Pleasanton Real Estate

THROUGHOUT the foreclosure crisis, Washington has done little to help people hang on to their homes. All those programs that were supposed to help — HAMP, HARP, Hope for Homeowners — have mostly failed.
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Times Topics: Gretchen Morgenson | Foreclosures

So many were skeptical when the Office of the Comptroller of the Currency announced yet another program in April. This one was intended to provide reparations to homeowners who’d been hurt financially by foreclosure abuses at banks.

As the details trickle out, the program looks like more of the disappointing same. “This is just the next program that’s getting people’s hopes up,” said Alys Cohen, staff attorney at the National Consumer Law Center in Washington. “Not only will it not help people, it could easily harm them.”

The program arose out of a regulatory review in late 2010 of loan servicing practices at the nation’s largest banks. The review followed the robo-signing scandal that erupted after consumer lawyers — not regulators, mind you — identified numerous apparent forgeries and other improper foreclosure documents filed with courts by banks and their representatives.

Last April, the banks agreed to fix problems found in the review and were required to hire independent consultants to audit their practices in 2009 and 2010. JPMorgan Chase engaged Deloitte, while Citibank and U.S. Bancorp hired PricewaterhouseCoopers. Three other banks hired Promontory Financial.

On Nov. 1, letters started going out to more than four million borrowers who were ensnared in the foreclosure process in the two years covered by the program. Those people were told how to request reviews of their cases. The letters also described 22 types of financial harm they might have experienced. Borrowers have until April 30 to request a review.

Obviously, this program has a lot of moving parts. But many of them are flawed, according to Ms. Cohen and other foreclosure experts.

Some of the problems were aired at a Senate subcommittee hearing on Dec. 13. Three Democrats — Robert Menendez of New Jersey, Jeff Merkley of Oregon and Jack Reed of Rhode Island — expressed doubts about the program to Julie L. Williams, chief counsel at the comptroller’s office. The senators were especially vocal about the potential for conflicts of interest among the consultants hired to conduct the reviews.

This is a real defect since the consultants were chosen by the banks that are paying them. And companies that have done work for these banks in the past, or that hope to do more work for them in the future, were not barred from taking on the assignments.

According to Ms. Williams, the comptroller’s office closely vetted the consultants to disqualify any that posed a conflict.

BUT Michael Olenick, a specialist in mortgage research, said he spotted a conflicted consultant after one hour of digging. Allonhill, a smallish firm appointed by Aurora Bank, a mortgage servicer, is headed by Sue Allon, whose previous small firm acted as credit risk manager in a 2003 mortgage pool for which Aurora oversaw the loans’ servicing. The prospectus on that deal noted that Murrayhill, Ms. Allon’s former firm, would “monitor and advise the servicers with respect to default management of the mortgage loans.” It also said that Murrayhill would make recommendations to the servicers regarding delinquent loans.

Now, under the comptroller office’s program, Ms. Allon’s firm may be analyzing the treatment of borrowers on whose loans it acted as credit risk manager. “This conflict is so deep and so obvious, how could anybody have missed it?” Mr. Olenick asked.

A representative for Ms. Allon wrote in an e-mail that Allonhill “focuses on a different area of the mortgage industry than Murrayhill did.” She said the foreclosure information Allonhill was reviewing for Aurora was “outside the scope of what was provided to Murrayhill.”

Aurora did not comment.

JPMorgan Chase’s hiring of Deloitte to analyze foreclosure practices also raises questions. Deloitte was the auditor not only for Washington Mutual, the huge mortgage lender that collapsed in 2008, but also for Bear Stearns, another defunct firm. Both WaMu and Bear were acquired by JPMorgan, so any loans they made may come under scrutiny by the same firm that audited their books.

Nye Lavalle, a foreclosure fraud expert who began warning bank executives about bad lending practices back in 1999, is troubled by this situation. “This review process is a wink-wink, nod-nod,” he said.

JPMorgan and Deloitte declined to comment.

Robert Garsson, a spokesman for the comptroller’s office, said the regulator was satisfied with its vetting process. “We were particularly focused on situations where consultants and law firms may have previously worked on issues they would be called upon to evaluate in the review process,” he said in a statement. “If we identify conflicts that were not apparent at the time the engagement letters were signed, we will take steps to address them.”

Beyond the potential for conflicts, Ms. Cohen pointed to other flaws in the program. For instance, she said the years under review were not when most subprime loans were put into foreclosure. Many predatory loans are likely to be excluded from the analysis.

Even more problematic, Ms. Cohen said, is the fact that the program has left troubled borrowers who participate in it unprotected against further damage. For example, participants in line to get remuneration may be asked to give up their rights to defend themselves if they get into financial trouble again.

“This process is not meant to fix the original lending practices, so people need to hang on to their right to challenge the original loan later,” she said.

She also noted that borrowers in the process of having their cases reviewed could still lose their homes under the program. “O.C.C. has said their policy will involve an escalation process and expedited review of people in a certain proximity to a foreclosure sale,” Ms. Cohen said. “But the sale itself is not being stayed in any systematic way.”

None of this surprises Ms. Cohen or others familiar with the regulator. “This is the O.C.C . that we’re talking about,” she said. “It has a long record of favoring banks over homeowners.”

Fri, 2011-08-19 16:48 — NationalMortgag…

The Federal Housing Administration (FHA) will implement new single-family loan limits as specified by the Housing and Economic Recovery Act of 2008 (HERA) as of Oct. 1, 2011. According to Mortgagee Letter 11-29, FHA will reduce loan limits in the highest cost metropolitan areas of the country, while limits would remain unchanged in most other parts of the nation. 

These new loan limits were scheduled to take effect in January of 2009, but continuing strains in credit markets led the Congress to delay implementation. The result has been nearly three years of higher loan limits for some areas based on the Economic Stimulus Act of 2008 (ESA).

Barring any new action by the Congress, many affected areas will have lower FHA loan limits come Oct. 1. The current standard (floor) loan limit for areas where housing costs are relatively low will remain unchanged at $271,050 for one-unit properties. The new “ceiling” loan limit for higher cost areas will be reduced from $729,750 to $625,500 for one-unit properties. FHA loan limits vary based on area median home price, but all will fall within the range of $271,050 and $625,500 for one-unit properties. Additional information and loan limits for two-, three- and four-unit properties are noted in FHA’s Mortgagee Letter 11-29. As in previous years, Alaska, Hawaii, Guam, and the Virgin Islands may have higher loan limits.

FHA estimates that only a fraction of borrowers living in the nation’s highest cost areas will be impacted by the new loan limits announced today. For example, last year only three percent of FHA-insured borrowers lived in these high-cost areas. The change in FHA loan limits will affect 669 counties across the country, out of a total of 3,234 jurisdictions in which FHA insures home loans. Most loan applications with an FHA case number assigned on or after October 1, 2011, will be subject to the new limits. However, there are some exceptions for FHA-insured to FHA-insured refinances that are noted in HUD’s Mortgagee Letter. In addition, there are exceptions for loans that were issued case numbers on or before Sept. 30, 2011 and meet all of the credit approval criteria detailed in Mortgagee Letter 2011-29.

The mortgage loan limit and maximum claim amount for FHA-insured reverse mortgages will remain unchanged. FHA’s Home Equity Conversion Mortgage (HECM) will continue to have a maximum claim amount of $625,500.

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Compliance NMP News Originations Residential Reverse Federal Housing Administration (FHA) Economic Stimulus Act of 2008 (ESA) Home Equity Conversion Mortgage (HECM) Housing and Economic Recovery Act (HERA) loan limits median home price Mortgagee Letter 11-29

In a major victory for REALTORS®, Governor Brown signed into law today a C.A.R.-sponsored bill, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.

Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale. A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.

Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.

This law is fully set forth as Senate Bill 458 (Corbett) at www.leginfo.ca.gov.

By Dina ElBoghdady, Thursday, April 14, 8:46 PM
One of the leading Democratic lawmakers on housing policy and the Obama administration’s own housing agency criticized as too stringent an administration proposal that would push home buyers to come up with sizable down payments.

Housing officials criticize 20% down-payment proposal
Down-payment requirement angers senators
Down payment proposal could make a mountain out of a mortgage
Regulators, mortgage servicers agree on reforms
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Under the plan, banks would have to retain a stake in the home purchase loans they make to borrowers who put down less than 20 percent. The banks say that the requirements would be costly and that those costs would be passed on to borrowers in the form of higher interest rates. That would effectively shut millions of families out of homeownership.

At a House subcommittee hearing Thursday, Rep. Barney Frank (D-Mass.) said the arguments against setting such a high threshold are “persuasive.” A 20 percent down payment “does seem very high,” Frank said.

Bob Ryan, acting commissioner of the Federal Housing Administration, agreed that the proposal has the potential to deny affordable loans to creditworthy borrowers. Ryan urged serious consideration of another option in the proposal that would set the down payment at 10 percent.

“We are definitely concerned about 20 percent and the impact,” Ryan said.

Since the proposal was unveiled last month, a coalition of consumer groups and civil rights advocates has joined the real estate industry to lobby against the high-down-payment initiative. They say saving the upfront cash is an especially tough hurdle for first-time buyers and minorities, who rely heavily on low-down-payment loans.

The six federal agencies involved in crafting the proposal — including the Federal Deposit Insurance Corp. and the Federal Reserve — will gather public comment on it through June 10. The plan would take effect a year after it is finalized.

But differences among the participating agencies surfaced at the hearing.

Ryan, whose agency is part of the Department of Housing and Urban Development, aligned himself with the 10 percent alternative. He argued that down payments alone are not the most reliable predictor of a borrower’s ability to sustain a loan, and he pointed to other factors, such as a borrower’s credit score. His agency insures low-down-payment loans and caters to low-income borrowers and first-time buyers.

But the Federal Housing Finance Agency — which oversees mortgage financiers Fannie Mae and Freddie Mac — analyzed loans sold to both companies from 1997 to 2009 and concluded that lowering the down payment to 10 percent would not greatly boost the share of loans exempt from risk retention.

The share of home purchase loans would have increased by just 5 percentage points, from 27 percent to 32 percent and those additional loans would have been riskier, Patrick Lawler, FHFA’s chief economist, told lawmakers.

Some consumer advocates reached similar conclusions. To buy a home for $172,100, the median national price, a borrower making a 10 percent down payment would have to come up with nearly $26,000, including closing costs, according to the Center for Responsible Lending. It would take a middle-income family about nine years to come up with the cash.

“Even a 10 percent down payment would put homeownership beyond the reach of many creditworthy families who would otherwise have succeeded in homeownership,” Ellen Harnick, senior policy counsel at the center, said in her testimony.

by : Jonathan Alter

The root canal Americans experienced over the averted government shutdown may seem painless compared with the operation that’s coming: debate over raising the debt ceiling followed by House Budget Committee chairman Paul Ryan’s plan to overhaul the government. The political fates of President Barack Obama and most of Congress depend on the outcome. While the stakes for the 2011 budget skirmish has been over a few billion dollars, the next fight—over the debt ceiling—is about several hundred billion. Then, Ryan’s proposed rewrite of the nation’s social contract will be about several trillion dollars.

So all the eye-gouging and hair-pulling over spending for the current fiscal year may be just a warm-up for what’s to come. Or it may move Congress to its senses. Then raising the debt ceiling can once again be a routine technical vote (as it has been for generations) and tackling entitlements and the tax code can move to the centre of a spirited but rational debate.

For now, it isn’t hard apportioning blame for the month’s unpleasantness. Five years ago, when the shoe was on the other foot—when Democrats were determined to pursue an ideological agenda and cut off funding for the war in Iraq—they didn’t threaten to shut down the government in order to get their way.

Today’s Republicans are so determined to defund Planned Parenthood, gut the Clean Air Act and go to the mat on their other ‘riders’ (amendments that have little budgetary impact) that the usual incentive for politicians to cut a deal on budget numbers has become clouded by ideology. The only remedy is to fix blame squarely and publicly where it belongs. If the Tea Party is seen as responsible for hundreds of thousands of delayed paychecks, weakened local economies and tourists not getting to see the pandas at the National Zoo, then the “Shut It Down!” crowd will have less leverage next month when Congress has to raise the debt ceiling.

This may be wishful thinking on the part of Democrats. They remember the 1995-96 government shutdown as the episode that secured President Bill Clinton’s reelection when he outfoxed Republican House Speaker Newt Gingrich. But blame for that crisis could have easily gone the other way. During the first of two shutdowns (one for five days in November of 1995 and a second for three weeks around Christmas), Clinton’s poll numbers dropped sharply. It was only after Gingrich earned “Cry Baby” headlines around the country for complaining about having to deplane from the back of Air Force One that the president emerged a winner.

As the 26-day Clinton era furloughs suggest, the political consequences of these events are greater than the economic ones. Contrary to claims by the White House, a short shutdown wouldn’t short-circuit the recovery. But according to almost every economist, banker and government official, failure to raise the $14.3 trillion debt ceiling would be disastrous. Treasury secretary Tim Geithner said in a letter to congressional leaders that Congress must act before May 16 or bring “severe hardships” to the US economy. This is brinksmanship; in truth, the Treasury Department has the power to put off the reckoning for a few weeks if necessary. But by early summer, the political posturing will be like playing with dynamite.

“Default by the US is unthinkable,” Geithner wrote to congressional leaders on April 4. Freshman Senator Marco Rubio of Florida, a likely 2012 vice-presidential nominee for any Republican candidate, is thinking it. He has come out against raising the ceiling. Rubio doesn’t mention what would then be required to avoid default: cutting spending by $738 billion in six months. Not even the most fire-breathing Tea Partier has suggested how to do that.

Cutting that kind of money over a longer time frame isn’t only doable, it’s essential. That’s where the plan unveiled last week by Paul Ryan comes in. He deserves points for courage and leadership, but not for seriousness. Ryan is still so much in thrall to the tax-cutting religion of his party that he reduces the top marginal tax rate to 25%, thereby undermining the deficit reduction that was supposed to be his ‘cause’. Unless you believe in supply-side economics, Ryan’s plan doesn’t add up.

The recommendations of the Simpson-Bowles commission—also denounced by the Democratic left—make a much better starting point for dramatic reductions in the deficit. Even on entitlement reform, Ryan falls far short. Politically, his plan to end the wildly popular Medicare programme is a dagger pointed at the heart of the Republican Party. Substantively, his voucher plan would do little to rein in costs, while shifting more tax money from the struggling middle class to the affluent elderly.

I hear from inside the White House that after the shutdown and debt ceiling debates have ended, Obama will finally weigh in with his own long-term deficit reduction ideas, and not wait for the election. A few common sense if politically dicey remedies (like raising the retirement age for non-manual labourers) are what the doctor ordered. No major surgery required.

The author is a national correspondent for Newsweek and has published ‘The Promise: President Obama, Year One’