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Foreclosure Mediation Sputtering

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MANATEE COUNTY, Fla. – May 9, 2011 – When Tracy went into the foreclosure mediation session last month, she hoped the bank would consider reducing her mortgage rate instead of taking her Palmetto home.

Instead, the bank demanded that she pay off the entire loan amount of more than $50,000. When Tracy said she couldn’t afford that, the bank offered to pay her $1,000 – for a rental truck if she moved out within 60 days.

“I broke down and cried,” said Tracy, not her real name. “I was so shocked, I felt like I was having a heart attack.”

Her experience illustrates one reason why Florida’s foreclosure mediation program has been so far ineffective, experts say.

And other flaws in the program – the voluntary nature of mediation, homeowner ignorance or unwillingness to participate and hardball negotiating tactics by banks – likely means negotiations will fail to help many borrowers, they say.

“The mediation process is what it is: an opportunity to sit down and talk,” said Dawn Bates-Buchanan, a Bradenton attorney who has attended more than 25 mediation sessions as a mediator and homeowner adviser. “It’s all voluntary. Nobody’s forced to do anything. If nobody has to do anything, usually nothing gets done.”

Low success rate

The Florida Supreme Court in late 2009 required mediation in new foreclosure cases involving homesteaded properties. Its aims were to aid borrowers and reduce a foreclosure backlog of more than 462,000 cases.

While it and other efforts have helped reduce the backlog by a third, the program has fallen short of meeting the first goal, state figures show.

Nearly 58,000 cases statewide have been referred to mediation in the six months since the program began in March 2010, according to a recent report from the Office of the State Courts Administrator. Of those, just 2,162 cases – or less than 4 percent – had resulted in an agreement between the bank and borrower by May 1 of this year.

The 12th Judicial Circuit, which consists of Manatee, Sarasota and DeSoto counties, had a higher success rate: 71 settlements out of 1,691 cases, or 4.2 percent.

That’s not good enough, the circuit’s top judge said.

“I’m not pleased with the results we’ve seen so far,” said Chief Judge Lee Haworth, who helped create the mediation program as a member of a Supreme Court task force. “I don’t think anybody is.”

Where are borrowers?

A big reason why there haven’t been more settlements: few borrowers coming to the bargaining table or even knowing the table is there.

Those administering the program have been unable to reach the borrower in 3 out of 5 cases, state figures show. In the 12th Circuit, the contact rate is even less: 35 percent.

That might be because the borrower’s phone has been disconnected, the borrower has moved without leaving a forwarding address or is overwhelmed by or ignoring foreclosure-related mail and phone calls.

Copyright © 2011 The Bradenton Herald, Fla., Duane Marsteller. Distributed by McClatchy-Tribune Information Services.

WASHINGTON – April 8, 2011 – Four fair housing organizations released findings from a year-long undercover investigation of 80 loan modification companies, which they say revealed an industry rife with corrupt practices.

The National Fair Housing Alliance (NFHA), the Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia Inc., and the Miami Valley Fair Housing Center issued a report entitled, “Have I Got a Deal for You! An Undercover Investigation of Mortgage Loan Modification Scams.”

An analysis of the 80 loan modification companies uncovered common tactics used by scammers to entice homeowners to use their services:

• 55 percent required an upfront fee to start work or required a low initial fee to conduct minimal work on behalf of distressed homeowners, such as reviewing loan documents.

• 43 percent guaranteed or promised they could secure a loan modification even before learning about the homeowners’ financial limitations.

• 24 percent advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their lenders.

• 16 percent guaranteed a new, much lower interest rate ranging between two and 6 percent on modified loans.

• 12 percent discouraged homeowners from seeking free help from government-approved housing counseling agencies.

• 8 percent encouraged homeowners to provide fraudulent information to their lenders.

“This is shameful abuse by loan modification scammers to take advantage of desperate homeowners,” says Shanna L. Smith, NFHA president and CEO. “We and our partner organizations will work to see to it that these companies are prosecuted by the Federal Trade Commission and other federal and state enforcement agencies.”

With one in nine homeowners nationwide more than 90 days behind on their mortgage payments, a lucrative industry of mortgage modification and foreclosure prevention scams has emerged.

Investigators working on behalf of the fair housing organizations captured scammers saying things like:

• “I’d be breaking the law if I told you to stop paying your mortgage, but friend-to- friend, you won’t get a loan modification until you are behind on your mortgage.”

• “If you don’t qualify, we modify expenses for you. They [the lenders] don’t check it. No one knows what you spend on groceries. We make you qualify by playing with the numbers.”
 
To read the full report, go to www.nationalfairhousing.org.

© 2011 Florida Realtors®

WASHINGTON – April 8, 2011 – Four fair housing organizations released findings from a year-long undercover investigation of 80 loan modification companies, which they say revealed an industry rife with corrupt practices.

The National Fair Housing Alliance (NFHA), the Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia Inc., and the Miami Valley Fair Housing Center issued a report entitled, “Have I Got a Deal for You! An Undercover Investigation of Mortgage Loan Modification Scams.”

An analysis of the 80 loan modification companies uncovered common tactics used by scammers to entice homeowners to use their services:

• 55 percent required an upfront fee to start work or required a low initial fee to conduct minimal work on behalf of distressed homeowners, such as reviewing loan documents.

• 43 percent guaranteed or promised they could secure a loan modification even before learning about the homeowners’ financial limitations.

• 24 percent advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their lenders.

• 16 percent guaranteed a new, much lower interest rate ranging between two and 6 percent on modified loans.

• 12 percent discouraged homeowners from seeking free help from government-approved housing counseling agencies.

• 8 percent encouraged homeowners to provide fraudulent information to their lenders.

“This is shameful abuse by loan modification scammers to take advantage of desperate homeowners,” says Shanna L. Smith, NFHA president and CEO. “We and our partner organizations will work to see to it that these companies are prosecuted by the Federal Trade Commission and other federal and state enforcement agencies.”

With one in nine homeowners nationwide more than 90 days behind on their mortgage payments, a lucrative industry of mortgage modification and foreclosure prevention scams has emerged.

Investigators working on behalf of the fair housing organizations captured scammers saying things like:

• “I’d be breaking the law if I told you to stop paying your mortgage, but friend-to- friend, you won’t get a loan modification until you are behind on your mortgage.”

• “If you don’t qualify, we modify expenses for you. They [the lenders] don’t check it. No one knows what you spend on groceries. We make you qualify by playing with the numbers.”
 
To read the full report, go to www.nationalfairhousing.org.

© 2011 Florida Realtors®

 WASHINGTON – March 9, 2011 – The number of Americans who owe more on their mortgages than their homes are worth rose at the end of last year, preventing many people from selling their homes in an already weak housing market.

About 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter, according to report released Tuesday by housing data firm CoreLogic. That’s up from 22.5 percent, or 10.8 million households, in the July-September quarter.

The number of underwater mortgages had fallen in the previous three quarters. But that was mostly because more homes had fallen into foreclosure.

Underwater mortgages typically rise when home prices fall. Home prices in December hit their lowest point since the housing bust in 11 of 20 major U.S. metro areas. In a healthy housing market, about 5 percent of homeowners are underwater.

Roughly two-thirds of homeowners in Nevada with a mortgage had negative home equity, the worst in the country. Arizona, Florida, Michigan and California were next, with up to 50 percent of homeowners with mortgages in those states underwater.

Fewer get modified mortgage

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 WASHINGTON – Oct. 26, 2010 – The number of struggling homeowners who cut their mortgage payments in September through an Obama administration initiative fell to its lowest level in nearly a year, increasing debate about the program’s effectiveness.

Nearly 28,000 homeowners reached agreements with mortgage servicers last month to permanently modify mortgages under the Home Affordable Modification Program (HAMP), a government report Monday shows. That’s down from the record 68,000 modifications in April and the lowest number since November, shortly after HAMP launched.

“HAMP has been to date a disappointment,” said Moody Analytics’ chief economist Mark Zandi, adding that it is “set to fall well short of expectations.”

Joel Naroff of Naroff Economic Advisors said he is “totally baffled” by the decline. “It’s not as if the need has dropped.”

HAMP aims to reduce mortgage payments for up to 4 million homeowners. As of Sept. 30, 467,000 people had permanently lowered their payments through HAMP, Monday’s Treasury report shows.

Timothy Massad, Treasury’s acting assistant secretary for financial stability, said HAMP is encouraging lenders to modify mortgages on their own. “We’ve seen the industry emulate a lot of the HAMP standards in their own proprietary (mortgage) modifications,” Massad said. “We’re having an effect on avoiding foreclosures.”

HAMP encourages mortgage servicers to take steps such as lowering a homeowner’s interest rate or reducing mortgage principal. Homeowners first get temporary modifications that last at least three months and can receive a permanent modification if the trial succeeds.

A large number of homeowners applied in the program’s early months, which led to a surge in permanent modifications from January to June as Treasury officials processed a backlog, Massad said. Applicants have since leveled off, which accounts for the drop in permanent modifications, Massad said.

Massad noted that 11 percent of homeowners in HAMP had defaulted on their modified mortgages, a figure he called “very good. The vast majority of people in permanent modifications are staying in them.”

But the foreclosure problem remains “incredibly complex,” and HAMP has been “a work in progress” with program changes that have made it difficult for servicers to implement, Zandi said.

The report Monday said Bank of America took 73 seconds to answer HAMP-related calls in August, well above the 5.5-second average call-response time.

“We’re disappointed,” bank spokesman Roger Simon said, calling August a “high-volume month.”

He said its response time through mid-September is “down considerably.”

NEW YORK – Oct. 19, 2010 – Bank of America and Ally Financial’s GMAC Mortgage have begun to lift their freezes on more than 100,000 foreclosure cases in Florida and other states, saying they’re not finding flaws in their paperwork.

Late Monday, Bank of America issued a statement saying that it expects to begin going back next week to courts in the 23 states where foreclosures are a judicial process, including Florida. A statement from spokesman Dan Frahm said the lender is preparing to re-submit documents in 102,000 foreclosure cases already underway.

Also Monday, Ally Financial spokesman James Olecki confirmed that GMAC is re-submitting documents in some foreclosure cases including at least one in Florida “as each of those files is reviewed and remediated when needed.”

Among major lenders, Bank of America had called a halt to all foreclosure sales nationwide. It also, along with GMAC, JPMorgan Chase and PNC Financial Services, initiated reviews in the 23 judicial foreclosure states. Bank of America later extended its review nationwide. Wells Fargo did not undertake a review of its procedures.

Major lenders in September began announcing halts to all or parts of their foreclosure processes, after revelations – in sworn statements submitted in lawsuits in which homeowners are fighting foreclosures – showing that employees or representatives failed to verify mortgage paperwork before submitting foreclosure cases to courts.

The so-called “robo-signers” said, under oath, that they handled thousands of documents each month without knowing whether they were accurate, as required by court procedure.

The GMAC and Chase documents surfaced in Palm Beach County cases that are still going through the courts.

On Monday, Bank of America said its “initial assessment findings” have shown “the basis for our foreclosure decisions is accurate.”

GMAC’s Olecki wrote in an e-mail, “Again, we have been in the midst of a review for approximately two months and have found no evidence of any inappropriate foreclosures to date.”

A spokesman for PNC Financial said the lender hasn’t changed its position on reviewing foreclosure documents. A spokesman for JPMorgan Chase repeated the bank’s intention to review about 115,000 foreclosure files and delay foreclosure sales.

Monday’s developments won’t speed the foreclosure process in Florida’s overburdened courts, said Alexander Fernandez, director of homeownership preservation for Neighborhood Housing Services of South Florida. He noted there are more than 50,000 cases in Broward County alone that are still pending. And renewed cases, he said, would probably go to the back of the line.

Foreclosure defense attorneys questioned how the process can be re-started. “Do they simply get to resubmit the document and go on like nothing happened?” said Matthew Weidner, a St. Petersburg foreclosure defense attorney.

Beyond Florida, Bank of America said it would continue its halt of foreclosure sales in the 27 states that do not handle foreclosures through the judicial system.

Mortgage rates fall to decades-low of 4.27%

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NEW YORK – Oct. 8, 2010 – Rates on 30-year mortgages fell to the lowest level in decades for the ninth time in 12 weeks, pushed down by traders anticipating a move by the Federal Reserve to pump more money into the economy.

The average rate for 30-year fixed loans dropped to 4.27 percent, mortgage buyer Freddie Mac said Thursday. That’s the lowest on records dating back to 1971, and down from 4.32 percent the previous week.

The average rate on 15-year fixed loans, a popular choice for refinancing, dropped to 3.72 percent from 3.75 percent. That was lowest on records dating back to 1991.

Rates have mostly fallen since spring as investors shifted money into the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.

The 30-year rate was 5.08 percent at the beginning of April, while the 15-year rate was 4.39 percent.

In recent weeks, Treasury yields have dropped as investors predict that the Federal Reserve will soon increase its Treasury purchases to help boost the economy. That has pushed down rates.

The yield on the closely watched 10-year bond reached its lowest point this year at 2.39 percent Wednesday following a surprisingly weak employment report.

However, historically low rates haven’t helped the struggling housing market, which recorded its worst summer in more than a decade.

Applications for mortgages to buy homes rose last week to the highest level since May, according to the Mortgage Bankers Association on Wednesday. However, that level is almost 32 percent below the level at the end of April, when homebuyer tax credits expired.

Also, much of the most recent surge was led by borrowers seeking a government loan before the requirements were tightened. The new standards, including higher credit scores and downpayments, went into effect this week.

Sales this fall are not expected to improve that much. Job concerns have kept many people from buying homes. Tighter credit standards have also dissuaded many would-be buyers from purchasing. Experts also expect the worst-hit cities to face more foreclosures and other distressed sales.

To calculate average mortgage rates, Freddie Mac collects rates from lenders around the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a given day.

Rates on five-year adjustable-rate mortgages averaged 3.47 percent, down from 3.52 percent a week earlier. Rates on one-year adjustable-rate mortgages fell to an average of 3.40 percent from 3.48 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.8 a point for 30-year mortgages. It averaged 0.7 of a point for 15-year and 1-year mortgages and 0.6 of a point for 5-year mortgages.

OAKLAND, Calif. – July 29, 2010 – Emily Rennie’s three-bedroom house in Oakland was a beauty in a sweet location. Walking distance to the lakeshore. Close to shops. A refurbished patio in the back. Inside, a modern kitchen with granite countertops.

Listed at $539,000 when she put it on the market, the Excelsior Avenue house was missing one crucial thing: The right price. After a few weeks with no offers, she cut the price to $499,000 in May. Then she cut it to $475,000 in June. She is still hoping for an offer.

Rennie is discovering the cold reality of post-housing-bust prices: No matter what she thinks her house is worth, what matters is what buyers are willing to pay. That can be a lot less in areas where the supply of houses for sale is swollen by foreclosures and short sales, often priced 20% to 30% below the ones being sold by financially healthy owners. Nationally, such properties account for a third of all sales three years after a historic chill blew over an overheated housing market.

Foreclosures “do make it harder to sell,” acknowledges Rennie, who works in marketing communications. “People can get a really good deal.”

Real estate professionals say Rennie is in good company. Nationally, 30% of the houses for sale were reduced in price in June, according to Zillow.com, an online real estate site. Plenty of sellers have trouble pricing their home against the foreclosed houses that lenders are trying to unload.

“It’s one of the hardest things for sellers to do. They have an emotional attachment to their house,” says Amy Bohutinsky, a spokeswoman for Zillow.com. “For sellers to understand how they should price, they should deeply understand their market and competition -- what’s on the market now, not just what’s sold.”

Those who do that successfully don’t have a problem.

Foreclosure vs. short sale: pros and cons

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PALM BEACH, Fla. – July 28, 2010 – With today’s reduced property values and increased unemployment, it’s tempting for some homeowners to just throw their hands up in defeat, allow the bank to take their home in foreclosure and rid themselves of the monthly mortgage burden.

Even suffering through the paperwork and stress of a short sale may seem too much for an overwhelmed borrower to handle.

But Florida homeowners should be aware of unique rules in the state that make the benefits of a short sale typically outweigh the ease of walking away in a foreclosure.

“I want to be very clear on this, short sales are a better solution than a foreclosure, even when all the options in a situation where you lose your house are not great,” said Mark Greene, owner and president of Short Sale Operations LLC in North Palm Beach.

The biggest difference between Florida and many other states when it comes to losing a home is the deficiency judgment.

While some states ban lenders from collecting the remainder owed on a loan after a foreclosure or short sale is completed, Florida law allows banks to go after borrowers for up to 20 years. That can lead to a garnishment of wages long after the home is gone.

In a short sale, where the bank agrees to take a lesser amount for the home than what is owed on a loan, lenders sometimes are willing to write off the deficiency on the front end.

Greene said in 90 percent of the cases he handles, the bank has waived its right to seek a deficiency.

That was the case with Jupiter resident Kathryn Lorello, who in 2008 found herself in a home she couldn’t afford.

Following a divorce, and with three children, Lorello bought a $408,000 home that she lived in comfortably for a year. But then she lost her job as a manager of a real estate company.

She remembers the day the bank served the notice of foreclosure.

“I cried my eyes out,” Lorello said. “That’s when I panicked because I really didn’t want it to happen.”

Lorello got advice from Greene on doing a short sale.

Her bank, Wells Fargo, waived its right to seek a deficiency even though it ended up taking $200,000 less than what was owed on the loan.

Also, if a bank refuses to waive the deficiency in a short sale, it still would have to go back to court to seek a judgment.

In a foreclosure, at the end of the proceeding, a deficiency judgment is automatically awarded by the courts and the bank is free to seek a claim.

“In the past, people just wanted to move from the property and get on with their lives and didn’t understand what the lenders’ rights were in terms of pursuing a deficiency claim,” said Paul Baltrun, director of loss mitigation at the LaBovick & La-Bovick law firm.

“I think people are more aware now about what can happen after the fact and that their nightmare can continue.”

Another consideration is the effect of a foreclosure or short sale on credit.

According to the Fair Isaac Corp., which developed the widely used measurement of credit risk called a FICO score, the negative effect of a foreclosure is only marginally worse than a short sale.

But in Florida, a deficiency judgment from a foreclosure is likely to have a much larger impact that will prohibit your ability to buy another home for many years.

Daniel Poulos, a mortgage broker with Elite Lending in North Palm Beach who has studied the effect of foreclosures and short sales on credit, said unless a borrower pays off the deficiency, it may be 20 years before someone is eligible for another mortgage.

“That’s the kind of information that’s not getting out in Florida,” Poulos said.

There are a few situations where some experts believe it is better for someone to go to foreclosure rather than do a short sale.

To do a short sale, a borrower must give all of his or her financial information to the bank before it will decide whether to allow the short sale. The idea is that if a person can afford to pay the mortgage, the short sale may be denied.

“Now the lender knows everything about your finances and they can better decide whether they will go after you or not,” said Jon Maddux, CEO of YouWalkAway.com, a company that advises people on strategic defaults.

If a lender doesn’t know your finances, Maddux argues, it reduces the chances it will go after you following a foreclosure.

“You might fly under the radar,” he said. “With the millions of people going through this, they are probably going to go after the low-hanging fruit.”

LOS ANGELES (AP) – July 15, 2010 – More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.

“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.

By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

The surge in home repossessions reflects the dynamic of a foreclosure crisis that has shown signs of leveling off in recent months, but remains a crippling drag on the housing market.

The pace at which new homes falling behind in payments and entering the foreclosure process has slowed as banks continue to let delinquent borrowers stay longer in their homes rather than adding to the glut of foreclosed properties on the market. At the same time, lenders have stepped up repossessions in an effort to clear out the backlog of distressed inventory on their books.

The number of households facing foreclosure in the first half of the year climbed 8 percent versus the same period last year, but dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.

In all, about 1.7 million homeowners received a foreclosure-related warning between January and June. That translates to one in 78 U.S. homes.

Foreclosure notices posted monthly declines in April, May and June, but Sharga said one shouldn’t read too much into that.

“The banks are really sort of controlling or managing the dial on how fast these things get processed so they can ultimately manage the inventory of distressed assets on the market,” he said.

On average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold, according to Lender Processing Services Inc., which tracks mortgages.

Assuming the U.S. economy doesn’t worsen, aggravating the foreclosure crisis, Sharga projects it will take lenders through 2013 to resolve the backlog of distressed properties that have on their books right now.

And a new wave of foreclosures could be coming in the second half of the year, especially if the unemployment rate remains high, mortgage-assistance programs fail, and the economy doesn’t improve fast enough to lift home sales.

The prospect of lenders taking over more than a million homes this year is likely to push housing values down, experts say.

Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties.

“The downward pressure from foreclosures will persist and prices will be very weak well into 2012,” said Celia Chen, senior director of Moody’s Economy.com.

She projects home prices will fall as much as 6 percent over the next 12 months from where they were in the first-quarter.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. Now, homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

There are more than 7.3 million home loans in some stage of delinquency, according to Lender Processing Services.

Lenders are offering to help some homeowners modify their loans. But many borrowers can’t qualify or they are falling back into default. The Obama administration’s $75 billion foreclosure prevention effort has made only a small dent in the problem.

More than a third of the 1.2 million borrowers who have enrolled in the mortgage modification program have dropped out. That compares with about 27 percent who have received permanent loan modifications and are making payments on time.

Among states, Nevada posted the highest foreclosure rate in the first half of the year. One in every 17 households there received a foreclosure notice. However, foreclosures there are down 6 percent from a year earlier.

Arizona, Florida, California and Utah were next among states with the highest foreclosure rates. Rounding out the top 10 were Georgia, Michigan, Idaho, Illinois and Colorado.

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Mark Castagna
Waters Edge Realtors
5363 Central Ave
St. Petersburg FL 33710
Tel (727) 346-1907
Fax: (888) 482-1177