Foreclosure Moratorium? What does this mean?

Foreclosure procedures undergo reviews

WASHINGTON – Oct. 18, 2010 – Recent revelations about mortgage lenders filing possibly faulty court papers to foreclose on homes has sparked a public outcry and called into question tens of thousands of foreclosures. Here’s a look at the issue and its impact.

Q: How did this come to light?

A: Lawyers for homeowners fighting foreclosures took depositions from officials who prepare legal documents to get court approval to foreclose. The document signers – who have now been dubbed robo-signers – said they signed thousands of affidavits without reviewing the supporting papers or having the affidavits signed in the presence of a notary. Both are supposed to be done before foreclosure papers are submitted to courts in about 23 states that require judicial approval for all or most foreclosures. Some lawyers allege there were instances of fraud, too, including backdated documents and forged signatures.

Q: What’s happened so far?

A: Some major banks have suspended foreclosures while they review their procedures; others are proceeding while doing their reviews. Bank of America has suspended foreclosures in all 50 states. GMAC Mortgage has suspended evictions and foreclosures in the states that call for a judge’s approval and is reviewing foreclosure practices in the others. PNC Financial Services and Litton Loan Services are reviewing their practices. JPMorgan Chase suspended foreclosures in 56,000 cases in the judicial approval states and is reviewing its practices in a handful of the other states.

Q: Who is investigating this and what could be the outcome?

A: State attorneys general have launched a joint investigation. The Justice Department is reviewing the matter. The Office of the Comptroller of the Currency, which regulates the nation’s largest banks, said Friday that it is examining banks’ foreclosure procedures, and the Federal Housing Administration is conducting a review. The Senate Banking Committee has scheduled a Nov. 16 hearing.

Possible outcomes include civil penalties, criminal prosecutions, the creation of an independent monitor to oversee foreclosure practices and legal settlements under which lenders agree to do more to get struggling borrowers into mortgage workout plans to help them avoid foreclosure.

Q: What about a national moratorium on foreclosures?

A: Some members of Congress have called for one, but the Obama administration has rejected that idea out of concern that a blanket halt to all foreclosures could damage the fragile housing market’s recovery and, with it, the economy.

Q: Why is this controversy important?

A: Lawyers and consumer advocates for homeowners say that if banks are found to have acted illegally, courts could see a wave of challenges in both current and past foreclosure cases. It could lead to title claims in courts, where former homeowners who lost their homes in foreclosure actions assert they still own them, even after the homes have been sold. Banks say that even if procedures were not followed correctly, there’s no mistake that the homeowners are in default and that the banks have the right to foreclose.

Q: What impact could this have?

A: Foreclosures already take a year or more to complete in some states and could slow further as judges review documents more thoroughly and banks tighten procedures. That could keep some homeowners in their homes longer but might also postpone the sales of homes that have been abandoned or that banks have repossessed, keeping them vacant longer.

Delays could be costly for banks and taxpayers, because banks and government-owned mortgage giants Freddie Mac and Fannie Mae all must continue to pay maintenance and other expenses on foreclosed properties they can’t sell. Freddie and Fannie own or guarantee more than half of all first mortgages.

Q: What could this mean for the housing market?

A: If foreclosures are delayed significantly, economists say the housing market recovery could suffer.

Significant delays in completing foreclosures could mean it will take longer for prices to recover, economists say. About 30 percent of all house sales now are foreclosures or other distressed properties that sell at substantially lower prices than homes whose owners aren’t in financial difficulty. That pulls down market prices overall.

The longer home prices stay depressed, the longer millions of homeowners will be underwater, owing more on their mortgages than their homes are worth. About one in four properties are underwater, making it difficult for the owners to sell their properties or refinance their mortgages.

Q: Should I buy a foreclosed home?

A: Real estate experts say buyers shouldn’t avoid foreclosures. But you may want to buy a title insurance policy to protect against a claim stemming from a previous foreclosure, says Guy Cecala of Inside Mortgage Finance.

Lenders generally require title insurance before they’ll approve a mortgage.

Short sales – where lenders agree to let owners sell houses for less than they owe – should not be affected by the foreclosure controversy, says Rick Sharga of RealtyTrac.

Christopher Immel, a lawyer at Ice Legal, a Florida law firm that represents homeowners challenging foreclosures, says prospective buyers of foreclosed properties should examine court case files for missing documents and incorrect dates.

He recommends hiring an attorney to review the file.

© Copyright 2010 USA TODAY

Fla. joins multi-state housing crisis probe

TALLAHASSEE, Fla. – Oct. 12, 2010 – Florida is joining a multi-state probe into the national foreclosure crisis that has placed a chokehold on the state’s housing market, a spokeswoman for Attorney General Bill McCollum confirmed Monday.

A working group, led by Iowa Attorney General Tom Miller, is investigating practices by some of the nation’s largest banks and mortgage lenders. In the past few weeks, Bank of America, GMAC and JP Morgan Chase have all announced that they are freezing foreclosure proceedings in Florida in light of allegations that the companies did not follow protocol when dispensing with the cases.

“The mortgage industry is getting the message that this is serious, it’s wrong, and we will stop it,” Miller said in a statement.

McCollum spokeswoman Ryan Wiggins says that McCollum has joined the working group but declined to say exactly what the group has done so far. Bloomberg News reports that the group is likely to make an announcement regarding its future plans this week.

Florida has been hit particularly hard in the economic downturn, which dealt a serious blow to the housing market. Though the state has shown some improvement, it is still the second worst state behind Nevada in the percentage of housing units receiving foreclosure notices during August, with one in every 155 homes falling behind, according to RealtyTrac.

The state has enacted a number of programs to deal with the foreclosure mess. Volunteer attorneys have been working with clients to help navigate the court system. The courts were given extra money to bring in retired judges specifically to work on the foreclosure docket. And McCollum has launched investigations into four Florida law firms over alleged unsavory practices related to foreclosures.

A Palm Beach County circuit judge ruled law week that the attorney general could not investigate one of the firms, Shapiro & Fishman, for alleged involvement in presenting fabricated documents to the courts in foreclosure cases. McCollum’s office announced Monday that it would appeal the ruling.

“When an attorney is suspected of creating and then using forged documents, even in court, the judicial and executive branches have concurrent jurisdiction,” the motion for rehearing said.

The issue is ripe for legislation as well. Rep. Maria Sachs, D-Delray Beach, has asked lawmakers, bankers, lawyers and homeowner groups to begin collaborating on policy that could help resolve some of the issues facing the state. She also generally called for increased regulation of large banks and law firms to protect homeowners facing foreclosure.

“It is time to reform the law to match the realities of our present economy in order to guard our citizens from the careless greed of those working to take advantage of their misfortune,” Sachs said in a statement.

Source: News Service of Florida

Mortgage rates fall to decades-low of 4.27%

Mortgage Rate Trend Index

Industry experts are equally divided on the short-term direction of mortgage rates. While a slight majority, 38%, predicts an increase, 31% expect a drop and 31% foresee no change.

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.
 Copyright © 2010 The Associated Press

Foreclosure freeze slows home sales

MIAMI – Oct. 7, 2010 – The decision by three major banks to freeze foreclosures will buy distressed homeowners months of extra time and temporarily block lenders from reclaiming homes.

But it also threatens to buckle South Florida’s home sales.

Bank-owned properties make up about 40 percent of home sales in South Florida, and suspensions by JP Morgan Chase, Bank of America and GMAC could deliver a debilitating blow to that crucial segment of the embattled real estate market.

“People don’t realize that this is our market,” said Matthew Murray, a Realtor with Pat Dahne Realty Group who specializes in bank-owned sales. “It’s what’s selling. If you delay the process, it’s going to delay the recovery.”

There are mounting reports of approved foreclosure sales being stopped pre-closing, and buyers being left in limbo as banks try to deal with exposed “robo-signers” and unverified affidavits.

As the foreclosure moratoriums play out, a slowdown in low-priced, bank-owned properties coming through the pipeline could further hamper sales in South Florida, which depends on foreclosures more than most parts of the country.

The lenders have put the brakes on their foreclosure operations after bank employees and affiliates confessed they had been individually signing thousands of legal documents each month without verifying the details of the cases. Those documents, which contain crucial information like the amount owed and the owner of the note, have sparked allegations that thousands of foreclosure filings are tainted by fraud and forgery.

As paperwork issues stall sales, the hottest sector of the local market -- bank-owned properties, or so-called REOs -- lies at risk of going cold.

Together, the three lenders represent nearly a third of the local REO market. Bank of America, for example, has nearly 500 REO properties listed for sale in Miami-Dade and Broward counties, according to its website. GMAC, now known as Ally Financial, has at least 200 REOs in South Florida and JP Morgan has at least 250. Many of those properties have buyers and are currently pending sales, the banks’ websites show. Other banks could follow suit in stopping foreclosure sales, although Wells Fargo announced Wednesday that it would not go that route.

IN LIMBO

Realtor Matthew Murray pointed out that most of his sales have not yet been affected, but other Realtors said bank suspensions have left some current sales in limbo and the future of the REO market uncertain.

Ashton Coleman, a Realtor with Keller Williams, planned to close on the sale of a North Bay Village condo this Friday before he got a letter from Bank of America saying the sale was being stalled.

“We figured that it would be fine since the bank already owned the property, but we figured that the bank probably found something wrong,” Coleman said. “The bank will be delaying [the sale] for at least 15 days, and for as many as 90 days.”

GMAC sent out letters to real estate agents last month alerting them that pending REO sales would be delayed an additional 30 days, Realtors said.

Anthony Askowitz, who has a few pending deals on GMAC-owned properties in Miami, said many of his buyers are investors, and have been willing to wait.

“If it’s an investor, the investor is going to be able to handle it a lot easier than someone who has to move out of their current home by a certain date,” said Askowitz, a broker and owner of two Re/Max offices.

But the depths of the foreclosure mess have not fully been uncovered, and no one knows for sure how long it will take lenders to clear up paperwork problems and re-start the foreclosure machine. With banks facing new calls for federal investigations and full-on foreclosure moratoriums, 30 days might not be enough.

HIGH-LEVEL CALLS

U.S. House Speaker Nancy Pelosi, Sen. Al Franken and Florida Congressman Alan Grayson are among those calling for bank probes and foreclosure halts across the U.S.

Most REO sales contracts have provisions that allow banks to halt a sale if issues come up concerning the property’s title, said Murray, who added that has happened to him just twice in 20 years.

“The only way that happens is if they can’t give you free and clear marketable title,” he said.

Banks have authority to push these sales back for months, but not all buyers will be willing to hang around. Bank-owned properties are often abandoned and unkempt, and the longer a home stays empty, the more vulnerable it is to vandalism and disrepair, which can affect the home’s value.

“It’s in the bank’s best interest to get this rectified as soon as possible,” Askowitz said. “So I don’t think that this is going to drag on.”

Dennis Donet, a Miami foreclosure defense attorney, said that the despite the banks’ desire to fix things quickly, legal battles could stall foreclosure sales for a year or more.

One of his clients recently learned that the sale of his foreclosed property was being canceled by its new owner GMAC, because of problems with the lender’s foreclosure affidavit. Jeffrey Stephan, the GMAC employee who signed the affidavit, was exposed last month as a so-called “robo-signer” during a deposition. Stephan said he had signed more than 10,000 foreclosure documents each month, indicating that he had not taken the time to verify the details of each case.

LONG-TERM ISSUE

Donet has been talking with attorneys that represent banks, and said the general consensus is that questionable affidavits and lost documents will leave foreclosures hanging in the balance for a long time to come.

“There isn’t anybody saying that this isn’t going to be at least a six-month to one-year delay on the process,” he said. “Anything that interrupts the flow of capital is bad for the community.”

Copyright © 2010, The Miami Herald

Housing tax credits benefit young most

WASHINGTON – Oct. 5, 2010 – New research from the National Association of Home Builders (NAHB) finds that the benefits of housing-related tax deductions, such as the mortgage interest deduction, generally decline in value as individuals age.

Using Internal Revenue Service Statistics of Income (SOI) data, NAHB studied how housing tax deductions benefit different age groups. The analysis found that pro-housing policies benefit younger households most – homeowners who typically have large mortgages, a small amount of equity and growing families.

“Opponents falsely argue that the (mortgage interest) deduction is only for the wealthy, but it is clear that the mortgage interest deduction is also of great value to younger homeowners,” says Robert Dietz, assistant vice president for Tax and Policy Issues for NAHB. “Any tampering with this deduction would have a disproportionate impact, as a share of household income, on younger homeowners … (and) these are households who have growing demand for homeownership due to marriages and children.”

The average mortgage interest deduction peaks for taxpayers in the 35- to under-45 age group, followed by the 18-to 34-aged taxpayers. The mortgage interest deduction peaks soon after the taxpayer moves from renting to homeownership, and declines over time as homeowners pay down existing mortgage debt and increase homeowner equity.

The largest share of homeowners (59 percent) claiming a tax deduction for mortgage insurance goes to those aged 18 to under-45. Owners who made less than a 20 percent downpayment on a home generally pay mortgage insurance.

The age-related pattern for the smaller tax deduction for local and state real estate taxes, however, differs slightly. Unlike the mortgage interest deduction, which declines in value as taxpayers age, the value of the real estate tax deduction increases as taxpayers age, primarily due to increases in home values as household income and wealth increases.

The report also finds that both housing deductions – for mortgage interest and real estate taxes – falls as a share of household income for older taxpayers. In contrast, the share of other non-housing deductions, such as the medical expenses, charitable contributions and investment interest expense deductions, rises for taxpayers 65 and older.

To read the entire NAHB report, “Housing Tax Incentives: Most Helpful to Younger Households,” go to NAHB’s website: www.nahb.org/TaxIncentivesStudy