Flipping Frenzy.com is your source for news, information, and commentary on Real Estate and Mortgage Fraud. 
If you believe you have been a victim of real estate or mortgage fraud, start here! Select your state from the pulldown menu below:
James Lockhart on the New Plan to Help Homeowners
From James Lockhart, director of the Federal Housing Finance Agency (FHFA):
As housing prices have fallen, delinquencies on mortgages have tripled, not just for subprime and Alt-A, but also for prime mortgages. Foreclosures have increased almost 150% from two years ago. Foreclosures hurt families, their neighbors, whole communities and the overall housing market. We need to stop this downward spiral.
Today we are announcing a major program designed to greatly reduce preventable foreclosures with a simplified, streamlined loan modification program to get struggling homeowners into mortgages that they can afford. It is an achievable goal if homeowners, banks, mortgage servicers, investors, Fannie Mae and Freddie Mac all work together.
As the regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks), the Federal Housing Finance Agency (FHFA) strongly supports the Enterprises’ leadership role in setting industry standards for assisting “at risk” borrowers who could lose their homes to foreclosure.
This streamlined modification program with uniform eligibility requirements will be supported by a consistent, efficient process approved by key industry participants. This program resulted from a unified effort among the Enterprises, Hope Now and its twenty-seven servicer partners, the Department of the Treasury, the Federal Housing Administration (FHA) and FHFA.
Fannie Mae and Freddie Mac own or guarantee almost 31 million mortgages, which equates to about 58% of all single family mortgages. Although these mortgages only represent 20% of serious delinquencies, Lockhart believes Fannie Mae and Freddie Mac’s leadership role will spread the modification approach throughout the whole mortgage loan servicing industry.
More from Lockhart:
The performance of private label mortgage backed securities that were sliced and diced and sold to investors is just the opposite of Fannie Mae’s and Freddie Mac’s. Private label securities represent less than 20% of the mortgages but 60% of the serious delinquencies. As the regulator of the housing GSEs that own over a quarter of a trillion dollars of private label securities, I ask the private label MBS servicers and investors to rapidly adopt this program as the industry standard. Not only will this streamlined program assist borrowers, but broad acceptance and effective implementation could stabilize communities and property values.
The program targets the highest risk borrower who has missed three payments or more, owns and occupies the property as a primary residence, and has not filed for bankruptcy. To be considered for the program, a seriously delinquent borrower should contact his or her servicer and provide the requested income information. The program creates a fast-track method of getting troubled borrowers to an affordable monthly payment where “affordable” is defined as a first mortgage payment, including homeowner association dues, of no more than 38 percent of the household’s monthly gross income. This affordable payment will be achieved through a mix of reducing the mortgage interest rate, extending the life of the loan or even deferring payment on part of the principal. Servicers will have flexibility in the mix used to get there, but the goal is to create a more affordable payment.
If the servicer is unable to create an affordable payment with this streamlined program, it will further evaluate the borrower’s situation through a customized process. The key to success is the borrower’s ongoing cooperation and communication with the servicer. Borrowers shouldn’t fear working with servicers. They have dedicated personnel who are experienced in working with borrowers who are struggling with finances, but who are eager to keep their homes.
The streamlined modification program complements existing loss mitigation programs. We expect that it could significantly increase the number of modifications completed. Borrowers who participate will be strongly encouraged to seek financial counseling through HUD-approved agencies – particularly, if the default is a result of being overextended or due to financial mismanagement.
Focusing for a moment on this (from above): “Borrowers shouldn’t fear working with servicers. They have dedicated personnel who are experienced in working with borrowers who are struggling with finances, but who are eager to keep their homes.… how long do you think it will take for “Loan Modification Fraud” to become part of the common vernacular!
A Ralph Roberts Site, Copyright 2005-2008 |
To answer your last question Ralph, I believe it already is. It seems like everyone is in or getting into or soliciting for Loan Modifications. I am getting emails saying I can make $500 to $1500 just for the referral. Wow! Sounds more like a get rich quick deal.
Some states have already outlawed Loan Modification services or extremely limited how they can operate. In Florida for example, you cannot charge up front fees for loan modification. You can collect a success fee upon completion. Only attorney’s can charge up front fees.
With the number of modification successes ever so slight, who would want to perform all that work for nothing so the result of the law pretty much eliminates much of this fraud.
But then again, why should attorneys be allowed to charge up front fees for loan modifications? Their success rates are probably no better the anyone else’s. The problem with loan modification is the inability of the servicer to negotiate them not necessarily the ability of the loan modification consultant.
Most states have little or no regulation of loan modification so fraud is definitely in sight. Giving false hope to people for a fee is just wrong.
The other problem with loan modification is that it often hastens the foreclosure process and information provided is often used against the homeowner. Evidence has surfaced that additional fraud at the servicers end has occured. Loan Modification requests signed by a borrower and required by the servicer are used to scan and forge that borrowers signature on other documents which are then used in foreclosure actions often taking away individual rights.
CAUTION: If anyone does submit a written request for Loan Modification - DO NOT SIGN IT - just type your name at the bottom.
There is still no real effort by government, lenders or servicers to help. Just more “feel good” programs that don’t work.
Next up: FHA’s new H4H program. Laced with flaws and problems for those who do get qualified and whose homes are saved find themselves with the government owning half the equity and appreciation. Talk about Socialism with hints of Communism where government owns or controls our housing.
Stay tuned, the Perfect Storm is not near being over.
Comment by Larry Rubinoff — November 13, 2008 @ 6:09 pm
The problem with this Loan Mod program is it’s being offered to the people who don’t need it. It’s also encouraging homeowners to destroy their credit rating to be eligible because you have to 90+ behind on your payments to qualify. The people who are dire need of a modification are the people who are in sub-prime loans or in loans where the Loan Originator put the client nto a stated program and then overstated the income. Those homeowners don’t qualify and are the ones who need it.
The other problem is most of these loan mod agreements have indemnification clauses in them holding the lender harmless for any fraud or misrepresentation that transpired during the original loan process. Lenders are only doing loan mods as pre-emptive move to shield themselves from the flood of TILA and RESPA lawsuits that will be hitting the courts soon.
Comment by Steve Dibert — November 14, 2008 @ 9:38 am
Steve:
You are absolutely correct on all the points you made.
If you are current you cannot modify. If you are delinquent you can not qualify. If you are lucky enough to be one of the few you does get a modification, the indemnification clause not only prevents you from taking action against the lender for any wrongdoing, it also waives many of your rights as to foreclosure should you be late on a payment.
In addition, lenders can only offer modifications on loans they still own and hold in their portfolio. Since the majority of loans were “securitized” and sold off in pieces to investors world wide, the servicer in most cases does not have the authority to modify and therefore cannot.
Comment by Larry Rubinoff — November 14, 2008 @ 2:13 pm
Agree Steve and Larry, I’ve heard of so many restructuring programs but have yet to hear of anyone who can qualify for one. Here is Michigan, our Governor Jennifer Granholm, put together a program several months ago called “Save the Dream”. I have talked with many people who tried for several weeks to even get a response, then no dice. These programs are merely smoke screens to calm the public, I guess. I am looking forward to 2009 and see if our new president can make any sense of this maze-like, crooked system we live in.
Comment by Jean Sample — November 23, 2008 @ 12:52 pm
Don’t look for too many changes unless the truth can be uncovered and told to the public. CBS News is beginning this process but without prosecution and sentencing no changes will occur.
There is an old saying, “if it is to be, it is up to me”. This is where change must come from, you and me. We must direct the actions of Congress and our President as our constitution calls for, “For The People, By The People”. Regardless of one’s political leanings, we need to come together as one to solve the problems we all are facing.
Comment by Larry Rubinoff — November 23, 2008 @ 5:03 pm
Words from an Opinionated California Lawyer
In California, the Department of Real Estate website (www.dre.ca.gov) lists the companies that have DRE “permission” to modify loans… add to this list any licensed California attorney, and that is where you should begin your due diligence when you seek help in California. Other states probably have similar laws, so check with your own state DRE.
My law firm has been getting more and more calls recently from homeowners that were victims of predatory lenders who put them into an unaffordable loan and now fell into the hands of those same people who sold the toxic loans but profess to be saviors… DON’T BE A VICTIM TWICE!
Do your homework and THOROUGHLY investigate any firm before hiring them to save your biggest asset and the place you call “home.” These scammers are popping up like dandelions on a freshly mowed lawn. They advertise on the Internet, freeway billboards, radio, television, and print media everywhere. Make no mistake, in many cases, these are the exact same loan officers and mortgage brokers who fleeced homeowners the first time around. After losing their jobs with the crash of the mortgage industry, they have found a new way to make ill-gotten profits from hard-working homeowners through loan modifications.
In California, with very few exceptions (and attorneys are one exception), it is against the law for anyone to take money up front for helping a homeowner who is in default. Don’t trust a company that begins its relationship with you by breaking the law.
Of course, this is one lawyer’s biased opinion, but one based on many distressing calls to my office every day. And, yes, my firm does take cases against loan modification companies who have violated laws. This field is quickly becoming one of the fastest growing sections for our mortgage law firm.
- Paul J. Molinaro, Esq.
Comment by PaulMolinaroEsq — December 12, 2008 @ 10:09 pm