Mortgage News
Read the latest news about mortgages, foreclosures, servicers, loan modifications, HAMP, Dodd-Frank, Qualified Residential Mortgage (QRM), mortgage brokers and more.
- Forced Homeowner Policies Assailed
Wall Street Journal 18 May 2012
New York Department of Financial Services Superintendent Benjamin M. Lawsky is training a microscope on banks and insurers that require homeowners to purchase costly homeowners insurance. The department is leading three days of hearings into whether banks have gouged consumers on the policies while generating significant profits for themselves. The hearings revolve around "force-placed" coverage, which banks can force on borrowers who allow their own insurance to lapse. Lawsky's office issued subpoenas and formal document requests to banks and insurers in the state over the past few months, seeking answers on how the premiums are calculated. Lawsky said that specialty insurers often pay out less than 25 cents of each premium dollar for a claim. "The rest is profit," Lawsky said. Insurers say the prices are typically 1.5 to two times higher than the average homeowners policy because they are taking on more risk. But consumer advocates say the insurance is detrimental for already-struggling homeowners and can push some "over the foreclosure cliff."
- Returning Veterans Can Lower Credit Card Interest Rates
KSTP Eyewitness News ABC 5 (Minnesota) 16 May 2012
Although not widely known, the 2003 Servicemembers Civil Relief Act (SCRA) offers valuable protections for current and past members of the U.S. military. Under it, deployed veterans can serve out their missions overseas without worrying about finances. For example, the law prevents banks from foreclosing on veterans who are deployed. This applies not only during the active-duty period but also for nine months after. During this time, creditors cannot foreclose or repossess items from veterans without a court order allowing them to do so. The SCRA also caps loan interest rates at 6 percent while enlisted persons are on active duty, a limit that also applies to credit cards, auto loans, and business financing. Veterans who send a letter to lenders to request the 6 percent cap, within 180 days of coming home, are entitled to a credit or refund if their loan is fully paid.
- CFPB's Proposed Mortgage Reforms Not Enough Say Some Consumer Activists
Huffington Post 16 May 2012
In April, the Consumer Financial Protection Bureau (CFPB) published a proposal to create permanent mortgage servicing reforms that would be in place by the time the $25 billion foreclosure settlement between the country's biggest lenders and state attorneys general expires in three-and-a-half years. While it is still early in the process, some consumer advocates already are saying that the proposed reforms are not adequate. The CFPB said the goal of the reforms is to eliminate two of homeowners' biggest grievances: costly errors and the endless runaround many have experienced when trying to avoid foreclosure. But the National Consumer Law Center's Diane Thompson says the federal agency needs to broaden the reforms even more, in part by also taking a look at costly force-placed home insurance policies. The CFPB stressed that the rules it outlined in April were not part of a formal proposal. The agency said it is seeking public feedback and will issue a formal proposal this summer.
- Bill Helping Distressed Homeowners Set to Expire
Fox 5 San Diego 16 May 2012
Consumer advocates and tax experts are warning that a federal bill that has helped thousands of U.S. homeowners will expire at the end of 2012. California-based accountant Brett Chappell said that if the Mortgage Debt Relief Act is not extended, financial trouble could be on the horizon for those considering short selling their homes. The measure forgives debt that is acquired during a short sale or foreclosure, when the house fetches less than the amount owed. "Anytime a bank loses money it ends up canceling the debt. To the IRS, that canceled debt needs to be reported as income," said Chappell. "Without question, this bill has helped distressed homeowners."
- Needy States Use Housing Aid Cash to Plug Budgets
New York Times 16 May 2012
As the funds from a $25 billion nationwide settlement over foreclosure abuses are distributed to individual states, money set aside specifically to help distressed homeowners is instead being re-routed into depleted state coffers. Only 27 states have directed 100 percent of their funding into housing programs, reports Enterprise Community Partners. About 15, with California being the latest, have announced that the settlement money will be used in part or completely for other purposes, ranging from economic development to debt reduction. U.S. Housing and Urban Development Secretary Shaun Donovan has been privately nudging state officials to use the money -- $2.5 billion total -- as it was intended. "Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live," he said. Alan Jenkins of the Opportunity Agenda, which supports homeownership, goes so far as to suggest that redirecting the settlement funds could even have a racially discriminatory effect in some states. "If you dump all of these funds into the general coffers," he explains, "the African-American homeowners are not going to benefit in any real way because they represent such a small percentage of the larger state."
- Lawmakers Move to Expand Mortgage Protection for Military
Housing Wire 15 May 2012
Members of the military could win expanded protections from mortgage lenders under legislation to be introduced May 15 by Reps. Elijah Cummings (D-Md.) and Bob Filner (D-Calif.). The lawmakers will submit an amendment to a defense spending bill that expands the Servicemembers Civil Relief Act (SCRA) to include more homeowners under the umbrella and to stave off evictions for a longer period. If passed, the law also will cover veterans considered disabled when discharged; enlisted persons operating in support of contingency operations, such as national emergencies; and surviving spouses of military personnel who died in service. The revised SCRA would hold off a foreclosure for beneficiaries for an entire year, as opposed to three months currently. Additionally, penalties against violators of the law will be doubled to a $110,000 fine for first-time violations. Repeat offenders could face $220,000 instead of $110,000. "our servicemembers protect our country, our way of life and our homes," declared Filner. "We can do no less to protect their homes against mortgage foreclosure."
- Cardinal Financial Cleared in Justice Department Discrimination Inquiry
Washington Business Journal 14 May 2012
According to a securities filing by Cardinal Financial Corp., the U.S. Department of Justice (DOJ) will not sue the Virginia-based bank for alleged lending bias. In July, DOJ opened a probe into two of the company's units -- Cardinal Bank and George Mason Mortgage -- for potential violations of the Fair Housing Act and Equal Credit Opportunity Act. While the bank declared that it did nothing wrong, DOJ was preparing a complaint alleging that its home loans fell short of credit needs in certain market segments. The announcement comes as the bank opened a new branch in predominantly African-American Prince George's County, Md., and in Baltimore.
- California Homeowners Warned About Mortgage Relief Scams
Sacramento Bee 12 May 2012
The $25 billion settlement over foreclosure wrongdoing is meant to help distressed homeowners nationwide; however, there is growing concern that scammers will use the promise of assistance as a "hook" to lure people into their schemes. Wayne Bell, chief counsel for the California Department of Real Estate, said that homeowners facing foreclosure will be targeted by a new crop of predators. At a May 11 press conference, he and law enforcement officials -- along with state agency and real estate industry representatives -- warned that foreclosure rescue fraud may masquerade as forensic loan audits, claims of class-action litigation, and upfront fees for loan workouts. Anyone struggling to stay in their home should check the credentials of any company offering assistance, avoid paying anything upfront, and be wary of anyone offering mortgage relief. And despite possibly being embarrassed about being victimized, Sacramento County District Attorney Jan Scully stressed the importance of reporting the fraud.
- Mortgage Brokers Face New Rules
Wall Street Journal 10 May 2012
On May 9, the Consumer Financial Protection Bureau said it may roll out new rules governing mortgage lending fees -- including one requiring lenders to charge flat origination fees, which borrowers pay as compensation to loan officers. The fees currently are calculated as a percentage of the loan size, but the CFPB hopes that a flat charge will deter loan officers from pushing borrowers into more expensive loans in order to trigger greater compensation for themselves. Another possible rule would restrict the amount by which borrowers can lower their interest rate through purchasing "discount points." The agency is not trying to end the practice but does want to ensure that borrowers who take this option actually see a meaningful reduction in their monthly mortgage obligation. The new rules, which would implement provisions of the Dodd-Frank Act, could be proposed this summer for targeted implementation in early 2013.
- UDAP, Fair Lending Issues Causing CRA Downgrades
American Banker 09 May 2012
For many banks, increased scrutiny of unfair or deceptive acts or practices (UDAPs) is showing up in the form of lower Community Reinvestment Act (CRA) ratings. With the Consumer Financial Protection Bureau on board with the issue, that trend is likely to increase, according to industry observers. While the agency is not empowered to enforce CRA, it does have a broad mandate to address fair lending violations and plans to work closely with the prudential regulators to ensure those findings are factored into CRA ratings. "The fact that UDAP is now being brought more proactively into the CRA evaluation process does mean that there will be an increasing impact on CRA by what the bureau does with UDAP," says Jo Ann Barefoot, a co-chairman of Treliant Risk Advisors. Of 28 banks whose ratings were released by the Office of the Comptroller of the Currency in April, five had their ratings lowered to "Needs to Improve" and three were downgraded specifically for illegal credit practices or discrimination relating to UDAP and fair lending violations. The percentage of banks receiving failing CRA ratings has increased from 1.7 percent in 2007 to 4.3 percent as of March 31, according to data from CRAHandbook.com. "It's a combination of regulators getting tougher, but the broadening of the CRA net to include fair lending, UDAP, and other issues has also contributed to the lower ratings," says bank consultant Ken Thomas.
- Feds May Seek Fines Against Wells Fargo in Mortgage Bias Probe
Los Angeles Times 08 May 2012
The Department of Justice may bring claims against Wells Fargo & Co., seeking damages and penalties for alleged discrimination in mortgage lending. The San Francisco bank disclosed this newest development of an ongoing investigation in a quarterly filing with the Securities and Exchange Commission. Wells Fargo said in its filing, "We believe such claims should not be brought and continue seeking to demonstrate to the Department of Justice our compliance with fair lending laws." The filing did not elaborate on the federal accusations, but cases of this nature tend to involve charges of providing costlier loans to minorities. The Illinois state attorney general filed a fair lending lawsuit in 2009 that accused Wells Fargo of selling more costly subprime mortgages to blacks and Latinos compared with whites with similar incomes. Federal authorities also are looking into whether Wells Fargo misled investors in its mortgage bonds.
- Report: Forced-Place Insurance Pushing Homeowners Into Foreclosure
Consumerist 07 May 2012
Homes with mortgages require insurance, which the bank will often obtain if the owner stops paying the premium. However, "forced-place" policies often cover less, cost more, and may not prevent foreclosure. A Bloomberg analysis found that the loss ratio on forced-place polices is far lower than expected. Instead of paying out $.55 on the dollar, many policies only pay out 20 cents, indicating that the insurers are charging excessive premiums. The policies also often cover the bank's losses, meaning that the policy would pay for repairs to a fire-damaged home but not for the possessions. The analysis also found that banks, which receive commissions on such policies, often make more money by reinsuring them, taking out a policy to protect a property while also betting that the policy will never pay out. Fannie Mae issued a directive to mortgage servicers with Fannie-backed loans to reduce the cost of insurance premiums. The Consumer Financial Protection Bureau is also examining the matter of forced-place insurance.
- Experts Warn Against Predatory Schemes in Hard-Hit Area
Times-Ledger 04 May 2012
According to fair housing experts, predatory lenders took advantage of minority communities in southeast Queens even before the foreclosure crisis hit the region. Now, they are warning that many of those practices are currently being used in offers to help struggling homeowners. Neighborhood Housing Services of Jamaica, along with City Councilman Leroy Comrie (D-St. Albans), recently met with housing experts to discuss options for distressed borrowers. Deyanira Del Rio of the Neighborhood Economic Development Advocacy Project said the group has been mapping lending, foreclosure, and banking patterns in New York City for about 12 years. "Unfortunately, many of the patterns remain the same," she noted. The group said southeast Queens already led the city in the number of foreclosures when the crisis hit New York in 2008. Additionally, Jeffrey May of the National Community Reinvestment Coalition said female heads of black and Latino households and elderly individuals were most vulnerable to predatory lending practices as early as 2000. The groups said that many homeowners in the neighborhood are still paying 9 percent to 10 percent interest on their mortgages. The panel advised borrows to seek advice from reputable housing counseling organizations to avoid predatory lending and scams.
- Pesky Fees That Could Surprise You Are Out There, And They Can Add Up In a Hurry
Detroit Free Press 03 May 2012
Although most consumers are familiar with annoying fees, many of them often go unnoticed. In Michigan, for example, lenders can charge a 45-cent verification fee for each payday loan transaction verified through a state database that makes sure individual consumers do not take out too many loans at the same time. Failure to repay the loans on time also attracts fees. Payday lenders can charge a returned check fee of $26.88, regardless of whether the loan was for $100 or for $600. "People can get into trouble because this can snowball into a bigger problem," according to Lisa Ross of the Michigan Office of Financial and Insurance Regulation. Some credit unions and banks charge fees of up to $5 for mail returned from an invalid address, so consumers should promptly update their addresses if they move. When buying or selling a home, the average home inspection should run about $350 to $700, but some places will try to charge as much as $1,000. Some scams try to charge individuals $20 to claim a fake sweepstakes prize, a practice that the Federal Trade Commission is cracking down on. There are also fees associated with secured credit cards, such as for raising the credit limit or a processing fee. Consumers looking to buy a car should also watch out for inflated documentation fees.
- Housing Secretary Backs Homeowner Bill of Rights in Los Angeles
Los Angeles Times 02 May 2012
According to U.S. Housing Secretary Shaun Donovan, it is important for California lawmakers to pass a Homeowner Bill of Rights to protect consumers and curb foreclosure abuses. While the state is expected to receive the largest portion of the national $25 billion mortgage settlement, Donovan said it is crucial to make reforms to the industry. He said the state could do this by adopting a series of bills by California Attorney General Kamala D. Harris, which would prevent financial institutions from moving forward on a foreclosure while negotiating a loan workout with the borrower and require banks to designate a single point of contact for distressed homeowners. "Because foreclosures and other processes around homeownership are directed by state law, it is critical that a Homeowner Bill of Rights move forward," Donovan stated, the same day that he toured South Los Angeles communities battered by the housing crisis.
- Mortgage Aid Programs Were Halted, Papers Show
New York Times 02 May 2012
Fannie Mae and Freddie Mac launched programs with Citibank and Wells Fargo to lower homeowner debt and save taxpayers millions but scrapped them before they progressed far enough to gauge their success, according to newly released documents. Federal Housing Finance Agency head Edward DeMarco said the pilots "ended due to complex operational issues involving system changes, accounting considerations and the interest level of Fannie Mae's partners," but a former Fannie Mae employee has argued that they were abandoned due to ideological reasons. Democrats have pushed DeMarco to forgive debt for certain homeowners, but he has resisted -- despite recently conceding that it would reduce losses for the agencies. Most of the country's homeowners were financed through Fannie Mae and Freddie Mac and, therefore, are not eligible for debt reduction under Treasury programs that offer incentives to lenders under a $26 billion settlement with five major banks.
- Ex-N.C. Banking Commissioner Monitors $25 Billion Settlement
Raleigh News & Observer (NC) 01 May 2012
North Carolina's former banking commissioner has shouldered the task of monitoring the landmark $25 billion national foreclosure settlement, overseeing five of the country's biggest banks over the next three years. Joseph Smith Jr. said that while he does not expect the settlement alone to reform the industry, he is hopeful that its consumer protections and compliance provisions will serve as a model for new federal regulations on all mortgage providers. The settlement came after news surfaced that some of the nation's largest banks engaged in a practice known as "robo-signing," or endorsing foreclosure documents without verifying them for accuracy. The settlement with Bank of America, Wells Fargo, Citigroup, J.P.Morgan Chase, and Ally Financial requires the banks to establish new foreclosure practices and provide more than $20 billion in "consumer relief." Additionally, the financial institutions will be required to submit quarterly reports to Smith, along with reports from independent review groups. As monitor of the Office of Mortgage Settlement Oversight, Smith said he plans to hire a major accounting firm to help him track the banks practices; and he is prepared -- and empowered -- to seek a court injunction against banks that fail to comply, forcing them to comply or seeking fines against them.
- MGIC Settles Historic Mortgage Insurance Case Involving Maternity Leave
Forbes 01 May 2012
In May 2010, Carly Neals applied to refinance a home loan with PNC Mortgage on the house she owns jointly with her husband in Pennsylvania. Mortgage Guaranty Insurance Corp. (MGIC) received a request to insure the loan on July 12, 2010, but after reviewing Neals' bank records, said it would not issue the policy while she was still on maternity leave. The plaintiff filed a complaint with the U.S. Department of Housing and Urban Development (HUD), alleging that the insurer had discriminated against her by preconditioning coverage on the early termination of her maternity leave. HUD issued a charge of discrimination and referred the case to the Department of Justice (DOJ) -- which then filed suit against MGIC in the U.S. District Court for the Western District of Pennsylvania, alleging that it illegally required women on maternity leave to return to work before granting mortgage insurance. On April 30, 2012, DOJ announced that it settled the lawsuit. In its investigation, the department identified other aggrieved individuals. Overall, the settlement establishes a $511,250 fund to compensate 70 individuals victimized by alleged discriminatory treatment between 2007 and 2010. Neals will receive $42,500 from the settlement fund, and MGIC must follow detailed nondiscriminatory provisions in its future review of mortgage insurance applications involving individuals with leave from work related to a child's birth, adoption, or foster care placement.
- Reverse Mortgages: Don't Let the Fonz Sell You
CBS MoneyWatch 01 May 2012
During the housing boom, many homeowners expected to use their equity to fund large purchases and even retirement, but recession forced them to spend savings and cash in investments. Many of these consumers are tempted by a reverse mortgage -- a home loan that allows borrowers aged 62 and older to convert part of their equity into cash, if the house remains their primary residence. Many reverse mortgages are offered through the Department of Housing and Urban Development and are guaranteed by the Federal Housing Administration (FHA) through its Home Equity Conversion Mortgages program. The loans do not have a underwriting process and do not require monthly principal and interest payments. However, younger retirees who use these reverse mortgages may run out of money and options early. Reverse mortgages are also costly: FHA charges a single upfront mortgage premium of 2 percent of the home's appraised value or $625,500, whichever is less, and also charges the borrower a 1.25 percent annual premium on the entire loan balance as well as a monthly servicing fee of up to $35. Consumer Union has warned of "deep concerns about the suitability of the products for some borrowers" and "the aggressive marketing and misleading advertising of reverse mortgages to seniors." Many celebrities, including Fonz portrayer Henry Winkler, have been paid to advertise the benefits of reverse mortgages. Consumers who are considering a reverse mortgage should consult a registered investment advisor or an attorney to help determine if it is the best decision for them.
- Ariz. AG settles With Mortgage Loan Modifier
Legal Newsline 30 Apr 2012
Arizona Attorney General Tom Horne has reached a settlement with Scottsdale-based Underwater Property Solutions LLC (UPS), a mortgage modification service. UPS allegedly participated in deceptive practices to collect advance fees from consumers who hoped to receive aid in obtaining loan workouts. State law forbids businesses from charging fees upfront for loan modifications in most cases. UPS was named co-defendant in a consumer fraud lawsuit with The Mortgage Law Group LLP, against which litigation is still pending. The settlement with UPS, if it receives court approval, would permanently prohibit UPS from engaging in consumer loan or debt modification activities in Arizona or for Arizona consumers. UPS also would have to pay full restitution to consumers who filed a complaint with Horne's office, in addition to attorney's fees.
