally dependent on a government controlled by Wall Street, the Federal Reserve and their true owners - foreign bankers whose families were involved in its inception back in 1913 and will continue control until we, as a nation, decide to dissolve the Federal Reserve.
There have been thousands of views already. If you like it like I do, then please forward it as well. America MUST KNOW the truth. The information in this program just further verifies what I and others have been writing about for years.
Wall Street Conspiracy with Jesse Ventura...Part 1
Part 2
Part 3