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More mortgage relief from the White House – but congressional OK doubtful

In his State of the Union Address, President Obama laid out a plan to help responsible borrowers and support a housing market recovery.  Details of that plan were released yesterday.  However, funding for the proposed program must be approved by Congress, lowering the possibility that it will be implemented quickly.

Making sense of the story

• Operated by the Federal Housing Administration, the plan would allow underwater homeowners to refinance into cheaper federally insured loans.  Borrowers with good credit who are current on their loan payments are eligible.
• The measure also streamlines the process of refinancing an underwater mortgage, eliminating the need for an appraisal or submitting a new tax return.
• To qualify, borrowers must be current on their mortgage, have a minimum credit score of 580, and must be refinancing a loan on a single-family owner-occupied principal residence.
• Lenders only need to confirm that the borrower is employed.  Loans that are more than 140 percent of the home value probably would not qualify until banks wrote down part of the balance.
• Congress must approve $5 billion to $10 billion in funding, leading housing experts to praise the plan’s objectives with skepticism of it passing this year.

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Related articles

• Realtors applaud Obama refinancing initiative (freedommortgage.com)
• More mortgage relief from the White House — but congressional OK doubtful (mercurynews.com)
• President Reveals New Refi Program Details (mickdoesloans.wordpress.com)
• DSnews.com: Obama Details Plan for Mass Refi Program Funded by Largest Lenders (foreclosure-avoidance.com)
• Obama proposes home loan refinancing plan – CNNMoney (money.cnn.com)

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Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give short-term aid to unemployed homeowners, but housing counselors warn that these borrowers will need to look at longer-term solutions.

Making sense of the story

• In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments.  The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
• There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments.  The unpaid balance continues to increase during this time.
• The new temporary mortgage payment is often set to 31 percent of the household income; in some cases lenders agree to accept no payments.  Fannie Mae’s extended unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
• However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
• Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Development.

Read the full story

Related articles

• Fannie Mae Extends Mortgage Relief for the Unemployed (tominvestor.wordpress.com)
• Unemployed Mortgage Holders Get Payment Extension (nytimes.com)
• Freddie, Fannie Expanding Mortgage Forbearance (debbyfrank.wordpress.com)

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The state-run program, “Keep Your Home California,” which helps homeowners struggling to pay their mortgages now has broader eligibility guidelines.  Borrowers who did “cash-out” refinances and own multiple properties now are eligible for the program, according to California Housnig Finance Agency officials.

• To date, Keep Your Home California has helped approximately 8,000 low- and moderate-income households that are behind on loan payments or close to default.
• There are four parts to the program: Mortgage help for the unemployed, mortgage aid for homeowners with documented financial hardship, relocation help for those in the midst of a short sale or deed-in-lieu of foreclosure, and reduction of principal.
• Homeowners who completed “cash-out” mortgage refinancing now are allowed to take part in the four programs outlined above, and borrowers who own more than one property also can apply for the program.  Previously, these two groups of borrowers were excluded from participation.
• Mortgage aid to unemployed borrowers also has been extended to nine months, instead of six.  Such homeowners can receive up to $3,000 a month.  To qualify, borrowers must be receiving unemployment benefits.
• Additionally, the program has reinstated up to $20,000 in past-due mortgage payments instead of the previous $15,000 cap.
• To review qualification guidelines, visit www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org.

Read the full story

Related articles

• Advantages of the HAFA Process (lilynyland.wordpress.com)
• About Tax Deductions for a Mortgage (turbotax.intuit.com)
• Troubled Homeowners Get A Lifeline (nevadacounty.com)

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California Attorney General Kamala D. Harris

5 Tips to Avoid Being Scammed

1. Don’t pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed.
2. Don’t ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house.
3. Don’t transfer title or sell your house to a “foreclosure rescuer.” Beware! This is a scam to convince homeowners they can stay in the home as renters and buy their home back later. It might also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict the victim and take the home.
4. Don’t pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.
5. Never sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.

Where Do I Report Fraud or File a Complaint?

File a complaint with the California Attorney General’s Office.

File a complaint with the Federal Trade Commission.

If your complaint is against a real estate broker, visit the Department of Real Estate website.

If your complaint is against an attorney, visit the State Bar of California website.

You may also wish to consider filing a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. You can recover up to $7500 in Small Claims Court. You represent yourself and can request a judgment for monetary damages. Visit the California Courts Self-Help Center for further information.

Source: Attorney General of California

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Just as in 2011, in 2012 many will be trying to figure out where housing is headed.  While the housing market didn’t worsen in 2011, it also didn’t stabilize either.  This year, the story will be about local markets.  While many housing markets rose and fell together, they’re recovering at difference paces so talking about housing on a national level is not beneficia

• Confidence and jobs: Housing is more affordable than it has been in decades, but many would-be buyers are worried about buying today if prices are going to be lower tomorrow.  Still, others don’t want to buy a house until they have more evidence that they’re not going to get laid off or see their hours cut back.

• Foreclosures: Banks and other mortgage investors own around 440,000 foreclosed properties, but there’s another 3.4 million loans in foreclosure or serious delinquency, according to estimates by Barclays Capital.  Because banks are faster to cut prices to unload inventory than are traditional sellers, home values can fall further as the share of distressed sales rises.

• Rents: If low mortgage rates aren’t enough to give urgency to would-be buyers, rent hikes could accelerate buyers’ decisions to take the plunge.

• Mortgage credit and rates: It’s still hard for many buyers to get approved for a mortgage because banks are demanding lots of documentation of borrowers’ incomes.

• Regulation: Many analysts don’t expect Congress to make major changes to Fannie Mae and Freddie Mac during the election year, but several major regulatory changes could significantly reshape the future of the lending landscape in 2012.

• Meanwhile, the regulator that oversees Fannie and Freddie is revamping the way that mortgage companies are paid for collecting loan payments.  This could lead to a broader shakeup in the mortgage industry that ultimately influences how much borrowers are charged for mortgages and how banks handle loans that fall into delinquency.

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Bank of America Nevada City Closing in 2012 Photo by John J. O'Dell

Faced with finicky lenders, would-be home buyers are increasingly turning to family members, friends, and even strangers they meet online.  While this is understandable, given the abundant bargains on the market, they also present significant risks.

• So-called peer-to-peer lending sites, such as Prosper and Lending Club, say demand for home-related financing is on the rise.  In September, Weemba, a social-networking site, launched a platform to connect lenders directly with prospective home buyers and other borrowers.
• Despite historically low mortgage rates, traditional lenders remain reluctant to provide mortgages to anyone with less than stellar credit.  And, in certain markets, lenders are requiring down payments of more than 20 percent of the home’s purchase price.
• Borrowers taking loans from family members – so-called intrafamily loans – save on interest since family members are likely to charge less than the banks.  Additionally, parent lenders can earn a higher return from their child’s interest payments than they would on a certificate of deposit or money-market fund.  Under federal law, on a loan of more than nine years, parents must charge at least roughly 2.8 percent, in most cases.
• Consumers who prefer to look for loans beyond the family can apply at peer-to-peer lending sites.  If approved for a loan after a screening by the companies, applicants may then receive money from investors.
• However, these alternative routes to financing can be expensive for borrowers.  Rates at Lending Club run from around 7 percent to 28 percent.  At Prosper, rates run roughly 7 percent to 35 percent.  The companies say these rates, which are fixed, are higher than traditional mortgage rates in part because their loans are unsecured.

]]> http://www.nevadacounty.com/2011/12/lots-home-bargains-lenders/feed/ 0 http://www.nevadacounty.com/2011/12/arrest-nationwide-6-million-loan-modification-scam/?utm_source=rss&utm_medium=rss&utm_campaign=arrest-nationwide-6-million-loan-modification-scam http://www.nevadacounty.com/2011/12/arrest-nationwide-6-million-loan-modification-scam/#comments Mon, 12 Dec 2011 18:29:09 +0000 jd http://www.nevadacounty.com/?p=11687

December 7, 2011

LOS ANGELES— Attorney General Kamala D. Harris today announced the arrests of two Southern California men who, under the guise of an attorney-backed loan modification company, collected more than $6 million from homeowners nationwide for services that were never performed.

Christopher Fox, 37, of Laguna Niguel and Curtis Melone (AKA Curtis Kubat), 37, of Huntington Beach were arrested Tuesday on 37 felony counts, including conspiracy, grand theft and unlawful collection of advance fees. They are being held at the Orange County Jail on $500,000 bail and will be arraigned today in Orange County Superior Court.

Fox and Melone – along with King Harris III, 42, of St. Louis, Missouri – collected more than $6 million in up-front fees through Orange County- based Green Credit Solutions. The Attorney General’s office will seek extradition of Harris, who currently faces federal mail and wire fraud charges in Missouri.

“Homeowners continue to struggle throughout California and across the country to hang onto their homes, and this prosecution is another warning to predators who would seek to profit from their distress: this kind of criminal conduct will meet with swift and certain consequences,” Attorney General Harris said. “Homeowners should never pay up-front fees to reduce their loans. Californians who face mortgage difficulties should instead contact a non-profit housing counselor, either through www.HUD.gov or a local non-profit housing clinic, to learn about the mortgage process and their rights as homeowners.”

In June 2009, the Attorney General’s office launched an investigation of Orange County- based Green Credit Solutions – later renamed Guardian Credit Services and Get My Credit Grade – in response to numerous consumer complaints filed with the office, as well as with the Better Business Bureau, the California Department of Real Estate and the State Bar of California.

Through witness interviews, analysis of the company’s marketing materials, and its business and financial records, DOJ investigators uncovered a scheme in which thousands of victims paid $3,500 for what they believed were attorney-backed loan modification services to reduce their interest rates, monthly payments or principal balance.

From November 2008 to October 2009, Fox, Melone and Harris collected more than $6 million from thousands of homeowners across California and nationwide. Victims were told their funds would be held in a so-called “attorney escrow account” until services were completed. In fact, those fees were often deposited into the account of a disbarred attorney and then promptly transferred to GCS.

Likewise, the company fraudulently claimed that loan modification services would be performed by attorneys; Harris is a disbarred Tennessee attorney and marketing materials referred to his alleged partners at the defunct law firm of “Smith Harris PLLC.”

In May 2011, Attorney General Harris formed a Mortgage Fraud Strike Force to investigate and prosecute mortgage fraud. In August, the Strike Force filed its first suit against a law firm that took millions from desperate homeowners: Click to view

The complaint is attached to the online version of this release at http://oag.ca.gov/

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Photo courtesy of GlobalGiving blog

With most lenders requiring borrowers to put down at least 20 percent as a down payment – unless using an FHA or VA loan, or purchasing mortgage insurance – the best holiday gift some people might receive would be help with a down payment on a house.

• According to a survey by Trulia, the biggest barrier to buying a home these days is saving for the down payment.  The survey, conducted over the summer, found that 51 percent of renters said coming up with money for the down payment was preventing them from buying, while 35 percent identified qualifying for a mortgage as the stumbling block.
• Under federal tax law, each individual is permitted to give money or valuables worth up to $13,000 to a single recipient in a calendar year.  A married couple could jointly bestow up to $26,000 a year per recipient.
• According to one financial planner, there also is the option of lending a relative or close friend the money for the down payment, or the closing costs, then forgiving the loan in a future year.  The recipient would have to pay interest on the loan until it was forgiven, at which point it would become a gift.
• Another way to help with the down payment is to pay other expenses, such as tuition, thereby freeing up money to make a home purchase.  Gifts for educational or medical expenses are not subject to taxes, as long as they are paid directly to the educational or medical institution.
• However, prior to giving the money, gift-givers should consider their own financial picture, and they should make sure the recipient is responsible and not behind on other payments that could be subject to debt collection.

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The Obama administration announced broad outlines of the revised Home Affordable Refinance Program on Oct. 24. Fannie Mae and Freddie Mac issued guidance last week that filled in most of the details.

• HARP 2 greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.
• Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won’t begin buying certain types of refinanced loans until March.
• To qualify, the existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The loan balance must be more than 80 percent of the home’s market value. The loan must be current for the past six months, with no more than one late payment in the past 12 months. Those who previously refinanced through HARP are ineligible.
• The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan regardless of how much is owed. The existing program caps the new loan at 125 percent of the home’s market value.
• Homeowners also can refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case the new first mortgage cannot exceed 105 percent of the home’s value.
• In most cases, borrowers won’t have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.
• Borrowers who refinance through their existing loan servicer generally won’t have to document their income or assets or have a particular credit score or debt-to-income ratio. The lender will only have to verify that one borrower on the loan has a job or other source of income, but not the amount of income.
• Homeowners who refinance through a new lender will have to meet additional underwriting requirements, but not as many as people who are refinancing through traditional routes.
• Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will.
• If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.
• There are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require, and whether investors will be willing to buy securities backed by these new HARP 2 loans.

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New York Times
Closing costs can increase the price of a home by as much as $10,000, sometimes more.  Borrowers who are “cash-poor” can ask for assistance, or talk to their lender about a lender credit toward closing costs.

• Some lenders advertise that if borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.
• These mortgages are sometimes called no-closing-cost loans, though the term is misleading.  The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal.  That generally leaves title insurance, mortgage-recording taxes, insurance, and escrowed taxes to cover.The amount of credit depends on total closing costs and other loan details.  Generally, for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount.
• While these mortgages can be helpful to some, borrowers should carefully review all the details.  There are pluses and minuses to these loan types.  A downside is the higher rate and monthly payment remain in place through the life of the loan.
• Doing a side-by-side comparison of loans with and without the credit can be helpful.

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