Los Angeles Personal Injury Lawyer - foreclosure crisis

Lucrative Fees More Attractive to Loan Servicers than Modifications

Paul Kiesel — Tue, 04 Aug 2009 16:21:32 GMT

This week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.

But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”

For the rest of this article, click here.

For another article on Loan Modification Scams, click here.

Originally posted at InjuryBoard by Paul Kiesel

Reuters: Microsoft Warns of Financial Crisis E-mail Scams

Paul Kiesel — Wed, 29 Oct 2008 15:58:47 GMT

Loan modification scams are becoming more prevalent as most of the nation, along with nefarious scam artists, is aware of the $700 billion financial bailout that was passed weeks ago. Congress and other consumer advocate organizations have also been urging lenders, as part of the recommendations of the bailout package, to modify loans in order to protect themselves against further financial damage and to abate the strength of the foreclosure crisis.

Also, check out my blog from yesterday which discusses other loan modification scams that aren't as sophisticated as e-mail scams, however, they can be implemented just as effectively.

From UK Reuters: LONDON, Oct 29 (Reuters) - Internet fraudsters will try to exploit the global financial crisis by sending fraudulent emails purporting to offer cash-strapped consumers new mortgages, loans or money from failed banks, a Microsoft executive said on Wednesday.

Tim Cranton, an Internet safety expert at Microsoft, said there are early signs that criminals have already begun trying to cash in on the economic turmoil.

"It's especially troubling right now with the financial crisis," he told Reuters in a telephone interview. "There are more and more people who are maybe in a more desperate or vulnerable situation.

"We have seen an increase in some mortgage refinance type of scams. We are anticipating that they'll become more sophisticated.

"We have seen that with Hurricane Katrina, the (2004 Asian) tsunami and other natural disasters where the scammers immediately jump."

Fraudsters may send spam emails to consumers that ask them to pay a fee related to the collapse of a bank or financial institution, he added.

"They will allege it is associated with the refinancing -- so because of this bailout you'll get a much better deal on your mortgage and all you have to do is pay this fee."

Online criminals have long used promises of easy money to try to defraud unsuspecting victims.

Common scams include requests to help move money out of a developing country. People are offered a cut of the fortune if they first pay a release fee.

Or they are told they have won a lottery in a foreign country and will receive a huge jackpot once they pay an administration fee.

A poll for Microsoft on Wednesday found more than a quarter of computer users thought it was likely they would fall victim to an online scam that would cost them money.

Half said the scams made them more wary of shopping online, while more than a third said it led to them being more reluctant to use the Internet at all.

However, the poll suggested that the actual chances of becoming a victim are far lower than the perceived risk.

Of 5,000 people polled across Europe, only 113 had lost money to an Internet fraudster in the last year. That equates to one in 44 of those questioned.

Microsoft said it has formed a coalition with Yahoo!, Western Union and the African Development Bank to help spread the message about hoax emails.

"What we'd like to do is raise awareness so that people feel more confident about using the Internet," Cranton said. "We don't want to see a reduction in e-commerce."

Originally posted at InjuryBoard by Paul Kiesel

Freddie Mac Boss Ignored Foreclosure, Housing Crisis Warnings

Paul Kiesel — Tue, 05 Aug 2008 15:17:13 GMT

Richard F. Syron, the chief executive of Freddie Mac, rejected internal warnings that, according to the New York Times, "Could have protected the company from some of the financial crises now engulfing it."

In 2004, Syron received a memo from Freddie Mac's chief risk officer warning him that the firm was financing "questionable loans" that would eventually threaten its financial health. Freddie Mac insiders, who have chosen to remain anonymous, say that Syron heightened the companies recent problems (due to the housing crisis) by ignoring repeated recommendations. Basically, this problem (housing and foreclosure crisis) could have been made less severe, if the person in charge of Freddie Mac had kept the company's exposure to bad loans at a minimum, instead of proliferating it acquisitions of the risky loans.

David Andrukonis, the former chief risk officer to the embattled mortgage giant, told Syron in mid-2004 that the company was buying too many bad loans that "would likely pose an enormous financial and reputational risk to the company and the country." Syron refused to consider the possibilities that Andrukonis portended, contending that his options were limited. He claims several times over that he was almost bullied into buying more loans by Congress and shareholders, however, at the end of the day, he runs the company and knew that complying with both groups would result in the compensation he's received since 2003: $38 million. Therefore, he chose not to rock a boat that would eventually sink his reputation, the company's shares and require government/taxpayer involvement, but we now know that, to Syron, all of those negatives were worth $38 million.

Andrukonis was not the only one warning Syron, several other executives at Freddie Mac warned Syron that the firm needed to expand its capital cushion and to slow the firm's mortgage purchases. Syron accelerated the latter and now look at where the company sits: It's shares have fallen by more than 60 percent since February, 2008 and the Fed has had to intervene and financially back both Freddie Mac and Fannie Mae, as both companies were added to the housing bill (with a type of "blank check" provision) that was passed by Congress and signed by Bush last week.

"More than two dozen current and former high-ranking executives at Freddie Mac, analysts, shareholders and regulators said in interviews that Mr. Syron had ignored recommendations that could have helped avoid the current crisis," (New York Times, 8/5/08). Meaning, the two companies that own half of the country's $12 trillion in mortgages could have avoided government intervention.

Syron and Fannie Mae's chief executive, Daniel H. Mudd, whose company is also facing the same problems as Freddie, defended their choices of buying high risk loans, saying that they did not anticipate that the housing market would decline so quickly (yet they received a bevy of warnings telling them to curb their high risk mortgage purchases). But the more sinister aspect to their defense is that Syron and Mudd, yielding to the pressures of Congress and shareholders, wagered that if things got too bad (housing prices crashed), the government would bail them out.

Andrukonis reiterated Syron's and Mudd's foresight of a government bail out (which they foresaw in this instance, but not in predicting that buying bad loans would equal financial turmoil?). "The thinking was that if something really bad happened to the housing market, then the government would need Freddie and Fannie more than ever, and would have to rescue them [. . .] Everybody understood that at some level the company was putting taxpayers at risk.”

Therefore, companies like Freddie and Fannie collect rich profits, while taxpayers are put at risk, and, still, Syron nor Mudd are accountable for their reckless actions, passing the buck to other groups of people. Large Freddie Mac shareholders echo the sentiments of what Janet Tavakoli, a finance industry consultant and observer of both firms, said concerning Syron and Mudd, "The top people should be booted out, and replaced by executives who have the confidence of the markets."

Syron, in response to all of the criticism he's recently faced, said, "What I'm working for right now is to save my reputation." However, it's fair to say that we can ignore whatever's left of Syron's reputation, as he ignored and scoffed at the warnings of the current housing, foreclosure and credit crisis (when presented to him by Andrukonis and others). The myopic business practices of the last four years were employed by none other than the captain of Freddie Mac's sinking financial ship, and regardless of who enabled those poor decisions, Syron should be the one held accountable.

Originally posted at InjuryBoard by Paul Kiesel

Center for Responsible Lending Foresaw Foreclosure Crisis Back in 2006, Greenspan and Bush Officials Largely Ignored Group's Findings

Paul Kiesel — Mon, 28 Jul 2008 18:08:21 GMT

Below is an article from HousingWire.com, written back in December, 2006. The article clearly states that "billions of dollars" will be lost and that the then looming foreclosure crisis will be "one of the worst foreclosure crises in American history."

Touting a report to be released tomorrow, the Center for Responsible Lending, a Washington, D.C.-based consumer advocacy group, said today that subprime mortgages originated from 1998 through the first half of 2006 will wipe out billions of dollars of economic wealth in what the group characterized as “one of the worst foreclosure crises in American history.”

The CRL will release what it says is the first comprehensive, nationwide look at how subprime mortgages perform, providing projected foreclosure data on all major U.S. metropolitan statistical areas (MSAs).

The report is scheduled to be released tomorrow afternoon during a news conference featuring Michael D. Calhoun, president, Center for Responsible Lending; Pat Vredevoogd Combs, president, National Association of Realtors; and Wade Henderson, executive director, Leadership Conference on Civil Rights. (December 18, 2006)

Just two months prior to the publication of this article, Alan Greenspan, the former Federal Reserve chairman, was quoted as saying on October 9, 2006, "I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out [. . .] There is a good chance of coming out of this in good shape, but average housing prices are likely to be down this year relative to 2005. I don’t know, but I think the worst of this may well be over," (MSNBC.com, 10/9/06).

Ben Bernanke, the then recently appointed Fed chairman, said that the housing market was undergoing a "substantial correction." However, he didn't elaborate any further on what he meant by that statement.

Nonetheless, the writing was on the wall back then and little was done by the current administration to help prevent or prepare the country for the amount of foreclosures we've seen over the last 10 months.

There have been over 1.4 million foreclosures throughout the first half of 2008, up 121% from last year. 2.5 million foreclosures are projected for 2008.

Originally posted at InjuryBoard by Paul Kiesel

California Senate Passes Key Mortgage Bill

Paul Kiesel — Thu, 03 Jul 2008 17:57:26 GMT

The California Senate passed the first major bill that is designed to help prevent more home foreclosures and it is being sent to the governor. Gov. Schwarzenegger is expected to sign the measure into law.

The bill would require lenders to give homeowners earlier and extensive warning that their home loans were heading in to default. The bill will take effect immediately upon Gov. Schwarzenegger's signature.

The Los Angeles Times reports that a third provision on the bill, that is more important than it might sound, requires lenders to maintain property that is sitting empty after a foreclosure. In effect, the provision will curb lenders from immediately foreclosing on a person's mortgage, and prompt the lender -- or at least give some moderate incentive to the lender -- to work out a deal with the borrower.

Senate President Pro Tem Don Perata (D-Oakland), who authored the bill, said, "SB1137 will make a difference right away [. . .] This legislation is an important piece of the puzzle of how to best protect California homeowners and communities from the fallout from the nation's mortgage crisis," (Los Angeles Times, 7/3/08).

The "Mortgage Default Warning Bill" is an excellent first step by the state Senate to combat the foreclosure crisis that has hit California very hard (one of four states with the most foreclosures over the last year; Arizona, Florida and Nevada are the other three). State Assembly Speaker Karen Bass said that Wednesday's passage of the foreclosure-prevention bill would create momentum to resurrect a handful of related measures that were killed in the Senate two weeks ago. According to Bass, there are "an effective package of bills to submit to the governor in August."

There is one more key bill that might pass as well in August. Assemblyman Ted Lieu (D-Torrance) seeks to prohibit stated-income loans, which allow people to qualify for mortgages without verifying their income or if they'd even be able to make the monthly payments. Also in Lieu's bill is a provision that would ban less-than-interest-only loans or "teaser rate" loans/payments. These loans are essentially negative amortization loans, however, on the TILA disclosure forms, this is not stated; a violation of the Truth in Lending Act.

Originally posted at InjuryBoard by Paul Kiesel

75% of Americans and a Growing Number of Republicans Blame Bush for Failed Economic Policies, Foreclosure Crisis

Paul Kiesel — Thu, 26 Jun 2008 19:33:01 GMT

There has been a sharp increase in economic pessimism over the last year, and three out of four Americans blame President Bush for ushering in one of the more turbulent economic periods, particularly for the middle-class, over the last thirty years.

Only nine percent of respondents to a Los Angeles Times/Bloomberg poll released yesterday said the country's economic condition had improved since Bush became president. 75% said conditions had worsened.

However, the number/statistic that stood out the most was amongst Republicans polled. 42% of Republicans said the country was worse off, 26% said it was static, and 22%, less than a quarter of registered Republicans, thought economic conditions had improved.

Clearly, the concerns surrounding the economy are bipartisan. High gas prices, increasing grocery costs, and the housing/foreclosure crisis are issues on top of most Americans' minds. This is also reflected in Bush's most recent approval rating -- just 23% -- compared with 34% in February. The stimulus checks, as many economists expected, have not alleviated any of the aforementioned concerns.

Also, because of recent allegations surrounding politicians who've received preferential or VIP treatment when it came to securing a "preferred interest" on their mortgage, Americans are now less likely to support a housing bailout plan/package, which is very unfortunate (whether a housing aid package is approved or not). This most likely stems from distrust in the officials who are suppose to have the public's interest in mind and not the lenders, like Bear Stearns, who have received government assistance/bailouts ($29 billion in Bear Stearns' case) and misled millions of borrowers into Option ARM loans -- the same lenders, like Countrywide, who in recent days have been in the press as state Attorneys General have been filing complaints against them.

All of these statistics have jumped considerably since the LA Times/Bloomberg poll was taken in February.

Originally posted at InjuryBoard by Paul Kiesel

California and Illinois AGs Sue Countrywide Over Mortgage Loans, Borrowers Misled

Paul Kiesel — Wed, 25 Jun 2008 15:22:27 GMT

California Attorney General Jerry Brown filed a complaint today in Los Angeles state court claiming that Countrywide Chief Executive Officer Angelo Mozilo and a unit specializing in loans to consumers with poor credit used deceptive marketing tactics to entice thousands of borrowers into ARM loans without disclosing that their payments would balloon after 30 days. These are the same TILA violations that I've been blogging on for months now, and it is great to see Jerry Brown be one of the first two AGs to file suit against lenders like Countrywide, who were insatiable in their hunger to glut the mortgage market with misleading subprime loans.

According to Bloomberg News, Mr. Brown seeks restitution for borrowers, civil penalties of as much as $2,500 per violation and a court order halting the practices.

The other AG that has filed a lawsuit today is Illinois Attorney General Lisa Madigan, whom I discussed on Monday, in regards to how several states would be taking the appropriate steps to help mitigate the foreclosure crisis and bring lenders like Countrywide to task. Ms. Madigan contends that, "thousands of Illinois homeowners paid a steep price for Countrywide Financial's 'desire to dominate the marketplace'," (New York Times, 6/25/08). Lisa Madigan had subpoenaed Countrywide for documents last fall when the foreclosure crisis was in its early stages.

Ms. Madigan contends, as does Mr. Brown in California, that Countrywide promoted high-risk loans that contributed to the high number of foreclosures in Illinois and that Countrywide was more concerned with profits than keeping residents in their homes.

Both of these states' lawsuits come on news that Bank of America's acquisition of Countrywide has been approved by the latter's shareholders, earlier today.

Originally posted at InjuryBoard by Paul Kiesel

States to Help Rescue Homeowners from Foreclosures

Paul Kiesel — Mon, 23 Jun 2008 15:45:36 GMT

As Congress continues to talk about providing a federal response to the foreclosure crisis, which has been going on for almost a year, attorneys general, like New York Attorney General Andrew Cuomo, are busy helping troubled homeowners at the state level.

Lawsuits are being filed by AGs across the nation, as AGs also lobby legislatures for tougher mortgage lender laws and build partnerships with mortgage servicers and community development groups to help fight the troubled homeowner battle. And it looks like these efforts are starting to pay off.

According to CNNMoney.com, "The Mortgage Bankers Association says a million home were in foreclosure in the first three months of 2008 [. . .] that number would have been larger if the AGs weren't involved." Therefore, the Bush Administration should tone down its assertions that the Hope Now program has been a major factor or helper of combating foreclosures, when all other evidence, as cited in dozens of InjuryBoard's blocs since March (via news stories), shows that other parties have contributed to a majority of any homeowner relief that has taken place. The Hope Now program has mainly solved problems for homeowners that would have received help anyway, if they had spoken to their lender or servicer to begin with. The Hope Now program does not have a significant success rate, or at least it doesn't provide any evidence, that shows people in underwater mortgages receiving adequate assistance. The successes in troubled homeowner relief is coming from a variety of sources, like state attorneys general.

In Illinois, for instance, Attorney General Lisa Madigan is going after mortgage brokers and lenders she claims used abusive lending practices, such as the TILA disclosure form violations --those violations being one of the more underrated contributors to the foreclosure crisis. In November, she filed suit against Chicago-based mortgage broker One Source Mortgage, alleging the outfit drew in hundreds of clients by advertising low rates on Option ARM loans, but failed to inform the borrowers, usually through tricky TILA forms, that those rates would adjust higher, and often 30 days after the first mortgage payment was made.

In one instance, One Source allegedly told a borrower that his interest rate of .95% would last the entire first year of the loan, however, it jumped to 7.5% after one month. The borrower was still making a monthly payment based on a .95% interest loan, but the rest of the unpaid interest was being compounded, resulting in a negative amortization loan, and a shorter period before the loan reset to the 7.5% interest rate payment (sometimes tripling the prior month's mortgage payment). Hence, why these foreclosures have been happening in waves and in such high numbers; so many people were told disinformation by shady lenders, many of which are no longer in business or have sold the loan to a servicer.

"The vast majority of people with these loans didn't understand them and were lied to by brokers," said Lisa Madigan, (CNNMoney.com, 6/21/08).

The suit that represents disenfranchised borrowers is still making its way through the courts. One Source's phone service, like many other crooked mortgage brokers, has been disconnected, and is currently unrepresented.

Fortunately, we have AGs like Madigan, whose bill is requiring foreclosure notices to include an explanation of options that borrowers have to help them retain their houses. Unfortunately, those explanations weren't available prior to help the borrowers understand his or her options before signing on the loan, but hopefully more oversight throughout the lending industry in the future will prevent the reoccurrence of reckless lending practices from wreaking havoc on the entire economy.

Originally posted at InjuryBoard by Paul Kiesel

Bush to Veto Foreclosure Rescue Bill

Paul Kiesel — Fri, 20 Jun 2008 18:42:11 GMT

President Bush has repeatedly said that he would veto any House or Senate housing bill/ foreclosure package that helps out lenders and/or speculators. Of course, it's interesting he continues to say this as everyone is well aware of the "bailout" Bear Stearns received back in March from the Fed. Now, another foreclosure package is making its way out of the Senate, even amongst all the superfluous trouble brought on by the news of Senator Dodd's VIP loan, and this package is receiving strong bipartisan support.

However, it remains to be seen if the Senate will pass this bill by July 4th with enough support to override a Bush veto. If they're not able to, Bush has guaranteed to veto it.

The main points of the bill are: The FHA would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. However, borrowers would only be eligible for the bill if their mortgage holders were willing to take a substantial loss and allow them to refinance. A portion of the profits from the new loans would be shared with the government.

The beneficiaries of this proposed Senate package are not the lenders, whether it appears the lenders are being helped out because their capital losses would potentially be mitigated, the troubled borrowers and other homeowners in neighborhoods with escalating foreclosure rates end up as the winners. The longer foreclosed property stays on the market and increases in volume, the worst it is for the entire economy and other homeowners inadvertently affected by the foreclosure crisis.

As Senator Obama pointed out yesterday, "It's baffling why the White House would oppose a bill that would help so many American families at risk of losing their homes on the same day hundreds of mortgage fraud arrests were announced," (CNNMoney.com, 6/19/2008), it just doesn't make sense why a government backed effort isn't occurring, considering the financial aid expediently used to help keep Bear Stearns alive. However, since the Bush Administration and the Fed ignored many warnings about a "bubble burst" and a potential wave of foreclosures, maybe it makes even more sense as to why the White House is doing little to help remedy this problem.

Originally posted at InjuryBoard by Paul Kiesel

Lending Regulation Bills to be Voted on in Sacramento

Paul Kiesel — Wed, 18 Jun 2008 20:54:48 GMT

The Banking, Finance and Insurance Committee will be taking a look at various bills related to the subprime mortgage mess, that are being brought to this committee in hopes that it will prevent the severity of what's going on in the financial marketplace from occurring again. The bills will likely have a mild effect on the rising tide of foreclosures (including the pending interest rate resets that prime borrowers will go through; subsequently suffering many of the same pains subprime borrowers have been and still are going through), but the importance of the bills is that they will provide regulations within and more oversight throughout the lending industry (regulations that had not existed before).

As noted in a Los Angeles Times editorial, the bills would "limit prepayment penalties, which can deter borrowers with bad loans from refinancing into better ones, and eliminate a financial incentive for brokers to steer borrowers into loans with higher interest rates. In doing so, it would require borrowers to be given a clear choice between loans and without penalties, and between higher rates or higher upfront fees [. . .] the bill[s] would stiffen the state requirement that lenders not provide larger loans than subprime borrowers can reasonably be expected to pay [. . .] and it would prohibit lenders from refinancing loans unless there's a real benefit to the borrower," (Los Angeles Times, 6/18/08).

It's amazing that pragmatic rules and regulations, such as the ones these bills present, were not in effect when the subprime boom began. How much trouble we could have avoided will never be known, but it is highly implausible to think that the banks and homeowners would be in such precarious situations as they are now, if we had had more oversight five years ago.

Granted, the bills that will be voted on in Sacramento only apply to the State of California, however, if they pass and become law, a venerable precedent will have been set; making it more likely that federal regulators to follow.

Originally posted at InjuryBoard by Paul Kiesel