TheREALTYgram Blogger

Foreclosures Are Up In California;REO Rush May Start Here

BusinessWeek Online Hot Property blog reports that foreclosures are up in California:

"Lending institutions sent default notices to 12,568 California homeowners during the July-to-September period, up 3.5% from last year's third quarter."

I'm predicting that the foreclosure market will enjoy a new renaissance, even when the rest of the market is cool, thanks to the bankruptcy bill that put new rules into effect last month. Bankruptcy attorneys tell me that many consumers who are not able to get relief from credit card debt will not be able to stay current on their mortgage payments and they forecast a huge increase in foreclosures.

David Lereah, chief economist of The National Assn. of REALTORS^®, told reporters that he is uncertain about the impact of the bill on the foreclosure rate, but that it is an open question and he will study the issue. We look forward to his findings. We just wish that NAR had the wisdom to ask their economic talent about such things before supporting that terrible bill in such a wholehearted fashion. (Note: This post appears also on the Real Estate Blog Squad. Typically I do not double post articles, but the nature of the material is so compelling and disturbing that I made an exception in this case.)

State Leaders Tell Congress: Say 'No' To BillThat Would Create Financial Lion's Den

Leaders from states with strong predatory mortgage lending laws joined the Center for Responsible Lending to send a clear message to Congress: Any federal bill must not roll back state laws that protect citizens from predatory mortgage lenders. A Ney-Kanjorski bill pending in Congress and supported by much of the lending industry would gut existing state laws. Another bill, sponsored by Reps. Miller and Watt of North Carolina and Barney Frank of Massachusetts, is supported by consumers and civil rights groups, and would let states keep strong laws and protect their consumers. Click here for a side-by-side comparison.

The National Assn. of REALTORS^® joined CRL to design a Shopping for a Mortgage? Do Your Homework First. NAR policy wonks opine: "The Watt-Miller-Frank bill (H.R. 1182) would make the Home Ownership and Equity Protection Act stronger and does not preempt state law. The sponsors are all Democrats, which makes House action unlikely." We're hoping that NAR will send some of its talented lobbyists to round up some Republicans to co-sponsor this bill and make this a bipartisan effort for financial security.

New Mexico Chief Deputy Attorney General Mr. Bluestone of New Mexico said:

"Two years ago, New Mexico passed a progressive Home Loan Protection Act in response to an alarming rise in abusive mortgage lending practices and home foreclosures. Too many homeowners were losing home equity because dishonest lenders rolled points and fees into mortgage loans and did so repeatedly through abusive refinances. New Mexico’s new law stops these abuses, but now Congress proposes in the Ney-Kanjorski bill to usurp our state’s ability to protect our homeowners. That bill would gut our new effective law, install in its place a weak federal standard and prevent us from adequately protecting our residents from lending abuses."

Massachusetts Rep. John F. Quinn warned:

"The passage of the Ney-Kanjorski bill would do irreparable damage to the protections afforded to consumers under the newly enacted anti-predatory lending law in Massachusetts. This bill is bad public policy and would weaken the ability of the states to protect consumers from unscrupulous lenders."

New Jersey Banking Director H. Robert Tillman said New Jersey’s law both protected consumers and preserved the marketplace for sub-prime mortgages, where people with imperfect credit borrow and where most predatory lenders operate:

"Our well-balanced law significantly reduces predatory lending…It appears that our state banks and licensed lenders have prepared for the new law and have helped create a more competitive market," said Executive Vice President Debbie Goldstein of the Center for Responsible Lending, a nonprofit that combats predatory lenders. "Rather than preserve and strengthen state and federal protections for homeowners, the Ney-Kanjorski bill wipes out state anti-predatory lending laws proven effective at preventing abusive practices and significantly weakens some protections available under the federal law today. This is a bad deal for consumers, who would be the real losers here."

North Carolina Reps. Brad Miller and Mel Watt and the ranking member on the House Financial Services Committee, Barney Frank (D-MA), have introduced a bill that prohibits abusive lending practices and ensures that everybody who can afford a home loan will get one. The Prohibit Predatory Lending Act of 2005 (H.R. 1182) is based on the  North Carolina’s predatory lending statute, widely considered the model for preventing abusive lending while preserving access to credit. Miller said,

"This bill protects vulnerable consumers without cutting off credit for lower income borrowers. It’s time that all American consumers have the protection that North Carolina consumers now have."

TAKE ACTION NOW!

Colorado RE/MAX 100 Agent, Loan OfficersBusted On Home Loan Forgery Charges

A district attorney in Colorado  has indicted RE/MAX 100 real estate professional Ricardo Medina and independent loan officers Nancy Rios and Perla Alvarado on charges of forgery, theft, and conspiracy under the Colorado Organized Crime Control Act, according to the National Assn. of REALTORS^®. (Note that NAR has already stripped the REALTOR^®  designation from Medina in its press release.)

The charges stem from their involvement in a scheme that provided $6.5 million in federally insured home loans to undocumented Hispanics. Medina is accused of targeting Hispanics who would not have qualified otherwise and then working with Rios and Alvarado to forge documents such as loan applications, credit letters, check analyses, W-2 employment forms, utility bills, and employment verification letters in order to secure loans backed by the Federal Housing Administration for applicants.

"They didn't even have to come up with any money," says Scott Storey, Jefferson County District Attorney, adding that some of the loans went into default. Doug Anderson, president of Washington Park Mortgage in Denver and former president of the Colorado Association of Mortgage Brokers, says loan fraud remains a problem because the state does not require licensing for mortgage brokers.

From The Denver Post:

"Certain banks in Colorado and across the nation allow undocumented workers to take out home loans if they have an Individual Taxpayer Identification Number, which the IRS issues to workers regardless of immigration status.

"But many Hispanics, even with an ITIN number, fail to qualify for loans because they lack a credit history or cannot prove sufficient employment - and that's where forged documents come in.

" 'There's a huge number of these kinds of transactions and it's happening under our noses,' said Doug Anderson, president of Denver-based Washington Park Mortgage.

"Bob Brown, of the Colorado Bureau of Investigation, said Medina, Rios and Alvarado each lived "lavish lives," with salaries of several hundred thousand dollars a year."

HUD Announces RESPA Roundtable;Who Will Prevail, Consumers Or Predators?

  We have been waiting breathlessly for HUD to make an announcement about RESPA reform. Insiders who told us to expect an announcement short weeks ago did not foresee more cold feet in the warm summer months. Jane Wickell's Home Buying/Selling Blog talks about HUD's long trek to RESPA reform:

"Enacted to protect consumers during a real estate transaction, the Real Estate Settlement Procedures Act (RESPA) is over 30 years old and overdue for some serious reform in order to make loan comparisons an easier process. HUD proposed changes a few years ago, but backed down under pressure from members of the banking and real estate industry. Now HUD is back on track and plans to hold a series of roundtable discussions this summer to get industry input regarding the pathway to reform. Folks attending these invitation-only meetings will hopefully put the interests of consumers first--and if they don't it's essential that HUD not bend to pressure by special interest groups who are looking only at their bottom line, no matter what the cost to home buyers."

There are approximately 35 invitees who will participate in each session. Here is a list of all participant invitees.   

The following  is a select group of organizations that will be present at ALL roundtable discussions:

AARP, ACORN, Center For Responsible Lending, Consumer Federation of America, Consumers Union, National Assn. of Attorneys General, National Assn. of Consumer Advocates, National Assn. of Mortgage Brokers, National Assn. of REALTORS^®, National Center on Poverty Law, National Community Reinvestment Coalition, National Consumer Law Center, U.S. Public Interest Research Group.

Somebody may want to send HUD Secretary Alphonso Jackson a pair of HOT SOX to keep his tootsies warm. That may help get him through these hearings and ultimately to an announcement podium.

Will The Whoremasters Have Their WayAs HUD Designs RESPA Reform?

Inman Blog reports that HUD will make an announcement tomorrow about reform of the Real Estate Settlement Procedures Act, or RESPA. HUD Secretary Alphonso Jackson withdrew a rule last month that would have permitted the packaging of settlement services, made the good-faith estimate disclosure form more understandable, and increased the certainty of settlement cost estimates given to consumers.

Will the word "reform" really mean "reform" this time, or will that poor, misused, and maligned word take on the tertiary meaning assigned in Capitol Hill's rewrite of the lexicon?

v. re'form v. tr. 1. To improve by alteration, correction of error, or removal of defects; put into a better form or condition.
2. a. To abolish abuse or malpractice in: reform the government. b.To put an end to (a wrong).
3. To spin the facts and otherwise conceal the true intent of the law or regulation to gain public favor (i.e. recent tort reform and bankruptcy reform legislation).

We're crossing our fingers for meaning number One or Two. But we are not holding our breath.

Georgia 'Rent-A-Banks' Face LockupFor Predatory Lending Practices

On June 10, 2005, the 11th Circuit Court of Appeals issued an important ruling that validates the ability of states to regulate "rent-a-bank" relationships between state chartered banks and payday lenders. The 11th Circuit ruled that the Federal Deposit Insurance Act does not preempt Georgia's state law on payday lending, according to Responsible Lending.org. Most payday lenders charge interest rates of 380%!

A Georgia law prescribes harsh felony penalties for lenders who make loans of $3,000 or less in violation of Georgia's existing lending and consumer protection laws. Passed with bipartisan support and signed by Gov. Perdue in April 2004, SB 157 caps small consumer loans at 60 percent per year, Georgia's small loan usury rate. The law explicitly bars non-bank lenders from partnering with out-of-state banks in order to avoid Georgia's usury limit.

Four out-of-state banks that make loans through Georgia payday lenders have filed lawsuits in federal court challenging the Georgia law.

FHA Streamline Repair Mortgage ProgramAvailable For Home Repairs $5,000-15,000

The Federal Housing Administration has launched an alternative to it 203(k) Home Repair program that enables homeowners to sell their properties "as-is" to FHA borrowers if only basic repairs are needed. The Streamline (K) Limited Repair Program allows FHA borrowers to add $5,000 to $15,000 to the loan amount to make repairs such as roof replacement, heating system replacement, and exterior painting after loan closing.

What is more, FHA borrowers can use the Streamline (K) product to correct problems that have been identified by a home inspector; and the only documentation needed for any work is a written estimate from a licensed contractor. The program—which took effect on June 6—does not cover work that involves paid consultants, engineers, or plan reviewers.

Corrupt Mortgage Lender Servicing Sonnet:How Can I Screw Thee? Let Me Count The Ways

Just when you thought you'd heard it all you hear more disturbing news about high crimes and misdemeanors in the mortgage industry. I added a link to Mortgage Servicing Fraud, a web site devoted to the crimes that are committed when a lender or lender's servicer manipulates performing loans to falsely indicate a default by:

• Entering on-time payments as late, to exact illegal and unauthorized fees.
• Charging force-placed insurance when the homeowner already has full coverage.
• Falsely reporting a default to the credit bureaus when it is the servicer creating the default.
• Paying property taxes late, then charging the late penalties to the borrower.
• Paying taxes and insurance on the wrong property.
• Refusing payments to guarantee default.
• Adding thousands of dollars in unearned legal fees to create a default.
• Ignoring customer complaints and "qualified written requests".
• Arrogantly violating numerous laws and regulations.
• Coercing the homeowner into signing a forbearance agreement to strip away their legal rights.
• Falsifying records.
• Commit fraud upon the courts by stating they are the holder and owner of the Note - when in fact - they do not even own the Note.
• Intentionally cause delays to run up your legal expenses.
• Forgery.
• Apply to the trust for reimbursement after deducting the fees from the borrowers p&i payments. (Known as double dipping.)
• Rounding up ARM rates when on a downward trend.
• Not adhering to the terms of the loan documents.
• Creating additional false deficiencies through a variety of questionable practices.
• Adding miscellaneous fees to purposely create a deficiency with the borrower's next payment.
• Not applying payments to principal and interest.
• Committing perjury through flagrant misrepresentations to the courts.
• Withholding or redacting discovery evidence.
• Conjuring up events that never happened and refusing to provide documentation to support these fallacies.
• Refusing to cooperate with other lender's attempts to refinance and stop the illegal foreclosure.

'Get Rich Quick' Real Estate Seminars;Good Business Or Foreclosure 'Rescue' Scams?

This is a MUST READ! DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity Stripping Foreclosure  "Rescue" Scams is a 68-page report issued this week by the National Consumer Law Center. The report contains numerous individual stories and reports of foreclosure "rescue" tactics used around the country, plus a special section of exhibits. One Maryland homeowner who lost her home to this scam tells her story and the report  documents why it hasbeen so hard to beat these scams and how foreclosure "rescue" tactics have become a major part of many nationally-advertised "get rich quick in real estate" seminars. Almost all those cited in the report are willing to be interviewed by the news media about their experiences and what might be done to combat these scams.

Georgia Gets Tough On Residential Mortgage Fraud;Perpetrators Face Prison Sentences and Property Loss

A new law in Georgia increases the penalties for residential mortgage fraud. Those convicted can be sentenced one to 10 years in prison and be fined up to $5,000, while those found guilty of multiple frauds can be imprisoned for three to 20 years and be fined up to $100,000.

The Georgia Residential Mortgage Fraud Act (S.B. 100) also states that any property used to violate the law can be forfeited.

Four people are going to be charged under Georgia's tough new mortgage fraud law. The following appears in The Atlanta Journal Constitution:

"The four accused conspirators — a buyer, an agent, a broker and an alleged ringleader — are accused of attempting to steal at least $60,000 from a bank by inflating the value of a Fulton County property by placing fake liens on it.

"That method is a variation on a widely practiced scam that has turned metro Atlanta into one of the nation's worst hot spots for mortgage fraud, federal authorities have said.

"Typically, the scam involves a buyer who obtains a loan to buy a home for far more than it's worth based on a phony appraisal. In many cases, the borrower is in on the conspiracy.

"The original owner, who usually knows nothing about the conspiracy, is paid the asking price, but the additional cash from the loan is divided among the conspirators. In most cases, the property gets foreclosed upon because the buyer doesn't make the mortgage payments.

"The hyper-inflated values of the "flipped" houses also can prompt increases in surrounding home values and property taxes."

Georgia has become a hot bed of mortgage fraud. Earlier this year the state legislature enacted a new law that makes it a felony to illegally flip a piece of property. First time offenders face up to 10 years in prison and a $5,000 fine.

The law will help reduce the number of buyers who obtain "inflated appraisals" on newly purchased properties and then sell them a few days later at a profit. It defines residential mortgage fraud as "knowingly misstating, misrepresenting, or omitting information during the mortgage lending process; receiving proceeds from a mortgage closing that one knew to be fraudulent; conspiring for either of the previous or filing with the official registrar of deeds of any county any fraudulent document."