OREGON REAL ESTATE ROUND TABLE

Never Miss an Event – View Our Calendar

Blog

  • Citigroup, Ally Sued for Racketeering Over Database, by Margaret Cronin Fisk and Thom Weidlich, Bloomberg.com


    Map of USA with Kentucky highlighted
    Image via Wikipedia

    Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

    The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

    “Defendants have filed foreclosures throughout the state of Kentucky and the United States of America knowing that they were not the ‘owners’ or beneficiaries of the loan they filed foreclosure upon,” the homeowners wrote in their complaint filed Sept. 28 in federal court in Louisville, Kentucky.

    The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

    The lawsuit is one of multiple cases against MERS and banks alleging that the process allows wrongful foreclosures. Several of these cases, combined in a multidistrict litigation in Phoenix, were dismissed Sept. 30, with the judge allowing the plaintiffs to re-file their complaints.

    ‘Inflammatory’

    “The allegation is inflammatory and without merit and we intend to defend our position fully in a court of law,” Gina Proia, a spokeswoman for Ally, said in an e-mailed statement.

    Mark Rodgers, a spokesman for Citigroup, declined to comment. Karmela Lejarde, a spokeswoman for MERS, didn’t have an immediate comment.

    The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

    “RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

    The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.

    In the Phoenix litigation, U.S. District Judge James A. Teilborg found that the mortgage banks properly named MERS as the nominee for the original lenders and that the plaintiffs didn’t include enough detail in their allegations that the banks formed MERS to conspire to deprive homeowners of their property.

    ‘Straw Man’

    Last year, the Kansas Supreme Court found that MERS’s relationship to the lenders is “akin to that of a straw man” and that it didn’t have rights over the mortgage at issue.

    “Having a single front man, or nominee, for various financial institutions makes it difficult for mortgagors and other institutions to determine the identity of their lenders and mortgagees,” the Kansas court said.

    The case is Foster v. Mortgage Electronic Registration Systems Inc., 10-cv-611, U.S. District Court, Western District of Kentucky (Louisville).

    To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, atmcfisk@bloomberg.net; Thom Weidlich in Brooklyn, New York, federal court attweidlich@bloomberg.net.

    To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

    Related Articles

  • Multi-Billion-Dollar Class Action Suits Filed Against Lender Processing Services for Illegal Fee Sharing, Document Fabrication; Prommis Solutions Also Targeted, Nakedcapitalism.com


    Welcome to our new readers from the FCIC.

    Lender Processing Services, a crucial player in the residential mortgage servicing arena, has been hit with two suits seeking national class action status (see here and here for the court filings). If the plaintiffs prevail, the disgorgement of fees by LPS could easily run into the billions of dollars (we have received a more precise estimate from plaintiffs’ counsel). To give a sense of proportion, LPS’s 2009 revenues were $2.4 billion and its net income that year was $276 million.

    These suits, one of which was filed late last week, the other Monday, appear to be the proximate cause for the sharp drop in LPS stock, which fell 5% on Friday and 8% Monday (trading was halted just prior to the close of the trading day).

    Those close to the foreclosure process have lodged many complaints against LPS. But the two suits we highlight here level the most serious and wideranging allegations thus far.

    By way of background, we’ve described issues with foreclosure mills and the flaws in the securitization process at some length in previous posts (see here and here for some recent posts which contain overview material). As evidence about problems with the foreclosure process have surfaced at more and more servicers, one of the common themes has been that a substantial portion of the foreclosure process was outsourced to various processing companies. Foreclosure defense attorneys have cited one firm, called Lender Processing Service (LPS) as one of the largest as well as more problematic firms in the outsourced foreclosure business. In addition, by 2008, LPS had purchased a company called DocX, the company responsible for the“document production” price sheet cited here earlier.

    LPS is effectively in three lines of business (which are organized in two divisions): Technology, Data, and Analytics; Loan Services, and Default Services. The suits focus on the practices of the Default Services operation, which contributed $1.137 billion, or 48% of total revenues. The allegations set forth in the suits involve its Default Services, which organizes and manages foreclosures (including property management and REO auctions) on behalf of servicers.

    But the rub in this line of business is that the servicers are technically not the clients. LPS acts a sort of general contractor, farming out various tasks to both internal staff as well as outside firms. But LPS’s business pitch to the servicing industry was that it would come in and use a technology platform and provide (if desired) a turnkey solution, FOR NO ADDITIONAL COST than what the servicers were already paying on foreclosures.

    How could that be? All of LPS’s revenues in Default Services come from the lawyers in the national network of foreclosure mills that LPS has developed over time. Note that these cases may be filed in state court or federal bankruptcy court, depending on the situation of the borrower. In a routine foreclosure, all legal actions will be filed in state court. If the borrower has filed for a Chapter 13 bankruptcy, the Federal bankruptcy court has jurisdiction. In theory, the bankruptcy filing stops the actions of all creditors until the borrower has worked out a payment plan with the court. But in these cases, LPS and its network firms are seeking to break the bankruptcy court time out and grab the borrower’s house (the legal procedure is “motion for relief of stay”).

    To illustrate the degree of control LPS exercises over its network: we have been told by an LPS insider that the software that LPS uses to coordinate with all law firms in its network, LPS Desktop, incorporates a scoring system called 3/3/30. When LPS sends a referral on a foreclosure, the referee is expected to respond in three minutes. When it accepts the referral, it is auto debited (ACH or credit card). In three days, it is expected to have filed the first motion required in pursing the case, and it is expected to have resolved the case in 30 days. Firms are graded according to their ability to meet these time parameters in a green/yellow/red system. Firms that get a red grade are given a certain amount of time to improve their results or they are kicked out of the network.

    The cases describe the many fees between LPS and the network law firms. The terms of standard agreements provide for the payment of $150 at the time of referral (the first 3 in the 3/3/30 standard above). Network firms allegedly pay other fees as various milestones are reached, and these are couched as fees for technology, administrative review, document execution, and other legitimate-sounding services. We’ve also been told separately by LPS insiders that LPS and network law firms split the fee for the motion for relief of stay in bankruptcy court, as well as the fee on a small filing called a proof of claim.

    What, pray tell, is wrong with this business model? The two suits attack LPS’s very foundations. One case was filed late last week in Federal bankruptcy court in Mississippi and the other in state court in Kentucky. Both make similar allegations, but the Federal case is broader in some respects (it includes a company called Prommis Solutions a firm backed by Great Hill Partners, that like LPS, provides services to foreclosure mills, including one named in this case as defendant along with LPS).

    The Kentucky case includes on the RMBS trust issue that we have discussed in this blog. First, it contends that the mortgage assignment attempted by the the local law firm to allow the trust foreclose was a void under New York law, which governs the trust. Hence the foreclosure was invalid. Second, it claims that the defendants (the local law firm and LPS) fabricated documents. Third, the plaintiffs claim that the defendants (LPS and the local law firm) conspired together to practice systemic fraud upon the court and engage fee sharing arrangements, which is tantamount to the unauthorized practice of law (It is illegal for a law firm to split fees with a non-lawyer or to pay a non-lawyer for a referral; it’s considered to be the unauthorized practice of law). And this leads to some very serious conclusions. Per the Kentucky case:

    This attempt by the Trust to take Stacy’s real property is most analogous to stealing since this Trust cannot provide any legal evidence of ownership of the promissory note in accordance with the requirements of New York law which governs and controls the actions of the Trust and the Trustee acting on behalf of the trust.

    But the real meat in these cases are the class action claims, and they are real doozies. Both allege undisclosed contractual arrangements for impermissible legal fee splittings, which are camouflaged as various types of fees we described earlier. The suits describe the considerable lengths that LPS has gone to to keep these illegal kickbacks secret, including requiring that all attorneys who join the network keep the arrangement confidential. as well as using dubious “trade secret” claims to forestall their disclosure in discovery.

    As bad as this fact pattern is, it has even more serious implications for the bankruptcy court filing in Mississippi. In a bankruptcy case, any attorney pleading before the court must disclose every disbursement pursuant to a case, no matter how minor. Yet the payment of fees to LPS have never been disclosed to a single bankruptcy judge in the US, since LPS requires they be kept confidential. LPS and its network lawyers are thus engaged in a massive, ongoing fraud on all bankruptcy courts in the US.

    The Prommis Solutions/Great Hill charges are included only in the Mississippi case. Prommis is broadly in the same business as LPS’s Default Services unit (”leading provider of technology-enabled processing services for the default resolution sector of the residential mortgage industry”). And Prommis and its investor Great HIll, like LPS, are not a law firms, which means their participation in foreclosure-related legal fees constitutes illegal fee sharing. Prommis filed a registration statement (it planned to go public) this past June. Consider this section from its “Risk Factors” discussion (boldface theirs):

    Regulation of the legal profession may constrain the operations of our business, and could impair our ability to provide services to our customers and adversely affect our revenue and results of operations.

    Each state has adopted laws, regulations and codes of ethics that grant attorneys licensed by the state the exclusive right to practice law. The practice of law other than by a licensed attorney is referred to as the unauthorized practice of law. What constitutes or defines the boundaries of the “practice of law,” however, is not necessarily clearly established, varies from state to state and depends on authorities such as state law, bar associations, ethics committees and constitutional law formulated by the U.S. Supreme Court. Many states define the practice of law to include the giving of advice and opinions regarding another person’s legal rights, the preparation of legal documents or the preparation of court documents for another person. In addition, all states and the American Bar Association prohibit attorneys from sharing fees for legal services with non-attorneys.

    The common remedy for illegal fee sharing is disgorgement. Remember the magnitude of this business: it accounts for nearly half of LPS’s revenues. LPS is a pretty levered operation, with a debt to equity ratio of over 3:1. It isn’t hard to see that success in either of these cases would be a fatal blow to LPS. Similarly, if the allegations are proven true it could have ramifications for all servicers who do business with Fannie and Freddie since they are not supposed to be involved in referring work to a vendor who pays a kickback for a referral.

  • Mortgage investor group wants loans ensnared in robo-signing snafu repurchased, by JASON PHILYAW, Housingwire.com


    The Association of Mortgage Investors wants trustees of residential mortgage-backed securities “to hold servicers accountable for negligence in maintaining the assets of trusts.”

    The Washington firm, which advocates on behalf of institutional and private MBS investors, said in a press release that the recently uncovered robo-signing debacle – first reported by HousingWire two weeks ago – “undermines the integrity and the operational framework of the housing finance and mortgage system as it exists today.”

    Most of the nation’s largest mortgage lenders, includingBank of America, Ally Financial, formerly GMAC Mortgage, and JPMorgan Chase, have suspended foreclosures to amend faulty affidavits that may have been signed without looking at the documents or a notary present.

    The AMI wants bond trustees to investigate the process and assure investors that mortgages bundled and sold into MBS are repurchased by the loan originators, who failed in their “fiduciary responsibilities [to] protect millions of American pensioners and retirees.”

    “The capacity constraints at our nation’s largest servicers continue to be an issue of great concern to investors,” said Chris Katopis, executive director of the AMI. “We urgeAlly, JPMorgan Chase, and all other servicers to invest the time and resources necessary to improve their operational infrastructure and to avoid situations where efficient mortgage servicing and collection practices are compromised.”

    He said the may snafus may cause inaccurate legal filings for the mortgages and underlying properties in the MBS pools.

    “The unfortunate and little-known consequence of these operational breakdowns is the destruction of capital needed to sustain fixed-income investors reliant upon cash flow from pensions and retirement accounts,” Katopis said.

    Write to Jason Philyaw.

    Related Articles

  • Inside Lending Newsletter From Geoffrey Boyd, Prime Lending


    Ben Bernanke (lower-right), Chairman of the Fe...
    Image via Wikipedia

    INFO THAT HITS US WHERE WE LIVE  Last week’s housing market data centered on Standard & Poor’s S&P/Case-Shiller Home Price Index. This showed home prices UP in July for the fourth month in a row, but the pace of their gain had slowed from prior months. With the expiration of the government’s home buyer tax incentives, some observers wonder if the S&P/Case-Shiller will keep moving up. The composite 20-city index, a broad measure of U.S. home prices, showed a 3.2% increase year over year, the sixth month in a row it posted an annual gain.

    Nonetheless, home price gains did slow in the waning days of the tax credits. In July, only 12 of the 20 cities surveyed showed price gains, compared to 17 cities reporting rising prices in June. Analysts pointed out that these results underscore the fact that the spring/early summer months are the best for home sales. Most experts feel the next few months should give us a better idea of the true strength of the housing market.

    >> Review of Last Week

    A BIT OF A BREATHER… Investors on Wall Street took a rest last week from bidding stock prices up the way they had earlier in the month. Performance of the major market indexes was uninspiring, though slippages were all less than a half a percent. But performance for the month was impressive. The broad-based S&P 500 index, favored by professional investors, shot up 8.8% for September, its best monthly gain since April 2009 and its best September reading in over 70 years.

    Perhaps investors took the week off because they remain cautious about the near-term economic recovery. Consumers seem to agree, as the week began with a surprise drop in September’s Consumer Confidence Index, which hit a seven-month low, falling far short of consensus expectations. The ISM Manufacturing Index also slid a bit from August to September, missing estimates, but remaining in expansion territory.

    Upside economic data included better than forecast weekly initial jobless claims, although 453,000 is still not a good number. Continuing claims dropped by 83,000 for the week, but that number remains well above 4 million. Personal income and spending (PCE) for August were up better than expected and Core PCE was up just 0.1%, so inflation is still in check.

    For the week, the Dow ended down 0.3%, to 10829.68; the S&P 500 was down 0.2%, to 1146.24; and the Nasdaq was off 0.4%, to 2370.75.

    The bond market ended the week with investor interest helping prices in some areas. One was the FNMA 30-year 4.0% bond we watch, which ended UP 10 basis points for the week, closing at $102.27. According to Freddie Mac‘s weekly survey, national average mortgage rates for fixed-rate mortgages dropped a tad, remaining at historically low levels.

    >> This Week’s Forecast

    WHERE WE’RE GOING WITH HOMES AND JOBS… The week begins with August Pending Home Sales, which count signed contracts and therefore tell us what will be happening with closings a few months out. Unfortunately, the consensus expects the August reading to be down a bit from July. But September ISM Services is expected to show the non-manufacturing sector still indicating expansion, with a reading just over 50.

    The week ends with the September Employment Report and the forecast is for no increase in payrolls overall, although 70,000 jobs are expected to be added to the private sector. However, population growth outpaces this rate of job creation, so unemployment is predicted to tick up to 9.7%.

    >> The Week’s Economic Indicator Calendar

    Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

    Economic Calendar for the Week of October 4 – October 8

    Date Time (ET) Release For Consensus Prior Impact
    M
    Oct 4    		 10:00 Pending Home Sales Aug 1.0% 5.2% Moderate
    Tu
    Oct 5    		 10:00 ISM Services Sep 51.8 51.5 Moderate
    W
    Oct 6    		 10:30 Crude Inventories 10/2 NA –0.475M Moderate
    Th
    Oct 7    		 08:30 Initial Unemployment Claims 10/2 455K 453K Moderate
    Th
    Oct 7    		 08:30 Continuing Unemployment Claims 9/25 4.450M 4.457M Moderate
    F
    Oct 8    		 08:30 Average Workweek Sep 34.2 34.2 HIGH
    F
    Oct 8    		 08:30 Hourly Earnings Sep 0.1% 0.3% HIGH
    F
    Oct 8    		 08:30 Nonfarm Payrolls Sep 0K –54K HIGH
    F
    Oct 8    		 08:30 Nonfarm Private Payrolls Sep 70K 67K HIGH
    F
    Oct 8    		 08:30 Unemployment Rate Sep 9.7% 9.6% HIGH

    >> Federal Reserve Watch

    Forecasting Federal Reserve policy changes in coming months  There’s been a lot of talk about the Fed’s readiness to provide a second round of quantitative easing (QE-2) if needed. This has led economists to believe that the Fed Funds Rate will remain at its rock bottom levels for quite some time. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

    Current Fed Funds Rate: 0%–0.25%

    After FOMC meeting on: Consensus
    Nov 3 0%–0.25%
    Dec 14 0%–0.25%
    Jan 26 0%–0.25%

    Probability of change from current policy:

    After FOMC meeting on: Consensus
    Nov 3 <1%
    Dec 14 <1%
    Jan 26 <1%
    Geoffrey Boyd
    Area Manager/Mortgage Consultant
    10135 SE Sunnyside Road, Suite 120
    Clackamas, OR 97015
    Phone: 503.462.0413
    Fax: 877.874.4649
    Mobile: 503.819.2462
    Main: 503.786.7092
    Related Articles

  • Inside Lending Newsletter From Geoffrey Boyd, Prime Lending


    Ben Bernanke (lower-right), Chairman of the Fe...
    Image via Wikipedia

    INFO THAT HITS US WHERE WE LIVE  Last week’s housing market data centered on Standard & Poor’s S&P/Case-Shiller Home Price Index. This showed home prices UP in July for the fourth month in a row, but the pace of their gain had slowed from prior months. With the expiration of the government’s home buyer tax incentives, some observers wonder if the S&P/Case-Shiller will keep moving up. The composite 20-city index, a broad measure of U.S. home prices, showed a 3.2% increase year over year, the sixth month in a row it posted an annual gain.

    Nonetheless, home price gains did slow in the waning days of the tax credits. In July, only 12 of the 20 cities surveyed showed price gains, compared to 17 cities reporting rising prices in June. Analysts pointed out that these results underscore the fact that the spring/early summer months are the best for home sales. Most experts feel the next few months should give us a better idea of the true strength of the housing market.

    >> Review of Last Week

    A BIT OF A BREATHER… Investors on Wall Street took a rest last week from bidding stock prices up the way they had earlier in the month. Performance of the major market indexes was uninspiring, though slippages were all less than a half a percent. But performance for the month was impressive. The broad-based S&P 500 index, favored by professional investors, shot up 8.8% for September, its best monthly gain since April 2009 and its best September reading in over 70 years.

    Perhaps investors took the week off because they remain cautious about the near-term economic recovery. Consumers seem to agree, as the week began with a surprise drop in September’s Consumer Confidence Index, which hit a seven-month low, falling far short of consensus expectations. The ISM Manufacturing Index also slid a bit from August to September, missing estimates, but remaining in expansion territory.

    Upside economic data included better than forecast weekly initial jobless claims, although 453,000 is still not a good number. Continuing claims dropped by 83,000 for the week, but that number remains well above 4 million. Personal income and spending (PCE) for August were up better than expected and Core PCE was up just 0.1%, so inflation is still in check.

    For the week, the Dow ended down 0.3%, to 10829.68; the S&P 500 was down 0.2%, to 1146.24; and the Nasdaq was off 0.4%, to 2370.75.

    The bond market ended the week with investor interest helping prices in some areas. One was the FNMA 30-year 4.0% bond we watch, which ended UP 10 basis points for the week, closing at $102.27. According to Freddie Mac‘s weekly survey, national average mortgage rates for fixed-rate mortgages dropped a tad, remaining at historically low levels.

    >> This Week’s Forecast

    WHERE WE’RE GOING WITH HOMES AND JOBS… The week begins with August Pending Home Sales, which count signed contracts and therefore tell us what will be happening with closings a few months out. Unfortunately, the consensus expects the August reading to be down a bit from July. But September ISM Services is expected to show the non-manufacturing sector still indicating expansion, with a reading just over 50.

    The week ends with the September Employment Report and the forecast is for no increase in payrolls overall, although 70,000 jobs are expected to be added to the private sector. However, population growth outpaces this rate of job creation, so unemployment is predicted to tick up to 9.7%.

    >> The Week’s Economic Indicator Calendar

    Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

    Economic Calendar for the Week of October 4 – October 8

    Date Time (ET) Release For Consensus Prior Impact
    M
    Oct 4    		 10:00 Pending Home Sales Aug 1.0% 5.2% Moderate
    Tu
    Oct 5    		 10:00 ISM Services Sep 51.8 51.5 Moderate
    W
    Oct 6    		 10:30 Crude Inventories 10/2 NA –0.475M Moderate
    Th
    Oct 7    		 08:30 Initial Unemployment Claims 10/2 455K 453K Moderate
    Th
    Oct 7    		 08:30 Continuing Unemployment Claims 9/25 4.450M 4.457M Moderate
    F
    Oct 8    		 08:30 Average Workweek Sep 34.2 34.2 HIGH
    F
    Oct 8    		 08:30 Hourly Earnings Sep 0.1% 0.3% HIGH
    F
    Oct 8    		 08:30 Nonfarm Payrolls Sep 0K –54K HIGH
    F
    Oct 8    		 08:30 Nonfarm Private Payrolls Sep 70K 67K HIGH
    F
    Oct 8    		 08:30 Unemployment Rate Sep 9.7% 9.6% HIGH

    >> Federal Reserve Watch

    Forecasting Federal Reserve policy changes in coming months  There’s been a lot of talk about the Fed’s readiness to provide a second round of quantitative easing (QE-2) if needed. This has led economists to believe that the Fed Funds Rate will remain at its rock bottom levels for quite some time. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

    Current Fed Funds Rate: 0%–0.25%

    After FOMC meeting on: Consensus
    Nov 3 0%–0.25%
    Dec 14 0%–0.25%
    Jan 26 0%–0.25%

    Probability of change from current policy:

    After FOMC meeting on: Consensus
    Nov 3 <1%
    Dec 14 <1%
    Jan 26 <1%
    Geoffrey Boyd
    Area Manager/Mortgage Consultant
    10135 SE Sunnyside Road, Suite 120
    Clackamas, OR 97015
    Phone: 503.462.0413
    Fax: 877.874.4649
    Mobile: 503.819.2462
    Main: 503.786.7092
    Related Articles

  • Study Finds Foreclosure Crisis Had Significant Racial Dimensions, Asanet.org


    Residential segregation constitutes an important contributing cause of the current foreclosure crisis-

    Newswise — Although the rise in subprime lending and the ensuing wave of foreclosures was partly a result of market forces that have been well-documented, the foreclosure crisis was also a highly racialized process, according to a study by two Woodrow Wilson School scholars published in the October 2010 issue of the American Sociological Review.

    Woodrow Wilson School Ph.D. candidate Jacob Rugh and Woodrow Wilson School’s Henry G. Bryant Professor of Sociology and Public Affairs, Douglas Massey, assessed segregation and the American foreclosure crisis. The authors argue that residential segregation created a unique niche of minority clients who were differentially marketed risky subprime loans that were in great demand for use in mortgage-backed securities that could be sold on secondary markets.

    The authors use data from the 100 largest U.S. metropolitan areas to test their argument. Findings show that black segregation, and to a lesser extent Hispanic segregation, are powerful predictors of the number and rate of foreclosures in the United States – even after removing the effects of a variety of other market conditions such as average creditworthiness, the degree of zoning regulation, coverage under the Community Reinvestment Act, and the overall rate of subprime lending.

    “This study is critical to our understanding of the foreclosure crisis since it shows the important and independent role that racial segregation played in the housing bust,” said Rugh.

    A special statistical analysis provided strong evidence that the effect of black segregation on foreclosures is causal and not simply a correlation.

    “While policy makers understand that the housing crisis affected minorities much more than others, they are quick to attribute this outcome to the personal failures of those losing their homes – poor credit and weaker economic position,” noted Massey. “In fact, something more profound was taking place; institutional racism played a big part in this crisis.”

    The authors conclude that Hispanic and black racial segregation was a key contributing cause of the foreclosure crisis. “This outcome was not simply a result of neutral market forces but was structured on the basis of race and ethnicity through the social fact of residential segregation,” the authors note in the article.

    “Ultimately, the racialization of America’s foreclosure crisis occurred because of a systematic failure to enforce basic civil rights laws in the United States,” the authors write in the article. “In addition to tighter regulation of lending, rating, and securitization practices, greater civil rights enforcement has an important role to play in cleaning up U.S. markets. It is in the nation’s interest for federal authorities to take stronger and more energetic steps to rid U.S. real estate and lending markets of discrimination, not simply to promote a more integrated and just society but to avoid future catastrophic financial losses.”

    Jacob Rugh’s research focuses on urban policy and the intersection of housing markets, land use regulation, and local politics. His forthcoming dissertation will focus on the social, economic, and local regulatory roots of the recent U.S. housing crisis and their implications for public policy.

    Douglas Massey’s research focuses on international migration, race and housing, discrimination, education, urban poverty, and Latin America. He is the author, most recently, of Brokered Boundaries: Creating Immigrant Identity in Anti-Immigrant Times (Russell Sage Foundation, 2010), coauthored with Magaly Sanchez. He has also authoredReturn of the L-Word: A Liberal Vision for the New Century(Princeton University Press, 2005) and Strangers in a Strange Land: Humans in an Urbanizing World (Norton, 2005). Massey currently serves as President of the American Academy of Political and Social Science and is past-President of the American Sociological Association and the Population Association of America. He is a member of the National Academy of Sciences, the American Academy of Arts and Sciences, and the American Philosophical Society.

    The research article described above is available by request for members of the media. For a copy of the full study and a two page summary, contact Daniel Fowler, ASA‘s Media Relations and Public Affairs Officer, at pubinfo@asanet.org or (202) 527-7885, or Elisabeth Donahue, WWS Assistant Dean for Public and External Affairs, at edonahue@princeton.edu or (609) 258-5988.

    About the American Sociological Association and the American Sociological Review
    The American Sociological Association (www.asanet.org), founded in 1905, is a non-profit membership association dedicated to serving sociologists in their work, advancing sociology as a science and profession, and promoting the contributions to and use of sociology by society. The American Sociological Review is the ASA’s flagship journal.

    About the Woodrow Wilson School
    Founded in 1930, the Woodrow Wilson School at Princeton University is a major international center of advanced training and research in public affairs. The Woodrow Wilson School is an institution with the energy and strength to tackle the most serious issues of the present day, and the vision and experience to prepare the leaders who will shape the public policies of the future.

  • Let’s Use Fannie And Freddie To Bail Ourselves Out By Refinancing Everyone’s Mortgage — Says Glenn Hubbard, by Daniel Gross, Yahoo!


    Glenn Hubbard, Harvard-trained economist, former Bush administration official, dean of the Columbia Business School, is a mild-mannered, buttoned-down guy. But his proposal to bolster the housing market and provide some stimulus to America’s long-suffering homeowners is a bit radical.

    In a recent New York Times op-ed article, Hubbard and Columbia Business senior vice dean Chris Mayer urged a simple solution: Fannie Mae and Freddie Mac, the government-controlled housing giants, should just refinance homowners at today’s low interest rates.

    Hubbard joined Aaron and me to discuss this proposal, as well as other prescriptions he lays out for reforming America’s housing finance

    system in his new book, Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity, co-authored with Peter Navarro.

    Hubbard noted that the government and the Federal Reserve have already made significant efforts to shore up housing. “The Fed’s purchase of mortgage-backed securities really helped the housing market a lot,” by helping to narrow the spread between Treasuries and mortgages, Hubbard said. But falling house prices have made it difficult for people with under water mortgages to take advantage of lower rates. “Even with low interest rates, it’s hard to see a lot of refinancings because loan to value ratios are high,” he says.

    A Sensible, Low-Cost Solution

    His suggestion is that Fannie and Freddie could simply refinance existing mortgages at lower rates, at no additional cost to taxpayers. With Fannie Mae and Freddie Mac under U.S. conservatorship, the taxpayers already guarantee most mortgages through them. Hubbard believes this refi boom would ultimately save taxpayers money, since borrowers would be more likely to stay current on new mortgages with lower interest rates.

    “More to the point for stimulus, this would be the equivalent of a $50 billion to $60 billion per year long-term tax cut for middle-income families, with no cost to the Treasury,” he says. “It seems pretty sensible.”

    A bonus: this plan wouldn’t require passing legislation through a gridlocked Congress.

    Of course, there are obstacles. Even at today’s much lower volumes, the home-lending system is having difficulty processing mortgage documents efficiently. Many critics are calling for Fannie and Freddie to reduce their scope of activities, not to increase them. And then there’s the question of moral hazard: Wouldn’t this just be another example of taxpayers bailing out borrowers who made what turned out to be poor decisions?

    Not so much, says Hubbard. Many of the borrowers who now have loan-to-value (LTV) ratios that preclude them from refinancing are in the situation not because they borrowed so much to buy a home, but because the property supporting the mortgage has declined in value by 30 percent. “The whole thrust is to keep people in their homes and provide a tax cut that they would have gotten if their LTVs weren’t so high,” said Hubbard.

    More Housing Solutions

    In Seeds of Destruction, Hubbard and co-author Peter Navarro offer some other provocative thoughts on how to reform housing finance and avoid another debacle. Among the suggestions:

    • Both homeowners and lenders should be required to have some “skin in the game” on mortgages.
    • Prohibitions or restrictions on funky lending practices such as interest-only and adjustable-rate products, especially if they’re going to be securitized.
    • Greater disclosure on the information that goes into creating credit ratings for mortgage-backed products.

    Perhaps most controversially, Hubbard calls for a rethinking of the home mortgage deduction, which allows homeowners to deduct interest on loans up to $1 million from their taxable income. The home mortgage deduction is an inefficient and expensive means of subsidizing housing and benefits higher-income Americans disproportionately.

    “I’m not saying repeal it this afternoon, but we should take a hard look at our subsidies for housing and ask if they really make sense,” he tells Aaron and me in the accompanying clip.

    If there’s a need to subsidize homeownership for lower and middle-income Americans, policy should focus subsdies on those sectors, Hubbard says. “But the very expensive subsidy system we have now really helped get us in trouble.”

  • Tens of thousands lose stimulus-subsidized jobs, Tami Luhby, Money.cnn.com


    Tens of thousands of low-income workers lost their jobs Thursday as a stimulus-subsidized employment program came to an end.

    About a quarter of a million people in 37 states were placed in short-term jobs thanks to a $5 billion boost to the Temporary Assistance for Needy Families program, according to the Center on Budget and Policy Priorities. States used about $1 billion to provide subsidized employment, with the remaining funds going to cash grants, food programs, housing assistance and other aid.

    About half the jobs were summer employment for youth and the rest were for disadvantaged parents. Each state configured its initiative differently. Some covered all the workers’ wages for a few months, while others paid for a portion of their salary.

    With the program expiring, many of the adults have been told not to report to work anymore. And it won’t be easy for them to find a new position at time when the unemployment rate continues to hover at 9.6%

    “They are just joining the millions of other people looking for permanent work,” said Elizabeth Lower-Basch, senior policy analyst at the Center for Law and Social Policy, an advocacy group known as CLASP.

    The TANF jobs initiative was one of several stimulus initiatives that ended Thursday. Also running out are a $2 billion subsidized child care program and a $2.1 billion boost for Head Start, an early learning program for needy children.

    Limping along

    State officials and advocacy groups have been lobbying Congress to extend the jobs program and other Recovery Act measures, but federal lawmakers have shown little appetite to do so.

    A handful of states will continue to operate the programs for another few months, but most of those will be downsized considerably.

    Illinois announced earlier this week that it will continue the program with state funds for up to two months in hopes that Congress will provide more money for it. The state has placed more than 26,000 workers at more than 5,000 private, non-profit and government employers.

    “The best way to make our economy stronger is to put people to work,” said Gov. Pat Quinn. “It is good for families, small business owners and businesses.”

    The TANF jobs program is among the few stimulus initiatives that have been embraced by Republican governors. Mississippi’s Haley Barbour, who headed the Republican National Committee in the mid-1990s, praised the effort.

    The “program will provide much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities,” Barbour said when the initiative launched last year.

    South Carolina, Texas and Minnesota — all headed by Republican governors — plan to continue their programs either in a smaller form or for a few months, according to the Center on Budget and Policy Priorities.

  • IRS Offers Tax Break for Homeowners With Defective Drywall, Joaquin Sapien, Propublica.org


    The federal government has made a modest step toward offering some financial relief to homeowners dealing with contaminated drywall. The Internal Revenue Serviceannounced Thursday that it will allow homeowners to write off expenditures they have or will incur trying to fix their homes.

    The Consumer Product Safety Commission has recommended (PDF) that homeowners remove all the drywall, along with the electrical, gas and fire safety systems — essentially gutting the homes. The drywall, most of it imported from China, emits high amounts of hydrogen sulfide, which can corrode wiring and other electronic appliances, causing refrigerators and air conditioners to fail. Homeowners also have complained that the drywall triggers respiratory problems, nosebleeds and severe headaches.

    According to the new IRS policy, homeowners can treat the amount they paid for these repairs as a “casualty loss in the year of payment.” Casualty losses are typically reserved for repairs homeowners have made after a natural disaster or sudden event.

    The policy includes some important caveats. For example, if a homeowner has filed a claim with an insurance company, the homeowner can write off only 75 percent of the amount the insurance didn’t cover. Homeowners also must itemize their federal tax returns. Deductions will be granted only for amounts that exceed 10 percent of the taxpayer’s adjusted gross income for the year the claim is filed and for amounts that exceed $500.

    Taxpayers who have already filed tax returns for the year in which they paid to fix their houses have three years to amend their returns and claim the deduction.

    Most insurance companies are not reimbursing homeowners for drywall problems. In fact, some homeowners say their insurers canceled their policies after they filed a claim.

    The tax deduction helps only those homeowners who can afford to repair their homes, which can be very expensive. Ridding a house of its drywall and wiring, as the product safety commission recommends, can cost $100,000 or more.

    Three U.S. senators — Bill Nelson, D-Fla. and Virginia Senators Mark Warner and Jim Webb — along with Virginia Congressman Glenn Nye first began asking the IRS to offer such a deduction in June 2009, and have written additional joint letters since then. Webb also filed amendments to two separate bills that would have required the IRS to offer the casualty loss deduction — but the amendments weren’t included in the final legislation.

    “This is welcome and long overdue news,” Nelson said. “This tax relief is just another important step to help drywall victims piece their lives back together.”

    On Wednesday, the day before the IRS made its announcement, Warner called Commissioner Doug Shulman and urged him again to take action, Warner’s spokesman said.

    “This is a key step forward in our efforts to provide some measure of relief to homeowners who have been struggling financially due to contaminated drywall issues,” Warner said in a statement after the IRS announcement. “Our office continues to work individually with Virginia families, including intervention with their mortgage lenders, and we will continue to look for ways we might be helpful to these families.”

    Webb said the IRS action was “an important step forward for thousands of American families whose homes have been contaminated with Chinese drywall.”

    “I have heard directly from my constituents about the emotional, physical, and financial hardship they continue to face as they struggle to maintain payments on houses that have been rendered uninhabitable, while also paying for a place to live and often dealing with corresponding health issues,” Webb said in a statement. “I will continue working to ensure that those affected receive the necessary federal attention.”

  • Wells Fargo Curtailing Short Sale Extensions, by Kate Berry, Americanbanker.com


    In a move that will expedite some foreclosures, Wells Fargo & Co. has stopped granting extensions for certain distressed homeowners to complete short sales.

    The change last month preceded recent revelations of faulty documentation at two major mortgage servicers — JPMorgan Chase & Co. and Ally Financial Inc. — that suspended thousands of foreclosure actions to review their processes. Wells said it does not have the same problems as those servicers.

    The company said it changed its policy on short sales at the behest of investors for whom it services mortgages, including the government-sponsored enterprises.

    Early last month, Fannie Mae told its servicers to stop unnecessarily delaying foreclosures. The GSE said it would hold servicers responsible for unexplained delays to foreclosures with fines and on-site reviews.

    In a memo e-mailed to short sale vendors last month and obtained by American Banker, Wells said it will no longer postpone foreclosure sales for those who do not close short sales by the date in their approval letter from the company. Only extension letters dated Sept. 14 or earlier would be honored, Wells said.

    Mary Berg, a spokeswoman for Wells, confirmed that the memo was genuine. But she said it had “caused confusion,” and stressed that Wells still grants extensions on loans in its own portfolio (including those it acquired with Wachovia Corp.) and in cases where investors allow it. For those two categories, Berg said, Wells allows one foreclosure postponement, provided these conditions are met: a short sale has been approved by Wells, by junior lienholders and by mortgage insurers; the buyer has proof of funds or approved financing; and the short sale can close within 30 days of the scheduled foreclosure sale.

    Berg would not say how often Wells’ investors allow extensions.

    The new policy on short sales was put in place “over the past couple of months … in response to various investor changes,” Berg said. Those investors “would include the GSEs, HUD and those investing in private-label” mortgage-backed securities.

    In a short sale, a home is sold for less than the amount owed on the mortgage and the lender accepts a discounted payoff. The transactions are often less costly to the lender than seizing and liquidating the home.

    “As long as there is a short sale possibility, the loss will always be less,” said Rayman Mathoda, the president and chief executive of AssetPlan USA, a Long Beach, Calif., provider of short sale training and education. “Basically foreclosure sales should be delayed for any responsible homeowner that has a real buyer available.”

    Wells’ decision also follows efforts by the Obama administration to encourage short sales for borrowers who do not qualify for loan modifications.

    “It makes no business sense why they are doing this, since it’s wrong for the borrowers and for the government,” said Eli Tene, the CEO of IShortSale Inc., a Woodland Hills, Calif., firm that advises distressed borrowers.

    But experts on short sales said that in recent months servicers have been reluctant to approve the transactions out of concern that they will fall through, further prolonging the process.

    “There is also a growing issue with the new buyer and financing issues, either losing their jobs ahead of closing or the new lender not being ready to close, which then gives rise to the buyer running out of patience and walking,” said Jim Satterwhite, executive vice president and chief operating officer of Infusion Technologies LLC, a Jacksonville, Fla., provider of short sale services.

    Satterwhite said many servicers have reached the point where they know which borrowers do not qualify for a modification and are moving those borrowers through to foreclosure to deal with the backlog of inventory. “A lot of servicers are just falling in line with Fannie,” he said.

    Moreover, the expectation that housing prices will fall further is forcing servicers — and the GSEs — to push for a quicker resolution through foreclosure, since short sales can involve further delays. “Values are dropping faster and that also means the losses on short sales are going up,” Satterwhite said.

    Of course, the recent reports of “robo-signing” at Ally Financial’s GMAC Mortgage and at JPMorgan Chase could gum up the foreclosure works again. For example, on Friday, Connecticut Attorney General Richard Blumenthal asked state courts to freeze all home foreclosures for 60 days to “stop a foreclosure steamroller based on defective documents.” The day before, Acting Comptroller of the Currency John Walsh said he had told seven major servicers, including Wells, to review their foreclosure processes.

    Another Wells spokeswoman, Vickee J. Adams, said the company’s “policies, procedures and practices satisfy us that the affidavits we sign are accurate.”

  • I Love My Ducks (Return of the Quack) – Supwitchugirl


  • Prices rise for homes in foreclosure or sold by banks, by Alejandro Lazo, Los Angeles Times (Latimes.com)


    The increase underscores the degree to which the mortgage crisis has spread to more affluent neighborhoods.

    Prices for homes either in foreclosure or sold by banks rose in the second quarter, according to a real estate group, underscoring competition in the market for distressed properties and the degree to which the mortgage crisis has spread to more affluent neighborhoods.

    FOR THE RECORD:
    Homes in foreclosure: A chart accompanying an article in some editions of the Sept. 30 Business section contained errors in illustrating the rise in the average price of homes sold during or after foreclosure in Southern California, the state and the nation. The chart listed prices for 2009 and 2010 but failed to note that the time frame was the second quarter of each year. The data, credited to Bloomberg, were compiled by RealtyTrac of Irvine. And the numbers presented for 2009 were incorrectly transcribed from RealtyTrac’s original data. A corrected version of the chart appears on Page B2 of the Business section. —

    In the second quarter, 248,534 U.S. properties were sold by banks or by owners who had fallen into foreclosure, RealtyTrac of Irvine said. That was an increase of 4.9% from the previous quarter, but a 20.1% decline from the same quarter last year, when discounted bank-owned homes flooded the market.

    The average price for these properties was $174,198, RealtyTrac said, up 1.6% from the previous quarter and 6.1% from the same quarter last year.

    “We are seeing the tail end of the foreclosure crisis caused by bad loans,” said Rick Sharga, senior vice president of RealtyTrac. “We are seeing the beginning of the wave of foreclosures caused by unemployment, which means you are seeing, in a lot of cases, a more expensive property in foreclosure than you would see, say, based on a subprime loan.”

    The price increase was more pronounced in California, according to RealtyTrac. The average price was $256,833 for homes sold by banks or by homeowners who had at least received a notice of default from their lenders. That was an increase of 4.2% from the previous quarter and 17.5% from the same quarter last year.

    The sales tracked by RealtyTrac included only properties sold to third parties, either investors or consumers, and not sales of properties sold back to lenders at trustee sales or through other transactions.

    Overall home sales during the three-month period captured by the report were boosted by a popular federal tax credit for buyers. Since then, sales of U.S. homes have weakened considerably, and many experts are predicting a decline in home valuations.

    “It is tempered a little bit by the fact that it covers the period of the tax credit, and everything looked fine, and since then the market has dropped off,” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “We need to watch this a little more and what it shows under the slower market conditions.”

    Banks have been repossessing homes at a record clip this year, pushing properties through foreclosure that had been delayed by several moratoriums last year as well as the Obama administration’s efforts to help troubled borrowers. In recent weeks, the practices of banks taking back homes through foreclosure have increasingly become a concern.

    Wall Street titan JPMorgan Chase said Wednesday that it was delaying foreclosure proceedings after it discovered that some employees signed affidavits about loan documents on the basis of file reviews done by other people instead of personally reviewing those files.

    The New York bank said it was working with independent counsel to review documents in foreclosure proceedings and has requested that the courts not enter judgments in pending matters until it has completed the review. Those foreclosures only apply to properties in so-called judicial foreclosure states, which require a court order for a foreclosure. The vast majority of foreclosures in California are conducted without a court order.

    The JPMorgan Chase foreclosure delay follows a similar move by Ally Financial Inc. last week, when its GMAC Mortgage unit suspended evictions and foreclosures in 23 states while it conducted a review of its processes.

    The Detroit company, formerly known as GMAC Inc., didn’t suspend evictions in California because almost all foreclosures in the state by it and other lenders don’t require a court order. Nevertheless, Atty. Gen. Jerry Brown has told the company to halt foreclosures unless it could prove it was observing the state’s laws.

    alejandro.lazo@latimes.com

  • Conforming Jumbo Loan Limits Extended, Thetruthaboutmortgage.com


    The conforming jumbo loan limits, which allow homeowners in certain areas of the country to get government-backed loans of up to $729,750, have been extended for another year, according to the Mortgage Bankers Association.

    Last night, H.R. 3081 passed the Senate and House – it contains provisions that extend the existing loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (including FHA loans and reverse mortgage products, or HECMs) through September 30, 2011.

    Additionally, it provides $20 billion in loan commitment authority for FHA’s General and Special Risk Insurance Fund.

    “Extending the existing limits is essential to helping borrowers continue to have access to affordable long-term, fixed-rate mortgage credit in today’s struggling economy,” said Robert E. Story, Jr., Chairman of the Mortgage Bankers Association, in a release.

    “The current limits have been a key component of keeping the mortgage market functioning, helping keep mortgage interest rates low for consumers who want to purchase a home or refinance an existing mortgage.

    Without such an extension, larger loans would have fall into the jumbo loan category, resulting in interest rates a percentage point or more higher than conforming loans.

    The traditional conforming loan limit is currently set at $417,000 for one-unit residential mortgages.

    Conforming jumbo loan amounts ($417,001 to $729,750) price at a slight premium to conforming loan amounts, but well below jumbo loans amounts.

  • Mortgage Refinance: Proposed Home Refinance Bill Could Allow Almost Everyone to Refinance, by Rosemary Rugnetta, Freerateupdate.com


    (FreeRateUpdate.com) – Although the current low mortgage interest rates have helped numerous homeowners torefinance into better terms, many have not be able to take advantage of these deals. Tighter lending guidelines have left many homeowners with no where to turn for help. In an effort to help save homeownership for many Americans, Representative Dennis Cardoza of California has proposed a home refinance bill that could allow almost everyone to refinance.

    H.R. 6218 is called The Housing Opportunity and Mortgage Equity Act of 2010 (HOME). It is designed to offer refinances directly to homeowners who need help. As other foreclosure prevention programs have failed to prevent further defaults, this bill can possibly reduce foreclosures drastically and reward those who have continued to make their monthly mortgage payments even through economic struggles. With reduced mortgage payments, consumers will have more available cash to spend each month thus stimulating a dragging economy. In addition, this type of refinance can help eliminate strategic defaults and loan modifications.

    Following are some of the details of the bill:

    -A qualified mortgage is one that is current or in default as long as it is the borrower’s primary residence and is owned or guaranteed by Fannie Mae or Freddie Mac, This residence can be a single family dwelling, one to four family dwelling, condominium or a share in a cooperative ownership housing association.

    -Any penalties for prepayment or refinancing and penalties due to default or delinquency would be waived or forgiven.

    -The term of the new refinance could be no longer than 40 years.

    -The servicer cannot charge the borrower any fees for refinancing.

    -Fees for title insurance coverage will be reasonable in comparison with fees for the same coverage available. Any fees associated with the refinance would be rolled into the mortgage.

    -The enterprise (Fannie Mae and Freddie Mac) will pay the servicer a fee not to exceed $1,000 for each qualified mortgage that is refinanced.

    -There will be no appraisal required.

    -In order to pay for this, the old mortgages will be paid off when refinanced. The new refinances will be funded by selling new mortgage securities.

    Although lenders believe that they will lose too much money if this bill is adopted, it can probably be the best solution given to date to halt the endless foreclosure issue. It will be interesting to see how this bill develops, what will be added and what will be taken away or even if it will pass. According to Congressman Cardoza’s website, there are about 30 million mortgages guaranteed by Fannie Mae and Freddie Mac. The savings from this program could be tremendous and have been estimated by Morgan Stanley and JP Morgan Chase to be an annual reduction of approximately $50 billion in mortgage payments. While the success of the available current programs is still questionable, this proposed bill which allows almost everyone to refinance could be the answer to accelerating the economy.

  • 71% of Borrowers Do Qualify for a Purchase Loan, by Rosemary Rugnetta, Freerateupdate.com


    (FreeRateUpdate.com) – As the economic crisis continues to slowly heal its wounds, the reports of the effects on our society is in the media every day. The housing market and mortgage market seem to be the hardest hit in this down turn that appears to be dragging on for months. While this solemn state of affairs engulfs each one of us into a state of depression, there is good news on the forefront. According to these new statistics, there are a large number of borrowers that still have acceptable credits scores. In fact, 71% of borrowers do qualify for a purchase loan.

    As reported by Zillow, according to Fair Isaac Corporation, the creator of the FICO score, 29.3% of today’s borrowers have a credit score below 620 which makes them unable to borrower money for a purchase mortgage. Anyone with a credit score below 620 is very unlikely to be able to obtain financing. Even if this group of people had a large down payment, they would most likely not be able to obtain a mortgage. On the other hand, the good news is that 47% of today’s borrowers have scores above 720 and a total of 71% are able to borrow. Higher credit scores are awarded with the best interest rates available.

    Due to tight credit standards and stricter underwriting guidelines, many borrowers today are being turned away from obtaining a mortgage. Years ago, these same borrowers were turning to sub-prime mortgage products as their only financing option. At that time, many of these same borrowers would have qualified for FHA loans but opted for sub-prime instead. In fact, prior to the introduction of sub-prime, there were only FHA loans available to these borrowers. Now, with FHAs exposure in the mortgage market so pronounced, they, too, are further tightening their lending guidelines making it difficult for this 29.3% group of people to obtain a mortgage.

    More people have been choosing to clean up their credit and pay off credit cards as credit card interest rates have increased. This is a positive move in an effort to increase their credit scores and make them more eligible to buy a home. Although people have been cutting back other spending while doing this and growth of the economy has suffered, they are becoming responsible spenders. As this movement continues, the percentage of borrowers that are credit worthy and able to buy should increase over time. Just as it took many years for this turmoil to occur, it will take time for the benefits of these actions to be seen.

    Although the number of borrowers that are unable to obtain a mortgage may seem high, earlier studies show that nearly 20% of the population had FICO scores below 620 in 2002 when the unemployment rate averaged around 5.7%. Considering the fact that we have just gone through the Great Recession followed by a very slow economic recovery and a very high unemployment rate, this new percentage of 29.3% is not so frightening. Reflecting on the fact that 71% of borrowers do qualify for a new home loan, things may just improve when borrowers realize that they are in this category and able to take advantage of historically low interest rates.

  • Chase Halts Foreclosures In Process, by Thetruthaboutmortgage.com


    JP Morgan Chase has halted foreclosures until a review of its document-filing process is completed, according to the WSJ.

    The New York City-based bank said the move affects roughly 56,000 home loans in some stage of the foreclosure process.

    Chase spokesman Tom Kelly announced that there were cases where employees may have signed affidavits about loan documents on the basis of file reviews done by other personnel.

    As a result, the bank and mortgage lender must now re-examine documents tied to loans already in foreclosure to verify if they “meet the standard of personal knowledge or review” where required.

    Back in May, law firm Ice Legal LP dropped Chase document-signer Beth Ann Cottrell after it became known that she signed off on roughly 18,000 foreclosure affidavits and other documents each month without actually reviewing the files.

    And last week, GMAC Mortgage told brokers and agents to immediately stop evictions, cash-for-keys transactions, and lockouts in 23 states after the company warned it could need to take corrective action in connection with some foreclosures.

    Sign of the times…a year ago it was all about foreclosure moratoriums to help borrowers in need, and now it’s all about lenders making sure they don’t get into hot water over their suspect loss mitigation activities.

  • Housing Finance Needs U.S. Backstop, Executives Tell Lawmakers, by Lorraine Woellert, Bloomberg.com


    Congress must preserve some form of U.S. guarantee on mortgages to attract private capital to the housing-finance system and stabilize a market recovering from the credit crisis, industry executives told lawmakers.

    Private capital must play a bigger role in housing finance as policy makers replace the current system, which is dependent on guarantees from government-backed Fannie Mae andFreddie Mac, the executives said today in testimony prepared for a House Financial Services Committee hearing. U.S. support will still be needed to keep loans flowing to borrowers and preserve products such as 30-year, fixed-rate mortgages, they said.

    Without a government backstop, there wouldn’t be enough private capital to support the $8 trillion in home loans that are funded by investors, said Michael Farrell, chief executive officer ofAnnaly Capital Management Inc., a New York real estate investment trust that owns or manages $90 billion of mortgage-backed securities.

    The House panel called Farrell and other housing-industry executives to testify as they seek ways to overhaul a finance system that collapsed in 2008 amid losses on securities linked to subprime mortgages. Some economists and lawmakers have urged that any new system rely solely on private capital and be priced to reflect the risks.

    “Recommendations to completely privatize miss the necessity of a government backstop to ensure consistent functioning of mortgage-backed securities markets under all economic conditions,” said Michael Heid, co-president of home mortgages for Wells Fargo & Co.

    Fannie, Freddie

    Fannie Mae and Freddie Mac, which own or guarantee more than half of the $11 trillion U.S. mortgage market, relied on an implied government guarantee to pool and sell mortgage-backed securities, which generated cash that could be channeled back into additional loans. The federal government seized the two companies amid soaring losses in September 2008 and promised to stand by the debt.

    Since then, Washington-based Fannie Mae and Freddie Mac, based in McLean, Virginia, have survived on a promise of unlimited aid from the U.S. Treasury Department. The companies lost $166 billion on their guarantees of single-family mortgages from the end of 2007 and the second quarter of this year and have drawn almost $150 billion so far. Treasury Secretary Timothy F. Geithner has promised to deliver a plan for overhauling the housing-finance system in January.

    One challenge for policy makers is how to keep money flowing into the system without the kind of open-ended commitment that left taxpayers responsible for catastrophic losses at the government-sponsored enterprises.

    “The GSEs clearly did not operate with enough capital to buffer the risks they assumed,” Christopher Papagianis, managing director of non-profit research group Economics21, told lawmakers. “Policy makers should recognize that bailouts in the housing sector are inevitable if the key institutions in the space do not hold sufficient capital,” said Papagianis, an adviser to former President George W. Bush.

    To contact the reporter on this story: Lorraine Woellert in Washington atlwoellert@bloomberg.net;

    To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.

  • Oregon Real Estate Wanted Updated With New Buyers Listings.


    OregonRealEstateWanted.com (ORW) has been updated with new listings.   ORW is a web site that lists buyers that are looking to invest or lease  real estate in the state of Oregon .  If you have a property on the market for purchase, lease or auction you should visit the site often and see if there is a buyer that is looking for what you have to offer.

    OregonRealEstateWanted.com
    http://oregonrealestatewanted.com

  • Loan Modifications Are Getting Better, thetruthaboutmortgage.com


    It appears as if more recently completed loan modifications are performing better than their predecessors, according to the latest Mortgage Metrics Report from the OCC.

    More than 90 percent of loan modifications implemented during the second quarter of 2010 reduced borrowers’ monthly principal and interest payments, while 56 percent reduced payments by more than 20 percent.

    And that focus on sustainable and affordable monthly mortgage payments resulted in lower post-modification delinquency rates (much lower than that 75 percent re-default rate we we’re worried about).

    Six months after modification, roughly 32 percent of the modifications made in 2009 were seriously delinquent or in somewhere in the foreclosure process, compared with more than 45 percent of loan mods made in 2008.

    And the performance of modifications made this year suggests the trend is continuing.

    At three months after modification, just 11 percent of the 2010 modifications were seriously delinquent, compared with 20 percent of modifications made last year and 32 percent of 2008 modifications.

    HAMP Modifications Outperforming Other Loan Mods

    Nearly all modifications made under the Making Home Affordable program (HAMP) reduced borrower principal and interest payments, and 78.9 percent reduced monthly payments by 20 percent or more

    HAMP modifications made during the quarter reduced monthly mortgage payments by an average of $608, while other loan mods reduced payments by just $307 on average.

    As a result, HAMP modifications implemented through the first quarter of 2010 had fewer re-default rates than other modifications implemented during the same period.

    At six months after modification, 10.8 percent of HAMP modifications made in the fourth quarter of 2009 were 60 or more days delinquent, compared with 22.4 percent of other modifications made during that quarter.

    Similarly, 10.5 percent of HAMP modifications made in the first quarter of 2010 were 60 or more days delinquent three months after modification, compared with 11.6 percent of other modifications.

    So perhaps HAMP ain’t so bad after all…and maybe loan modifications actually do work.

  • Multnomahforeclosures.com: Updated Notice of Default Lists and Books for the Week of September 24th, 2010


    Multnomahforeclosures.com was updated today with the largest list of Notice Defaults to date. With Notice of Default records dating back nearly 2 years. Multnomahforeclosures.com idocuments the fall of the great real estate bust of the 21st century.

    All listings are in PDF and Excel Spread Sheet format.

    Multnomah County Foreclosures
    http://multnomahforeclosures.com